Dow up 204, breaks 6-day losing streak
Gains for JPMorgan Chase and Wells Fargo plus hopes for more stimulus in China fuel the month's biggest rally. The Dow and S&P 500 end the week in the black. Crude oil and gold move higher.
Updated: 7:30 p.m. ETStocks surged today to their biggest gains since June 30 after banking giants JPMorgan Chase (JPM) and Wells Fargo (WFC) delivered better-than-expected results. At the same time, investors bet that China will engage in more stimulus to boost its economy after reporting its slowest growth in three years.
The rally was strong enough that the Dow Jones Industrial Average ($INDU) and the Standard & Poor's 500 Index ($INX) not only snapped six straight days of losses but ended the week with small gains.
JPMorgan was up $2.03 to $36.07 and was the best-performing Dow stock after CEO Jamie Dimon predicted the company would report record profits in 2012 despite the trading loss that cut profit by $4.4 billion in the quarter. Wells Fargo shares rose $1.06 to $33.91 after reporting a 17% earnings gain from a year ago, fueled in part by robust results from its mortgage business, the nation's largest. The growth in mortgages fueled gains in housing stocks as well.
The rally gives investors hope that the second-quarter earnings season might prove better than expected. Eight-eight S&P 500 stocks, including seven Dow components, are set to report next week.
The Dow closed up 204 points to 12,777. The S&P 500 gained 22 points to 1,357. The closes for the two indexes were their best since July 5. The Nasdaq Composite Index ($COMPX) rose 42 points to 2,908. The Nasdaq-100 Index ($NDX) climbed 40 points to 2,585. Apple (AAPL), the biggest influence on the index, was up $6.07 to $604.97.
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The rally came as stocks in Europe moved nicely higher -- even in Italy a day after Moody's Investors Service downgraded its debt -- and were mostly higher in Asia. The euro was higher against the dollar and boosted prices for gold (-GC) and light sweet crude oil (-CL) in New York. At the same time, drought worries added to recent increases in grain prices.
This was the kind of rally that resulted from many bears expecting the worst news out of China and from JPMorgan and Wells Fargo.
When the results turned out differently, short-sellers were forced to buy stocks to close their positions.
The big question from the rally is whether it was simply short-covering or a possible bottom. The major indexes ended the day above their simple 200-day and 50-day moving averages, often signals of investor confidence.
Their 14-day relative strength indexes, which measure closing prices against changes over the prior 14 sessions, are in the 50s. That's neither hot nor cold.
An ugly bout of losses ends
Not only did the rally end six-day losing streaks for the Dow and S&P 500, it snapped a five-day losing streak for the Nasdaq. The Dow ended the week up a whopping 5 points, or 0.04%; the S&P 500 finished with a 2-point gain for the week, or 0.1%. The Nasdaq was off 0.9%.
For the year, the Dow is up 4.6%, with the S&P 500 up 7.9% and the Nasdaq up 11.6%.
Financial stocks were by far the market leaders. JPMorgan Chase was the top S&P 500 stock as well as the top Dow stock. Citigroup (C), up $1.37 to $26.65, was fifth. Genworth Financial (GNW) and Bank of America (BAC) were the eighth- and ninth-best performers, respectively. The S&P 500 financial sector was up 2.76% to 198.
The one downside to the rally was a small decline in the University of Michigan's Consumer Sentiment Index. That was fed by uncertainty about the economy's prospects.
China was also a potential downside, but not yet. The government reported its economy grew 7.6% from a year ago, a rate that Western nations would love to have, but it is an annualized rate in the second quarter. That was the lowest growth rate in three years, and some analysts believe the economy is in worse shape than that. And so they bet today that the China will move to stimulate the economy.
But there are some good points. The Chinese economy was stronger in the second quarter than in the first, and retail sales were surprisingly strong.
| Markets for the week | ||||||||||||
| 7/13/2012 | 7/6/2012 | % chg. | YTD chg. | |||||||||
| Dow Industrials | 12,777.09 | 12,772.47 | 0.04% | 4.58% | ||||||||
| S&P 500 | 1,356.78 | 1,354.68 | 0.16% | 7.89% | ||||||||
| Nasdaq | 2,908.47 | 2,937.33 | -0.98% | 11.64% | ||||||||
| Russell 2000 | 800.99 | 807.14 | -0.76% | 8.11% | ||||||||
| Crude oil | $87.10 | $84.45 | 3.14% | -11.87% | ||||||||
| (per barrel) | 0.00 | 0.00 | 0.00% | 0.00% | ||||||||
| U.S. Dollar Index | 83.47 | 83.56 | -0.10% | 3.67% | ||||||||
| 10-yr. Treasury | 1.50% | 1.54% | -2.91% | -19.88% | ||||||||
| Gold | $1,592.50 | 1,578.90 | 0.86% | 1.64% | ||||||||
Crude oil and gold move higher
Crude oil settled up $1.02 to $87.10 a barrel. Brent crude was up $1.69 to $102.76 a barrel.
