Stocks jump, but questions linger

The Dow surges 173 points, but General Motors closes below its opening price. Worries ease about Europe and there's better news about the US economy. Dell's results impress.

By Charley Blaine Nov 18, 2010 3:19PM

UpdatedCharley Blaine: 6:50 p.m. ET

 

Stocks had a big day, no question about it. The Dow Jones industrials ($INDU) closed up 173 points, or 1.6%, to 11,181. The other major indexes soared as well.


And General Motors (GM) finished its first day as a newly minted public company up 3.6% to $34.19.


But the close might have left some investors with something of a sour taste in their mouths.


The Dow had a nice gain, but it was off nearly 20 points from its high during the day. The Standard & Poor's 500 Index ($INX) was up 18 points, or 1.5% to 1,197, but it was unable to close above 1,200, a very important psychological level.


The Nasdaq Composite Index ($COMPX) jumped 39 points, or 1.6%, to 2,514.


GM's finish might be a concern. It opened at $35, hit nearly $36 and then fell back for the rest of the day. It was slightly lower after hours at $34.09. The pullback may reflect a concern that its IPO price of $33 a share was too high.

The common wisdom was that a good day was an 8% to 10% gain.

GM sold 478 million shares of common stock at $33 late Wednesday. In addition, the company sold 87 million shares of preferred stock with a 4.75% dividend at $50 each. In all, GM sold $20.1 billion in what is the largest U.S. IPO.

The total could top $23 billion if underwriters exercise options for an additional 71.7 million common shares and 13 million preferred shares.


Investors like Dell results

There was good news after the close from personal-computer maker Dell (DELL). Shares were up 8.8% to $14.53 after hours.


The company said fiscal-third-quarter earnings doubled from a year ago to $875 million or 45 cents a share after one-time charges. Wall Street was looking for 32 cents.


Revenue jumped 19% to $15.39 billion. Investors didn't seem to mind that the Street estimate had been $15.74 billion.


The results were driven by strong corporate, public and small- and medium-business sales. Consumer sales were up only 4% to $3 billion.


In addition, shares of Salesforce.com (CRM), a force in cloud computing, were up 9.1% after hours to $126.20 after beating Street estimates on fiscal-third-quarter earnings.

The company reported 32 cents a share in earnings per share, up 10% from a year ago. Revenue was up 30% to $429 million. The company also boosted guidance for the fourth quarter and for fiscal 2012.

Futures trading suggests a modestly higher open on Friday.


Energy prices -- New York close
 

Thur.

Wed.

Month chg.

YTD chg.
Crude oil 

$81.85

$80.44

0.52%

3.14%
(per barrel)











Heating oil

$2.2951

$2.2519

2.57%

8.48%
(per gallon)











Natural gas 

$4.0070

$4.0300

-0.77%

-28.09%
(per mil. BTU)











Unleaded gasoline

$2.2283

$2.1579

8.20%

8.54%
(per gallon)











Retail gasoline

$2.8880

$2.8920

2.81%

9.44%
(per gallon; AAA)












The rally starts in Asia, moves around the globe
The market opened higher and surged after GM shares opened above their $33 initial public offering price and the Federal Reserve Bank of Philadelphia offered a surprisingly robust view of manufacturing in the mid-Atlantic region.


Worries eased substantially about financial problems in Europe.


The market rally began in Japan and China and spread to Europe. The big catalyst to start was the ease in worries about European financial woes.

The European Union, the United Kingdom and others were trying to build a rescue package for Ireland's troubled banks. The aim is to stabilize the situation and prevent the problems from affecting other countries, especially Portugal and Spain.

The hopes allowed the euro to rise against the dollar. That pushed the U.S. Dollar Index lower and set off rallies in gold, copper, silver and oil. The dollar index measures the greenback against a basket of six currencies. The euro represents 57% of the value of that basket.

Gold settled up $16.10 an ounce to $1,353. Copper was up 10.2 cents a pound to $3.831, and silver added $1.32 an ounce to $26.83.

Crude oil, meanwhile, settled up $1.41 a barrel to $88.85 in New York and was at $81.96 in electronic trading after hours.

The 10-year Treasury yield rose to 2.902% from 2.862% on Wednesday.

A broad rally with some losers
Not surprisingly, companies that benefit from a lower dollar saw their shares gain.

Freeport-McMoRan Copper & Gold (FCX) is the poster child for this performance. Shares were up 3.1% to $99.85.


