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Stocks Pare Gains; Banks Rise, Retail Falls

CNBC.com
Friday, 18 Mar 2011 | 12:17 PM ET

Stocks pared gains as news that fighting in Libya was continuing despite Libya's pronouncement that it was ceasing military operations, although bank stocks got a lift as institutions began announcing dividend increases.

The Dow Jones Industrial Average rose more than 100 points, after climbing back from the lows of the yearin Thursday's session.

Among Dow components, JPMorgan , Caterpillar, and American Express gained, while McDonald's slipped.

The S&P 500 and the Nasdaq also rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, sank nearly 10 percent to below 24. The VIX had been as high as 30 earlier in the week as the Japan nuclear crisis unfolded.

Among key S&P 500 sectors, financials,industrials and materials rose, while consumer discretionary fell.

Stocks immediately shot higher in premarket trading after after Libya announced it was ceasing military operations to protect civilians in the wake of United Nation's decision to create a no-fly zone over the country. The market was already poised to move higher in the wake of a decision by the group of seven largest industrialized nations (G7) to intervene in the currency marketto restrain a soaring yen in the wake of last week’s devastating earthquake in Japan.

Libyan Foreign Minister Moussa Koussa said the country was declaring a ceasefireto protect civilians and comply with a UN Resolution reached late Thursday. Muammar Gaddafi had earlier pledged to crush Libyan rebels with “no mercy, no pity.”

Middle East Turmoil
Middle East Turmoil

Oil prices intially sank on the news, but have since come back as traders expressed concern that the ceasefire will hold. London Brent crude traded below $115 barrel, while U.S. light sweet crude rose above $101 a barrel.

In the currency markets, the yen weakened just minutes after the announcement on joint intervention, but investors were still speculating whether the move will be successful in the long run. Japanese stocks rose on relief that exports will not be hampered by a strong Japanese currency.

The Federal Reserve cited "significant improvment" in recently-completed stress tests of 19 of the biggest banks. Banks are now beginning to tell investors if they have approval to boost dividends or issue buybacks.

JPMorgan Chase's shares rose after it announced it would increase its dividend to 25 cents a share from 5 cents a share. Wells Fargo also jumped after the bank's board agreed to a special dividend increase of 7 cents a share in the fiscal first quarter, up from 5 cents a share previously. The board also authorized a $200 million share buyback.

US Bancorp raised its quarterly dividend to 12-and-a-half cents a share from 5 cents, and said it woudl repurchase 50 million shares.

BB&T was the first to announce it would increase its dividend. The bank will boost the dividend by 6.7 percent to 16 cents a share, and will add 1 cent to the dividend in the fiscal second quarter.

The news lifted bank shares across the board, with investors expecting several institutions to announce dividends soon. Keefe Bruyette raised its rating on Fifth Third Bancorp to "outperform," saying it could boost its dividend. The brokerage also said PNC could offer a dividend surprise.

Bank of America and Citigroup have also gained.

G7 Move Sparks Positive Reaction
Markets are responding positively to the G7 move overseas, with Brian Belski, Oppenheimer & Co., and Barbara Marcin, Gabelli Blue Chip Value Fund.

Today is quadruple witching, when contracts on stock index futures, stock index options, stock equity options, and single stock futures expire. This happens once every quarter, on the third Friday of March, June, September and December. Volatility is common in the market in the week before quadruple witching as trades are settled, although geopolitical events have played a bigger role this week.

Meanwhile a host of companies including Honda , Sony and General Motors were expected to suffer from supply chain disruption as plants remain closed following the disaster last week.

Cisco shares gained after the company said it would pay a cash dividendto shareholders for the first time. The networking giant will pay shareholders 6 cents a share on April 20.

Nike led consumer discretionary stocks lower after the athletic-wear maker reported a disappointing profit hit by rising oil and cotton prices. The company's shares sank more than 9 percent.

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DJIA
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S&P 500
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ALXN
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BAC
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BBT
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C
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CAT
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NASDAQ
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CSCO
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DGX
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FITB
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GM
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HON
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JPM MLP ETN
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NKE
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PNC
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6758.T
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USB
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VIX
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WFC
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MCD
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