Industrials outperformed the market Wednesday, with the sector up around 0.8%, compared with a Dow Jones Industrial Average that was nearly flat at a 0.07% increase. Markets reacted favorably to news out of Europe, as Germany's equivalent of the Supreme Court issued a ruling friendly to the future of the euro. Investors also seemed to evince confidence that the Federal Reserve will issue a new round of monetary stimulus when their meeting concludes on Thursday. Manufacturers with strong exposure to Europe surged today, as did capital-goods suppliers geared to the American market.
On Wednesday, Germany's Federal Constitutional Court issued a preliminary ruling that approved the German parliamentary decision to contribute to the European Stabilization Mechanism, a massive fund meant to support the credit of troubled peripheral economies including Italy and Spain. Germany is now clear to contribute 190 million euros of the fund's 500 million euro total ($645 million), which is expected to be used to buy bonds to push prices down. On the news, the yield on Spanish and Italian debt fell, signifying greater investor confidence that these economies will eventually thrive.
Accordingly, companies that are geared to European consumer demand rose today. Terex
Similarly, Tata Motors
The single biggest gainer in the industrials segment on Wednesday, however, was British defense contractor BAE Systems (NASDAQOTH: BAESY.PK), which gained nearly 12% on news of a potential merger. The company is considering joining forces with the European Aeronautic, Defense, and Space Company, known as EADS, which produces the popular Airbus line of commercial passenger planes. Executives from both companies claim that the merger is meant to form a global counterweight to aeronautics powerhouse Boeing
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