Dow component Alcoa (AA) was up 3.4% to $13.38. CEO Klaus Kleinfeld told the Financial Times that his company expects global demand for the metal to grow 6.5% a year, doubling total consumption by 2020.

Caterpillar (CAT) was up 2.4% to $83.11; Boeing (BA) up 3.4% to $64.61.

Transportation stocks were higher as well, in part because Union Pacific (UNP) boosted its dividend 15% to 38 cents a share. UP closed up 2% to $91.69. The stock is up 43.5% this year.

The Dow Jones Transportation Average ($DJT) was up 1.7% to 4,840. The index is up 18.1% for the year, compared with 7.2% for the Dow and 7.3% for the S&P 500.

Twenty-nine of the 30 stocks were higher, with Alcoa the leader and Intel (INTC) the one loser, down 0.3% to $21.01.

Eightly-seven Nasdaq-100 ($NDX.X) stocks were higher. The index was up 39 points, 1.8%, to 2,139. Apple (AAPL), up 2.6% to $308.43, contributed nearly 12 points to the gain. The company announced a European launch of its iAd mobile advertising network next month.

Stocks that were seeing big moves included:
  • NetApp (NTAP), up 7.9% to $53.12, tops among Nasdaq-100 stocks. The third-biggest seller of external computer-storage systems told analysts in a conference call Wednesday that it expects to gain market share and is considering share buybacks. The stock was also raised to a "buy" from a "hold" at Canaccord Genuity.
  • Limited Brands (LTD), up 4.4% to $33.26. The clothing retailer lifted its 2011 earnings-per-share estimate to a range of $1.82 to $1.97. Analysts had expected earnings of $1.94. The company also declared a $3-a-share special dividend and authorized a $200 million share repurchase program.
  • DryShips (DRYS), up 7.7% to $5.594. The Greek owner of deep-water drilling rigs and vessels that haul iron ore and coal reported that third-quarter profit rose 57% as revenue from drilling rigs gained.
  • Sears Holdings (SHLD), down 3.8% to $63.70, the biggest loser among S&P 500 stocks. The largest U.S. department-store chain said its third-quarter loss widened as consumers remained cautious given high jobless rates. Excluding one-time items, the loss was $1.71 a share, wider than the Street estimate of $1.11 a share.
  • Williams-Sonoma (WSM), down 10.4% to $32.09. The gourmet-cookware retailer forecast fourth-quarter revenue may rise as little as 3%. Analysts had estimated a 5% increase.
Some decent economic news
The really bullish economic news was the Philadelphia Fed's manufacturing report. The index surged in November, hitting 22.5 after October's level of 1. According to Briefing.com, economists had expected a reading of 5.

Meanwhile, the Labor Department said the number of new people seeking unemployment benefits rose by 2,000 to 439,000 during the week ended Nov. 13, fewer than the 7,000 additional claims economists had expected. 

The Conference Board said its gauge of October leading indicators rose 0.5% after similar growth in September. The increase was below the 0.6% increase economists had forecast.

Short hits from the markets -- New York close
 
  Thur.

Wed.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.130%

0.140%

8.33%

160.00%
5-year Treasury note 

1.488%

1.457%

26.21%

-44.60%
10-year Treasury note

2.902%

2.862%

11.10%

-24.49%
30-year Treasury bond

4.284%

4.276%

7.10%

-7.69%
Currencies







 

 
U.S. Dollar Index

78.729

79.210

1.64%

0.65%
British pound

$1.6051

$1.5916

-0.02%

-0.77%
(in U.S. $)











U.S. $ in pounds

£0.6230

£0.6283

0.02%

0.78%
Euro in dollars

$1.3650

$1.3535

-2.24%

-4.76%
(in U.S. $)











U.S. $ in euros

€ 0.7326

€ 0.7388

2.29%

5.00%
U.S. $ in yen 

83.68

83.15

3.43%

-10.02%
U.S. $ in Chinese

6.66

6.64

-0.51%

-2.43%
yuan











Canada dollar

$0.980

$0.977

-0.25%

3.09%
(in U.S. $)











U.S. dollar 

$1.021

$1.023

0.24%

-3.00%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,353.00

$1,336.90

-0.34%

23.43%
(per troy ounce)











Copper

$3.8310

$3.7295

2.61%

14.48%
(per pound)











Silver

$26.8340

$25.5110

9.24%

59.30%
(per troy ounce)











