Published February 08, 2013
FOX Business: Capitalism Lives Here
Wall Street posted solid gains Friday as traders responded bullishly to a much bigger-than-expected narrowing of the U.S. trade deficit.
As of 10:43 a.m. ET, the Dow Jones Industrial Average climbed 63.1 points, or 0.45%, to 14007, the S&P 500 rose 7.9 points, or 0.52%, to 1517 and the Nasdaq Composite gained 26.9 points, or 0.85%, to 3192.
The markets have had a mixed week, but the gains on Friday have tilted them into the green for the week. The S&P is pointing to a 0.3% weekly gain, while Dow is up just slightly more than 0.3%.
The technology sector was the best performer by a wide margin on the day, while defensive plays like utilities suffered. Traders also ditched Treasury bonds in search of higher returns, shoving the yield on the 10-year up to 1.981% from 1.962%. Volatility, as tracked by the CBOE's VIX, also slumped 4.4%.
Global trade was in the spotlight Friday.
The U.S. trade deficit narrowed in December to $38.5 billion from $48.6 billion in November, marking the narrowest gap since January 2010. Economists were expecting the deficit to shrink to $46 billion. The figures will directly impact fourth-quarter gross domestic product readings, with a smaller deficit increasing the growth rate. The advance estimate showed a slight contraction for the quarter, partially due to a bigger-than-expected trade deficit.
"Trade data for December paint a reassuring and encouraging picture of the US economy at the end of last year, suggesting the economy did not fare as badly as the initial GDP estimate suggested in the fourth quarter," Markit Chief Economist Chris Williamson wrote in an e-mail.
China posted a January trade surplus of $29.2 billion, easily topping expectations of $22 billion, as exports surged 25% and imports jumped 28.8%. The data fueled hopes that trade in the world's No. 2 economy -- a major exporter -- will remain robust despite a stodgy world economy.
"While Chinese New Year distortions are likely to have played a part, we think stronger domestic demand also contributed to the significant increase in imports," economists at Barclays wrote in a note to clients.
Still, Zhiwei Zhang, an economist at Nomura, notes the data also sparked worries about inflation that could push the People's Bank of China to focus on cooling prices instead of stimulating growth.
Germany, however, saw its December trade surplus of $16.1 billion come in short of the $20.1 billion in the latest sign even Europe's biggest economy isn't immune to the debt crisis.
'Business as Usual' on Wall Street
Meanwhile, Wall Street was prepared for a normal trading day even as a major snowstorm hurtled at the New York region. A NYSE Euronext (NYX) spokesperson said "business as usual" is expected at the Big Board in lower Manhattan. As Hurricane Sandy, which pounded Manhattan, struck, NYSE was forced to scrap contingency plans to shift floor trading to an electronic platform after a revolt from major industry players.
The Nasdaq Stock Market, operated by Nasdaq OMX Group (NDAQ), is a completely electronic platform and is generally not directly impacted by the weather.
In commodities, oil prices were in the green. The benchmark U.S. contract rose 17 cents, or 0.18%, to $96.01 a barrel. Wholesale New York Harbor gasoline rose 0.61% to $3.018 a gallon. Gold fell $1.70, or 0.1%, to $1,670 a toy ounce.
The Euro Stoxx 50 rose 0.49% to 2611, the English FTSE 100 climbed 0.45% to 6256 and the German DAX edged up 0.16% to 7603.
In Asia, the Japanese Nikkei 225 sold off by 1.8% to 11153 and the Chinese Hang Seng ticked up by 0.16% to 23215.