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S&P 500 surges to five-year high as global sentiment improves

TradingPub Admin | January 10, 2013

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If you want an example of how rising confidence of investors can push stocks higher, one would be the S&P 500 Index surging to its highest point in five years on January 10 as markets responded to news of Chinese export data that exceeded expectations.

Rising stocks 
The S&P 500, which is considered a benchmark group of stocks, finished the day 0.8 percent higher at 1,472.12 at 4 p.m. New York time. Bloomberg reports that this was the highest value for the index since December 2007.

The Dow Jones Industrial Average also had a strong day, rising 0.6 percent to reach 13,471.22. Transactions on U.S. exchanges were higher than usual but not by a wide margin, with 6.8 billion shares being traded - which was 9.9 percent higher than the three-month average, according to the news source.

Global improvement 
Equities were bolstered amid signs of improvement around the world. Data indicated that Chinese exports surged 14.1 percent in December from the same month in 2011, which was far higher than the 5 percent increase that was previously predicted, the media outlet reports.

"Chinese growth is accelerating and the market over the last day or so seems to have taken on a more positive tone as it relates to earnings," Mark Luschini, chief market strategist at Janney Montgomery Scott, told MarketWatch.

Draghi predicts recovery 
Investor confidence was also supported by European Central Bank President Mario Draghi, who predicted that the euro zone would return to economic growth in 2013. He said that the region is already displaying evidence that it is getting better, and that the governments of member nations can help ensure that the region returns to expansion through stimulus, according to The Associated Press.

Draghi pointed to various economic improvements that the euro zone has made recently, and made his comments after the officials in charge of the European Union's central bank decided to leave its key interest rate at a record low 0.75 percent.

He noted that deposits were flowing back into lending institutions in many euro zone nations that have been suffering, equities have been rising and borrowing costs have been lower for the governments of countries, the media outlet reports.

"In Europe the recession is not worsening, Chinese growth is accelerating and in the U.S., the worst of the fiscal cliff is behind us. The impact of tax cuts is less than what the [Congressional Budget Office] initially scored, which has the potential to lift confidence and as a result business spending," Luschini told MarketWatch.

Indicators 'stabilized' 
He noted that indicators produced recently "have broadly stabilized" although not at the highest levels, and financial markets have also become more stable, according to The Associated Press. "Economic activity should gradually recover" later in 2013.

However, "to define a turning point you need a lot of things beside financial market stabilization," he stated. In order for this to occur, the region will require "greater strength in the economy."

These economic improvements have been reflected in equities pushing higher.

"The market is encouraged by evidence of healing on the international front," Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which has around $47 billion under management, told Bloomberg. "In the U.S., the earnings season is just getting started and there’s a lot of things that we don’t know. Investors will still be on that wait-and-see mode."

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