Wheat 

$6.4525

$6.3250

-10.04%

19.16%
(per bushel)











Corn

$5.4175

$5.2575

-6.92%

30.70%
(per bushel)











Crude oil 

$81.85

$80.44

0.52%

3.14%
(per barrel)










 

41Comments
Nov 18, 2010 5:15PM
avatar
Agreed "damm tired of this", if anybody out there thinks that the economy magically is all better just because a handfull of paid shills say so then I have some beachfront property is Arizona for sale to go along that bridge of yours. Lets see-a majority of people are living paycheck to paycheck, unemployment is actually over 10% (the BLS found an additional 600,000 unemployed from the census but decided not to report it or add it to the total until next year). Wal-Mart has had 6 consecutive quarters of declining sales in the US. Over 38 billion dollars have been pulled out of equities (401k's) this year by cash starved americans who needed the money to survive. I could write a book with all the bad economic data out there that shows this depression has only just begun. I guess "zzinstl" has never heard of the plunge protection team the government formed after the crash of '87 and has used to manipulate the markets since then.
Nov 18, 2010 4:53PM
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It's how it was sold. Bohama say it would result in cost reductions and savings. I understand Doc' cannot drive a Chevy.

 

You need to look into how the gov is manipulating the money and the market

 

And "how much power does the gov have?'  I say too much !!! especially when they molest 3 year old girls.

Nov 18, 2010 9:20PM
avatar

     $40K for a Chevy Volt, from a company that nearly derailed itself over a year ago, and was bailed out by the taxpayers to boot??? What a way to thank us with that cash cow.

      I'd rather spend $36K on a 370Z...

Nov 18, 2010 6:42PM
avatar
Same old stuff. Nothing changes while the rich milk the poor completely dry. Our Government, Corporate and Banking Industries are totally responsible for the shape this Country is in, and they are at it again. Bonus's anyone? Yes, much of America is living paycheck to paycheck--that is IF they have a job at all. Hey---I have an idea! Let's all spend $41,000.00 on a Chevy Volt! Foreign manufacturer's have timed the Volt's release perfectly. They are now offering their versions of the Volt for far less money--so what would you buy? The GM IPO is one that I absolutely refuse to be a part of. The only people who will make money on this IPO are the insiders anyway. If I wanted to invest in an American Automotive Company, it would have to be Ford. CEO Alan Mulalley is a rare breed. He is concerned for his investors as well as his Company. He refused to be a part of the bogus Government bailout. Ford is where they are today on their own merits. I wouldn't touch GM's stock with anybody's 10 foot pole and today's results indicate huge displeasure with the GM IPO debut. Is America finally getting fed up? I hope so, for the sake of our Children and Grandchildren. I don't think that the Feds realize there is a revolution going on. It's silent (so far) but deadly. This Country is mostly Rural and the normal American Citizen has lost all trust. My absolute BIGGEST laugh is Bank of America. Their advertizing should be put in the book "The World's biggest Lies". After all that BOA put their customers through (with deceit and minipulation), they are suddenly our best friend. If you buy into that, then you deserve to lose $41,000.00 on a Chevy Volt. All of a sudden new vehicles get MUCH better gas mileage---after the Government forced them to. The Auto Makers could have done this 20 years ago. Keep your eyes and ears open, Folks---but better yet---WATCH. Listen to what these Companies and our Government tell us, and then WATCH what they actually do. Going forward, if you are not completely alert, you may not even be able to live paycheck to paycheck. We better get "boned up" on our Bartering skills.
Nov 18, 2010 6:38PM
avatar
GM (i.e. US Motors these days) completely allowed the few shares I had in the company to be declared worthless. So I care not for how they fare in the future. I am not sure how many $40,000 Volts they'll need to sell to keep afloat, but I do think it's a travesty that the US government keeps hawking a $7500 taxpayer credit to justify buying one.
Nov 18, 2010 4:28PM
avatar
To 'canthit' and 'dam tired of this'; just how much power and control are you giving the Government?   A private company raises their insurance rates (as mine has done for the last six years) and, somehow, the "National Health Care cost reduction" (whatever that is??) is to blame?  The market does well and somehow the 'media', 'Wall Street', and the Government have made that happen?  Seriously people.   Take some time to try and figure out what is causing the problem.  If Washington had that kind of control over the markets, why wouldn't the market keep going up?  And how in the world does your insurance company's decision to charge you more (pure greed) relate to whatever the heckt he National Health Care cost reduction is?
Nov 18, 2010 4:14PM
avatar

Maybe it will go up as much has my companies Health Insurance rates , that I just got. So much for any raises this year, just have to figure out how to tell them they did get one, its all in your insurance.

