Want a basic lesson in the equity markets? One important facet of stock trading education is the relationship between news that makes market participants more optimistic about the broader economy and the price of these securities.
The S&P 500 Index and the Dow Jones Industrial Average recently broke through their previous records and reached new highs in March 2013, and these key indices continued to make gains on April 2, 2013, as markets responded to strong U.S. economic data in the form of factory orders, according to CNBC.
The Dow, which contains the stocks of 30 separate companies, increased to a new intraday high of 14,665.93, the media outlet reports. During the last eight trading sessions, this key index has fluctuated between gains and losses.
Data provided by the U.S. Commerce Department indicated that bookings for orders from factories increased 3 percent in February, according to the news source. This figure was the largest in five months, and also exceeded the median forecast of 2.9 percent provided by economists taking part in a Bloomberg survey.
"We're very confident about the U.S. economy," Pierre Mouton, who contributes to the management of $6 billion as a portfolio manager at Geneva-based Notz, Stucki & Cie., told the news source. "The U.S. market has performed better than the European one, but for good reason. The market isn't expensive when you consider the growth."
The S&P 500 Index also had a good day, trading up 0.6 percent at 1,571.29 at 10:04 a.m. in New York, according to the media outlet. At this point in the session, transactions for equities contained in this group of stocks was close to its 30-day average.
This benchmark index, which is frequently cited as a means of measuring the health of the U.S. stock market, has surged 10 percent so far in 2013 after spiking 13.4 percent in 2012, the media outlet reports. The S&P 500 could potentially have substantial room for appreciation, as Bloomberg data indicates that it is currently trading at 14.2 times estimated earnings, which is less than the 14.4 it has averaged over the last 10 years.
The next major breakthrough that market participants have been eyeing for this key index is a rise above 1,576.09, set on October 11, 2007, which represents the intraday high that the group of stocks reached on October 11, 2007, according to CNBC. Like the Dow, this group of equities has fluctuated in recent sessions, finishing the day higher on some and ending trading lower at the close of others.
It looks like Europe's economy is not pushing stocks higher like that of the U.S., as data provided by research firm Markit indicated that its euro zone manufacturing PMI index for March had a reading of 46.8, which indicated that the region's economy is continuing to contract, the media outlet reports.
"It now looks odds-on that the euro zone suffered further GDP contraction in the first quarter of 2013, likely around 0.3 percent quarter-on-quarter, while the increased drop in orders and declining back logs of work does not bode at all well for second quarter prospects," Howard Archer, an economist at major research firm IHS Global Insight, wrote in a research note, according to the news source.
Cyprus is making efforts to bolster its fiscal position, as Christos Stylianides, the spokesman of the government of the euro zone nation, stated that its officials are in talks with individuals representing the International Monetary Fund and the European Union to give the country one more year to get rid of its budget deficits before the jurisdiction is required to pay interest, the media outlet reports.
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