Corporate earnings were once again
the catalyst for renewed investor confidence and eventually led the
benchmarks to their third consecutive day of gains. However,
markets had to endure another round of weak economic readings, as
initial claims rose, manufacturing contracted and existing home
sales came in below expectations. These dismal readings did limit
gains, but economic stimulus hopes lingered on to somewhat help the
benchmarks’ uptrend.
The Dow Jones Industrial Average
(DJI) gained 0.3% and closed at 12,943.36. The Standard & Poor
500 (S&P 500) edged up 0.3% to finish yesterday’s trading
session at 1,376.51. The tech-laden Nasdaq Composite Index
outperformed the fellow benchmarks as it rose 0.8% to end at
2,965.90. The fear-gauge CBOE Volatility Index (VIX) dropped 4.4%
and settled at 15.45. Consolidated volumes on the New York Stock
Exchange, the Nasdaq and the American Stock Exchange were roughly
6.5 billion shares, lower than the 50-day moving average of 6.7
billion shares. The advancers had a better run than declining
stocks on the NYSE, as for 51% of the gainers, 45% stocks closed in
the red.
Expectations had been anything but
robust during the onset of earnings season this time. However, till
now some market majors have delivered encouraging figures and have
helped the markets end in the green on certain days. Last Friday,
it was encouraging figures from financial bellwether JPMorgan Chase
& Co. (NYSE:JPM) that helped markets to reverse their six-day
losing streak.
This week too things have looked
somewhat bright on the earnings front. Through the week, The
Goldman Sachs Group, Inc. (NYSE:GS) Citigroup, Inc. (NYSE:C), The
Coca-Cola Company (NYSE:KO) and Mattel, Inc. (NASDAQ:MAT) reported
encouraging numbers. The technology sector too joined the party
following a positive earnings release from Intel Corporation
(NASDAQ:INTC).
Yesterday, it was yet again
corporate result that drove the markets upward. Another
tech-heavyweight International Business Machines Corporation
(NYSE:IBM) boosted sentiment after its second quarter earnings
surpassed estimates. The company’s shares rose 3.8%. Even more
encouraging was the fact that IBM upped its earnings forecast for
fiscal 2012. IBM hiked its earnings forecast at a time when other
tech companies including Advanced Micro Devices, Inc. (NYSE:AMD),
Applied Materials, Inc. (NASDAQ:AMAT) and Infosys Ltd ADR
(NASDAQ:INFY) have slashed their estimates.
The tech sector enjoyed an upward
rally and the Technology Select Sector SPDR (XLK) gained 0.9%.
Other tech companies such as Oracle Corporation (NASDAQ:ORCL), Red
Hat, Inc. (NYSE:RHT), Apple Inc. (NASDAQ:AAPL) and Dell Inc.
(NASADQ:DELL) jumped 1.2%, 3.1%, 1.3% and 1.3%, respectively.
Separately, eBay Inc. (NASDAQ:EBAY)
also added to the cheer following encouraging second quarter
numbers. The company managed to beat both the top and bottom-line
expectations. Meanwhile, eBay chopped its third-quarter earnings
estimate, but that did not stop the share from gaining 8.6%.
Amidst the positive numbers, Morgan
Stanley’s (NYSE:MS) second quarter figures were grim as it failed
to beat earnings as well as the revenue estimates. Consequently,
shares lost 5.3%. Another financial firm American Express Company’s
(NYSE:AXP) shares slipped 3.5% as its second quarter results failed
to impress.
While corporate results hogged the
limelight yesterday, some economic readings were also released.
However, these were mostly discouraging and somewhat tainted the
cheery mood. The U.S. Department of Labor indicated an uptrend in
initial claims. According to the report, the advance figure for
seasonally adjusted initial claims increased 34,000 from previous
week to 386,000 in the week ending July 14. Consensus estimates had
projected the reading to come in at 367, 000.
Housing data too was on the
negative side. The National Association of Realtors reported that
total existing home sales have dropped 5.4% from 4.62 million in
May to 4.37 million in June. Consensus estimates projected the
figure to be 4.64 million.
Separately, Philadelphia Federal
Reserve’s Business Outlook Survey for July continued to indicate
that manufacturing numbers were in the negative zone. It was the
third-consecutive contraction as the “survey’s broadest measure of
manufacturing conditions, the diffusion index of current activity”
moved to a negative 12.9 from negative 16.6 last month. This was
far short of consensus estimates that projected the index to
improve to a negative 6.22.
This week, markets have remained
upbeat about fresh economic stimulus. Federal Reserve Chairman Ben
Bernanke was critical about the economy in his congressional
testimony and he noted that the pace of improvement in unemployment
remains “frustratingly slow. However, the dismal economic
conditions, and the acknowledgement of this situation by Bernanke,
helped to spark of fresh hopes about a round of third quantitative
easing (QE3). On the second day of his testimony, he said: “It may
be possible that we will take additional action if we conclude we
are not making progress towards higher levels of employment.” Thus
hopes of QE3 once again grew stronger and lingered on to partially
help the benchmarks’ green finish. Eventually, thanks also to
positive corporate results, benchmarks are trading higher for the
week. With just a day more to go, the Dow, S&P 500 and the
Nasdaq are up 1.3%, 1.5% and 2.0%, respectively.
APPLE INC (AAPL): Free Stock Analysis Report
APPLD MATLS INC (AMAT): Free Stock Analysis Report
ADV MICRO DEV (AMD): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
DELL INC (DELL): Free Stock Analysis Report
EBAY INC (EBAY): Free Stock Analysis Report
GOLDMAN SACHS (GS): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
INFOSYS LTD (INFY): Free Stock Analysis Report
INTEL CORP (INTC): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
COCA COLA CO (KO): Free Stock Analysis Report
MATTEL INC (MAT): Free Stock Analysis Report
ORACLE CORP (ORCL): Free Stock Analysis Report
RED HAT INC (RHT): Free Stock Analysis Report
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