 

Guess that National Health Care cost reduction is working as well as the markets. Its all  ***** up

Nov 18, 2010 9:54PM
avatar
You do realize that the federal debt increased under Reagan by 185% don't you? Do your research if you do not believe.
Nov 18, 2010 9:02PM
avatar

Even though I am an independent, I have to defend the Dems here.  In light of the wars he started in Iraq and Afghanistan, Bush should have either raised taxes or at least kept them the same.  The deficits created as a result of these policies left us with no ammunition to fight the economic meltdown of 2008.

 

As far as job creation is concerned, more jobs were created under the Clinton administration than were created under Reagan, Bush and Bush combined.

 

Tax cuts are nice, but they are only effective if they lead to economic growth to offset the cost.  When they go to people who don't spend them, they do very little to help grow the economy.  The Reagan tax cuts were a special case.  Prior to the tax reform bill of 1987, which receive strong bi-partisan support, the top tax rate was 70%.  Congress simplified the tax code and reduced marginal rates, resulting in a broader, flatter tax curve.  I hope the current Congress can do the same.

 

Nov 18, 2010 9:23PM
avatar

http: //articles.moneycentral.com/learn-how-to-invest/worst-investing-disasters-of-all-time.aspx?cp-documentid=28387584

 

Same crap, different time and date. Stupid greedy humans will never learn! Angry

Nov 18, 2010 8:01PM
avatar
I'm betting on $20 to 25 a share by Christmas. You know they are still in trouble by the 4.75% dividend yield on the preferred.
Nov 18, 2010 7:32PM
avatar
Anyone care to bet that GM is below $30 by Thanksgiving?
Nov 18, 2010 7:09PM
avatar
Read your history.  Reagan also raised taxes ( reinstated them) when he realized his foolish move. 
Nov 18, 2010 6:40PM
avatar
Oh come on. The government has always pumped currency in the economy to keep it in balance with the real wealth created by new assets, commodities and rising values.  How do you think we went from $3000 cars and $30,000 houses in the '60s to $30,000 cars and $300,000 houses now?  Do you really think everything is worth 10 times what it was?  There's no formula to making money other than looking for investmenst priced less than they're worth and then buying them and waiting for other people to catch up.
Nov 18, 2010 5:53PM
avatar

I missed the start of the recovery because I didn't buy in until it was 6800.  Darn the luck.

 

Concerning the Plunger police: The fed, JPMC, China and anyone one else of significant monetary weight are always trying to manipulate the markets in their favor.  But for every action there is an opposite action to counter balance these moves to maintain status quo.  although I must admit fear is hard to counter act because of the negative nature of reporting.  "If it bleeds it leads"

Nov 18, 2010 6:53PM
avatar

The Dems posting here don't seem to get it.. Reagan got it right when thhe cut taxes.  The old guy was smart and he brought back the sleeping giant.   Spending has never brought back an economy.  Even FDR admitted that all the spending they did during the depression was a complete waste.  Too bad.. We had an example of what works (cut taxes) and the Dems ignored history just for ideological purposes. Now, we have an extra trillion to pay off and we are still in great pain at 9.6% unemployment.   

Nov 19, 2010 2:19AM
avatar

The stock market is no longer a reliable gauge of our economy. They're are so many other indicators that point to a slow economy that whatever the stock market does is only significant to those playing the market, otherwise, its a bust.

 

How can you trust a system that has computers manipulating the outcome each day?! After the economic bust who would allow those proven untrustworthy to handle our money? No way!  

Nov 18, 2010 9:56PM
avatar
When Reagan was POTUS the US went from being the biggest creditor nation to the biggest debtor nation. Don't believe me? Look it up.
Nov 18, 2010 6:08PM
avatar
dam tired of this, you are so right. taxpayers bailed out GM, we will not get our money back, they will make it look that way on paper. Pump and dump is right. pump the market for the election so Dems aren't tightly overthrown in all seats and then pump the .... again to unload GM shares to provide money back to the unions for the next Pres run. I'm sure that Obama gets a cut from the unions somewhere out of this. GM will fail again. I just hope we don't bail them out again.
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