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Midday Market Report: Financials and Retailers Ride High On Improving Economic Data

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March is coming in like a bull. Strong retail and auto sales and improving employment numbers show that the US consumer is spending again.

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Despite hitting its highest level of unemployment since the introduction of the common currency, Europe's markets turned positive, led by the region's banks. Europe's financials extended yesterday's rally after the European Central Bank showered the region's banks with cheap money. Italian banks accounted for over a quarter of all the money borrowed in the long-term refinancing operation. UniCredit SpA gained 5.79% and Banco Popolare SC shares rose 10.51% in Milan today.
  • The Eurostoxx 50 jumped 1.45%, closing the day at 2,548.66.
  • The FTSE 100 headed up 1.02% to 5,931.25.
  • Germany's DAX rose 1.25% to 6,941.77.
In America, stocks are rising on renewed hopes for the US consumer. Consumer-facing banks and retailers are reaping the gains.
  • The Dow (^DJI) is up 0.35% to 12,997.59.
  • The S&P 500 (SPY) rose 0.59% to 1,373.68.
  • The Nasdaq (^IXIC) is up 0.77% at 2,989.61.
Applications for unemployment insurance in the States fell by 2,000, at a four-year low of 351,000, a bullish sign for February's employment situation report that will be released next week.

Chain store sales are showing that Americans are out shopping again. Retailers reported February same-store sales that beat Wall Street's expectations almost all across the board. Sales at the Gap (GPS) for the month came up 4% over last year, far surpassing the expectations of a decline. Shares of the Gap are up 7.83%. Macy's (M) sold 4.6% more than last year and shares have jumped 1%. Target (TGT) and Costco (COST) both grew revenues by 7%, but share price at both companies declined slightly. Wal-Mart (WMT) is confident enough to jack up its quarterly dividend by 9% to $1.59 per share.

Automakers also increased sales. Ford (F) added 2.83% after it reported that sales increased by 14%. Chrysler sales blazed ahead by 40%.

Financials are also rallying in the light of an improving US economy. After a miserable 2011, Bank of America (BAC) rose 2.13% today. The Charlotte-based lender's shares have risen 46.4% since the beginning of the year. JP Morgan Chase (JPM) also gained 2.85% and Goldman Sachs (GS) advanced 3.85%.

Manufacturing, in contrast, is disappointing. The ISM Manufacturing data released today showed that US manufacturing in January signaled slower growth than expected. High energy prices are blamed for slumping orders. Eurozone manufacturing contracted for the seventh straight month.

After his testimony to the House tacitly ruled out the need for more quantitative easing, Federal Reserve Chairman Ben Bernanke moved on to the Senate and reiterated his outlook on the economy and the dangers of high commodity prices, persistent long-term unemployment, and the state of the housing market.

As for fiscal policy, Bernanke warned that it could reverse the economic recovery.

"The United States is on an unsustainable fiscal path looking out over the next couple of decades. If we continue along that path, eventually we will face a fiscal and financial crisis that will be very bad for growth and sustainability," he said.

Twitter: @vincent_trivett
No positions in stocks mentioned.
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