Stocks recovered off a negative session to close higher in reaction to testimony by Fed Chairman, Ben Bernanke and assumptions made around that testimony. Bernanke shared his concerns over a continued slowdown in U.S. economic growth while reassuring financial markets that the central bank is prepared to act if further stimulus is needed. Also, better than expected corporate earnings in the U.S. helped raise investor sentiment.
Markets had a negative first-reaction to Bernanke’s speech today as no concrete statements were made regarding QE3. Once investors had the chance to sift through the reports, markets rebounded as indications from Bernanke were clear that progress in reducing the unemployment rate will be “frustratingly slow”, causing the central bank to stand ready to take further action to stimulate growth. Bernanke did warn, however, that stimulus tools should not be used lightly as there are associated questions regarding the risks and side effects of such programs.
On the economic front, reports released by the Labor Department, indicated that June consumer prices were flat and in line with expectations, as gasoline prices continued to fall. While Industrial production rose 0.4% (0.3% expected), slowing second quarter growth remains evident, as manufacturing output rose at a meager 1.4% on an annual basis.
According to Thomson Reuters, of the 46 S&P 500 companies that have reported so far, 72 percent have topped above estimates, while 13 percent have missed. If all remaining companies report profit in line with expectations, earnings will be up 6 percent from second quarter last year.
Have a good Tuesday night!
Market Indices/Statistics:
- Dow closed up 78.33 pts/+0.62% to 12,805.54
- S&P closed up 10.03 pts/+0.74% to 1,363.67
- Nasdaq closed up 13.10 pts/+0.45% to 2,910.04
- 25 of the 30 Dow stocks closed higher
- All 10 S&P 500 sectors closed up
- Healthcare was the most positive sector (+1.32%); IT was the least positive sector (+0.22%)
- The VIX ended down 0.63 at 16.48
- Oil is up $0.69 to $89.50
- Nat Gas is down $0.006 to $2.787
- Gold is down $9.10 to $1,582.50
- Euro vs. Dollar is down $0.0004 to $1.2289
- Dollar vs. Yen is up $0.03 to $79.07
Top Headlines:
J.C. Penney Co Inc. (JCP, -$0.33/-1.7% to $19.25) was under pressure today after Citigroup cut its price target to $24 from $40.
According to sources, FedEx Corp (FDX, -$0.67/-0.7% to $91.25) will need to fend off competition from United Parcel Services (UPS, +$0.16/+0.2% to $79.33) to hold on to a contract with the U.S. postal service valued at over $1 billion.
Yahoo! Inc. (YHOO, -$0.05/-0.3% to $15.60) was in focus today after announcing that the company named former Google (GOOG, +$1.99/+0.3% to $576.73) executive, Marissa Mayer as its new president and CEO. Yahoo! also announced adjusted Q2 EPS of $0.27 vs. estimates of $0.23; revenue was $1.22 billion vs. $1.1 billion expected by analysts.
Earnings:
Comerica (CMA, +$1.18/+3.8% to $31.99) reported Q2 EPS of $0.73 vs. estimates of $0.62; total loans grew about 10 percent to $43.22 billion, boosted by about a 20 percent rise in commercial loans. Net interest income rose to $435 million, up from $391 million a year earlier.
Cocoa-Cola (KO, +$1.21/+1.6% to $77.69) reported Q2 EPS of $1.22 vs. estimates of $1.19; revenue was $13.09 billion, better than the $12.98 billion expected by analysts. Sales volumes were more robust both domestically and abroad which helped drive positive earnings though the company does still remain wary of the crisis in Europe, the sluggish economic recovery in the U.S. and the slowdown in the Chinese economy.
Forest Labs (FRX, +$0.64/+1.8% to $35.82) reported adjusted Q1 EPS of $0.28 vs. estimates of $0.24; revenue was $821.1 million, less than the $830.33 billion expected by analysts. Earnings were down 79% as generic competition impacted sales of its antidepressant Lexapro. However, the company also said efforts to diversify its product portfolio were paying off, with its three newest drugs selling well.
Goldman Sachs (GS, +$0.30/+0.3% to $97.98) reported EPS of $1.78 vs. estimates of $1.17; revenue was $6.63 billion, better than the $6.28 billion expected by analysts. State Street Corp (STT, -$2.81/-6.4% to $41.33) said it will buy Goldman Sachs's hedge fund administrator for $550 million in cash. State Street Corp also reported Q2 EPS of $0.98 vs. estimates of $0.97; revenue was $2.42 billion, lower than the $2.43 billion expected by analysts.
Johnson & Johnson (JNJ, +$0.55/+0.8% to $69.00) reported adjusted Q2 EPS of $1.30 vs. estimates of $1.29; revenue was $16.5 billion, lower than the $16.69 billion expected by analysts. Negative foreign-exchange factors lead to lower-than-expected quarterly sales.
TD Ameritrade (AMTD, -$0.13/-0.8% to $16.27) reported Q3 EPS of $0.28 vs. estimates of $0.26; revenue was $667 million, better than the $660.8 million expected by analysts. Although trading levels fell, reduced expenses helped drive earnings.
Earnings after the Bell:
Intel Corp (INTC, +$0.25/+1.0% to $25.38) reported Q2 EPS of $0.54 vs. 0.52; revenue was $13.5 billion, less than the $13.56 billion expected by analysts.
United Rentals (URI, +$0.30/+0.9% to $34.43) reported adjusted Q2 EPS of $0.66 vs. estimates of $0.56; revenue was $993 million, lower than the $1.08 million expected by analysts. The company believes that it will see a 6.5% year over year increase in rental rates.
Coming Tuesday:
Economic Reports: Weekly Mortgage Applications (-2.1% expected) at 7:00 a.m.; June Housing Starts (745k expected) and Building Permits (765k expected) at 8:30 a.m.; Fed’s Beige Book at 2:00 p.m.
Earnings Abbott Laboratories (est:$ 1.22), American Express Co. (est:$ 1.09), Bank of America Corp. (est:$ 0.16), Bank of New York Mellon Corp. (est:$ 0.5), BlackRock Inc. (est:$ 3.03), Delta Air Lines Inc. (est:$ 0.68), Honeywell Intl Inc. (est:$ 1.11), Intl Business Machines Corp. (est:$ 3.43), Kinder Morgan Energy Partners L.P. (est:$ 0.47), Knight Capital Grp Inc. (est:$ 0.11), PNC Fincl Svcs Grp Inc. (est:$ 1.19), St. Jude Medical Inc. (est:$ 0.87), Stanley Black & Decker Inc. (est:$ 1.52), Stryker Corp. (est:$ 0.99), U.S. Bancorp (est:$ 0.7), W.W. Grainger Inc. (est:$ 2.62), Yum! Brands Inc. (est:$ 0.7). Nasdaq Earnings: ASML Hldg N.V. (est:$ 0.87), Check Point Software Tech Ltd. (est:$ 0.76), eBay Inc. (est:$ 0.55), Ericsson ADR (est:$ 0.12), QUALCOMM Inc. (est:$ 0.86)
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