The national average price of gasoline was up slightly to $3.388 a gallon from Thursday's $3.384. Gasoline climbed 0.9% this week and is up 3.4% for the year, according to AAA's Daily Fuel Gauge Report.
Gold settled up $26.80 to $1,592 an ounce and gained 0.86% for the week.
Interest rates were higher, with the 10-year Treasury yield hitting 1.503%, up from Thursday's 1.479%. The dollar was lower against major currencies.
Corn (-ZC) rose 7.75 cents a bushel because of drought concerns. It's up 16.6% this month alone.
| Energy prices -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $87.10 | $86.08 | 2.52% | -11.87% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $2.7882 | $2.7733 | 2.89% | -4.32% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $2.8740 | $2.8740 | 1.77% | -3.85% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.8161 | $2.8062 | 7.00% | 5.97% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $102.40 | $101.07 | 4.70% | -4.64% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.3880 | $3.3840 | 1.04% | 3.42% | ||||||||
| (per gallon; AAA) | ||||||||||||
About JPMorgan's big trading loss -- and profits
The big trading loss cost JPMorgan Chase $4.4 billion in the second quarter. But it now is up to $5.8 billion. And the company said traders might have tried to conceal the extent of the losses earlier this year.The bank still managed to earn nearly $5 billion in the second quarter and said it is in the process of fixing problems in the Chief Investment Office, which was responsible for the trading losses. In the worst-case scenario, JPMorgan will lose another $1.7 billion on the trades, it said.
But JPMorgan's disclosure that traders may have deliberately lied about their positions could bring even more intense regulatory scrutiny to the bank, analysts told Reuters. It is already under investigation by everyone from the FBI to the UK's Financial Services Authority.
JPMorgan said misvaluations for the first quarter had overstated the CIO's net income for the period by $459 million.
The big trade, which was supposed to hedge the bank against European financial stresses, was so badly executed that the company is yanking back two years of salaries from the three traders responsible. All three have left the bank.
The bank posted second-quarter net income of $4.96 billion, or $1.21 a share, compared with $5.43 billion, or $1.27 a share, a year earlier. The derivative loss after taxes reduced earnings per share by 69 cents, the company said.
Mortgage lending was strong during the quarter, which helped results. The bank reduced the amount of money it had previously set aside to cover bad loans. That reduction boosted profit by $2.1 billion before taxes.
The trading loss cost JPMorgan as much as $37 billion in market capitalization after the stock sank from $40.74 the day the company disclosed the bad trade and its bottom on June 4. The stock up nearly 16% since June 1. So, the shareholders have seen their losses trimmed to just $18.7 billion.
Wells Fargo's big day
Where JPMorgan is a global enterprise, Wells Fargo is more domestically oriented, especially on its mortgage business.
Wells Fargo said revenue from mortgage banking jumped almost 80% from a year earlier, to $2.9 billion, as low interest rates enticed homeowners to refinance, while a U.S. government program helped struggling homeowners do the same. Mortgage originations rose 1.6%, adding to strong first-quarter volume, to $131 billion.
While the mortgage business is going well -- so long as there's a housing recovery -- Wells Fargo also benefited from loan growth, growth in credit cards and reduced loan losses.
But the mortgage business is not perfect. On Thursday, the bank announced it had agreed to a $175 million settlement with the Department of Justice over allegations that it discriminated against Hispanic and African-American mortgage holders. The company insisted it had done nothing wrong and that the problems came with loans originally made by mortgage brokers.
A busy week ahead
Think this week had enough drama for you? Wait until next week.
Seven Dow components will report quarterly results: Intel (INTC), Johnson & Johnson (JNJ) and Coca-Cola (KO) on Tuesday; Bank of America (BAC) and IBM (IBM) on Wednesday; Microsoft (MSFT) on Thursday and General Electric (GE) on Friday. (Microsoft publishes MSN Money.)
Also reporting are Citigroup, Goldman Sachs (GS) and Yahoo (YHOO) on Tuesday; eBay (EBAY) and Yum! Brands (YUM) on Wednesday; Google (GOOG) and Sherwin-Williams (SHW) on Thursday; and Schlumberger (SLB) and Xerox (XRX) on Friday.
Economic reports for the week include retail sales on Monday; the Consumer Price Index (CPI) on Tuesday; housing starts on Wednesday; and existing-home sales and the Philadelphia Federal Reserve Banks's manufacturing index on Thursday.
