U.S. equity markets climb higher, Mar. 12-16

Optimism about the U.S. economy sent the Dow Jones Industrial Average and the S&P 500 Index both up 2.4% during the Mar. 12-16 trading week, with the DJIA closing at 13,232.62 points and the S&P 500 at 1,404.17. Upbeat economic news early in the week included remarks by the central bank that seemed to encourage greater risk-taking. The Federal Reserve confirmed it expects “moderate” growth over coming quarters and a gradual decline in the unemployment rate. JPMorgan Chase & Co., meanwhile, announced that U.S. regulators had approved an increase in its quarterly dividend and stock buybacks after the bank passed stress tests of its balance sheet. Data also showed that U.S. retail sales in February posted their biggest gains in five months despite higher gasoline prices, and the Labor Department reported first-time claims for unemployment benefits fell by 14,000 to 351,000 during the previous week, returning to a four-year low.

Cliffs Natural Resources led the advance with a gain of 12.5% or US$8.04 per share to US$72.03. Its board of directors approved a 123% increase in the quarterly dividend to 62.5¢ from the previous quarterly rate of 28¢, explaining that the increase “reinforces Cliffs’ strong outlook for cash generation and commitment to using disciplined capital allocation to drive total shareholder return (TSR).” At its new annualized rate, Cliffs’ dividend represents a yield of 3.9% based on the company’s closing price of US$64.91 per share on the New York Stock Exchange on Mar. 13, places Cliffs’ yield at the top of its metals and mining peer group and near the top 10% of companies on the S&P 500, and increases Cliffs’ dividend payout ratio to over 20% of 2011 net earnings, the company said.

Energy and potash companies rose on speculation that U.S. economic growth will accelerate. Peabody Energy rose U$2.05 per share to close the week at US$33.25, on no news, while Agrium climbed US$2.83 to US$86.07, Mosaic rose US$1.98 to US$57.51, Potash Corp. of Saskatchewan increased US$1.89 to US$45.91 and Intrepid Potash gained US$1.23 to US$24.76.

Precious metals companies continued to struggle with the Philadelphia Gold and Silver index falling 5.1% to 177.33. Randgold Resources posted the biggest decline, dropping US$10.92 to US$101.49 on no news, followed by Royal Gold with a decrease of US$3.40 to US$63.57. In a research note to clients Mar. 16, Canaccord Wealth Management commented that much gold liquidation has already taken place and pointed to figures from the Commitment of Traders Report demonstrating that Comex net long positions in the week of Mar. 5-9 posted the largest weekly collapse since 2004.