Stocks Close Higher as Egypt's Mubarek Steps Down
Stocks closed higher Friday after Egypt’s Hosni Mubarek announced he was relinquishing power following more than two weeks of protests calling for his ouster.
The Dow Jones Industrial Average closed higher for a second week and hit a two-and-a-half year high in the process.
Mubarek’s departure temporarily quelled fears that the demonstrations attended by tens of thousands of Egyptians would end violently or spread to neighboring Arab countries.
The crowds gathered in central Cairo burst out in jubilant celebration when the news came early Friday evening via a televised message by the newly appointed vice-president Omar Sulieman. Just a day after Mubarek had surprised the world by saying he was staying on until September, Sulieman said Mubarek had reversed course and was instead transferring power to the country’s military.
Burt White, chief investment officer at LPL Financial in Boston, said stock markets, which had fallen early Friday as the unrest and potential for chaos grew, responded to a sense of “increased clarity.”
White said he remains skeptical because the situation in Egypt remains fluid.
“I think what’s happened is that we’re a step closer to finding that clarity,” he said. “The time frame has been escalated to when we will see that clarity. In any event, the situation has moved from a boil to a simmer.”
Today’s Markets
The Dow Jones Industrial Average rose 43.97 points, or 0.36%, to 12,273.26. The Nasdaq Composite was up 18.99, or 0.68% to 2,809.44, while the Standard & Poor's 500-stock index rose 7.28, or 0.55% to 1,329.15.
Meanwhile, crude futures settled at a two-month low Friday as Mubarak's resignation calmed fears that growing unrest in the country would disrupt key oil-supply routes.
Light, sweet crude for March delivery settled $1.15, or 1.3%, lower at $85.58 a barrel on the New York Mercantile Exchange, the lowest closing price since November. Brent crude on the ICE futures exchange settled 56 cents higher at $101.43 a barrel.
So far in Egypt security has been boosted and maintained at critical spots along major transport channels the Suez Canal and the Mediterranean Suez oil pipeline.
The situation in Egypt combined with positive economic data in the U.S. to move stocks higher.
Financials led stocks higher as mortgage insurers surged on a government proposal to shrink the size of the Federal Housing Administration, a government-run competitor to the private mortgage insurance industry. Shares of Genworth Financial (NYSE: GNW), MGIC Investment (NYSE: MTG) and PMI Group (NYSE: PMI), all of which stand to benefit from the move, surged on the news.
Also, U.S.-listed shares of Nokia (NYSE: NOK) fell after the handset maker said it will adopt Windows Phone as its main smartphone platform. Shares of Microsoft (NASDAQ: MSFT) slipped 1.5%.
Ford Motor Co. (NYSE: F) rose after the auto maker said it will cut its debt load by another $3 billion.
On the data front, consumer moods cheered a bit in early February rising to its highest level in eight months. The Reuters/University of Michigan consumer sentiment index rose to 75.1 from 74.2 at end of January. Inflation expectations remained, however. One-year inflation expectations stayed put at 3.4% rate posted at end-January.
The U.S. trade gap widened to $40.58 billion, slightly larger than expected, from a revised $38.32 billion the month before, leaving the 2011 trade gap with its biggest percentage increase in 10 years on the back of a record-high shortfall in trade with China.
Treasurys rose initially on Friday as investors sought haven against uncertainty in the Middle East, but then fell as news of Mubarek’s resignation spread. The solid U.S. economic data also helped nudge investors out of the safe haven of Treasurys.