Federal Reserve Chairman Ben Bernanke testifies before Congress on the economy Tuesday and Wednesday. The Fed releases its Beige Book report on Thursday.
| Short hits from the markets -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.0900% | 0.100% | 12.50% | 800.00% | ||||||||
| 5-year Treasury note | 0.630% | 0.627% | -13.58% | -24.10% | ||||||||
| 10-year Treasury note | 1.499% | 1.479% | -9.64% | -19.88% | ||||||||
| 30-year Treasury bond | 2.584% | 2.564% | -6.48% | -10.56% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 83.474 | 83.809 | 2.11% | 3.67% | ||||||||
| British pound | 1.5581 | 1.5439 | -0.78% | 0.28% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.642 | £0.648 | 0.79% | -0.28% | ||||||||
| Euro in dollars | $1.22 | $1.22 | -3.01% | -5.51% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.817 | € 0.820 | 3.11% | 5.83% | ||||||||
| U.S. $ in yen | 79.26 | 79.28 | -0.61% | 2.80% | ||||||||
| U.S. $ in Chinese | 6.39 | 6.37 | 0.25% | 0.98% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $0.000 | $0.982 | -100.00% | -100.00% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $1.014 | $1.019 | -0.49% | -0.64% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,592.00 | $1,565.30 | -0.76% | 1.61% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.504 | $3.415 | 0.21% | 1.98% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $27.369 | $27.161 | -0.88% | -1.96% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $8.4775 | $8.4675 | 11.95% | 29.87% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $7.4025 | $7.323 | 16.62% | 14.50% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $0.7266 | 0.6993 | 1.86% | -20.75% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $1.8610 | 1.8205 | 9.02% | -18.96% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $87.10 | $86.08 | 2.52% | -11.87% | ||||||||
| (per barrel) | ||||||||||||
if anyone still keeps any of their personal or business money in any of these big banks, you're a fool. There are plenty of small community banks and credit unions that will take care of you much better. It's reassuring to walk into my bank and see the same faces for years and they know me.
We make the "too big to fail" banks and when they collapse we get the short end of the stick.
Im Confused here.............
this is what I mean when I say sometimes it should make us wonder what type of education the stock market investors/gamblers have.......
"stocks rally on hopes for big US banks" yet chase just lost close to 5.5 billion in a bad trade deal and Wells Fargo was just fined $175 million, which is actually a lot less than the real number they were fined, and yet some how stock market idiots think that the "Big US Banks" have made a turn around and have learned there lesson from the last time??????????? right.......... dumb people....... the only reason stocks should go up is when the PEOPLE of the US are doing good as in they are able to pay their bills, feed their kids and long story short have a JOB. The banks can't save the world economy yet all the governments in the world main focus is to SAVE THE BANKS......
Don't blame the Banks... blame the Democrats. Are you serious!!??!!
A) Look at the video of Bush during the signing of the American Dream Mortgage Act of 2003. Not only is he pushing for increased housing for minorities but also suggesting that they need help with down payments. (This is easily found on YouTube and yes, the words actually come out of his lips) So lets put some blame with Bush too.
B) During this same period many state Attorney Generals started to look into increased predatory lending. The national banks called foul and the Federal OCC agency (this during Bush's presidency who appointed the banking regulators) invoked a clause from the 1863 National Bank Act pre-empting all state predatory lending laws. So yes, LETS BLAME THE BANKS TOO since one would have to ask why the banks would want to over ride predatory lending rules if they were being "forced" to make these loans.
C) In 2004 the FBI issued a report concerning increased mortgage fraud which was ignored by the Feds, (a Republican controlled congress and presidency)
D) And go back to my post about Wall Street's role in this mess.
To solely blame the Democrats for this mess is beyond belief. Can't you do any research on your own or do you only allow yourself to be spoon fed BS????
Since Obama's Presidency folks (like you) have gotten mad and take America Back...BACK TO WHAT/WHERE is my question? After The 8 Years Of The Bush/Cheney Disaster, Now You Get Mad? YOU DIDN'T GET MAD When:
Supreme Court stopped recount and appointed a President.
Cheney allowed Energy Co's to dictate policy to invade Iraq.
Illegally invaded Iraq, posed no threat to US.
Spent billions on said illegal war.
Borrowed money from foreign sources than the previous 42 Presidents
10 billion dollars disappeared in Iraq
Bush embraced trade outsourcing policies, 6 million American jobs out of the US
Didn't catch Bin Laden
Rang up 10 trillion dollars in budget deficits.
Horrible conditions at Walter Reed.
Gave people who had more money than they could spend the 1%, trillions in tax breaks.
Worst 8 years job creations in several decades.
Over 200,000 US Citizens lost their lives because they had no health insurance.
Lack of oversight/regulations from Bush Administration caused US Citizens to lose 12 trillion dollars in investments, retirement, home values.
Finally got mad when Obama was elected President and decided that people in America deserved the right to see a doctor if they are sick. Yes, illegal wars, lies, corruption, torture, job losses by the millions, stealing your tax dollars to make the rich richer, and the worst economic disaster since 1929 all okay with you, but helping fellow Americans who are sick... Oh, Hell No!
Make a difference get educated, stop complaining - Vote OBAMA 2012
"But the mortgage business is not perfect. On Thursday, the bank announced that it had agreed to a $175 million settlement with the Department of Justice over allegations that it discriminated against Hispanic and African American mortgage holders. The company insisted it had done nothing wrong and that the problems came with loans originally made by mortgage brokers."
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