Dow jumps 181; Google tops estimates
Stocks may open lower after China's GDP report disappoints. Google announces a stock split. Stocks jump as top Fed officials see low interest rates for years to come because the recovery is so fragile. Oil and gold move higher.
Stocks rallied powerfully for the second day in a row Thursday thanks to a combination of hopes for a strong report on Chinese economic growth and the expectation the Federal Reserve won't be raising interest rates any time soon.
But after the major averages have recovered all of their losses from Tuesday's steep sell-off, China reported its economy grew 8% from a year ago in the first quarter, lower than expected. Futures trading suggests U.S. stocks will open lower on Friday.
Google (GOOG) shares were up modestly to $653.63 after hours after rising $15.05 to $651.01 in regular trading. The after-hours price suggests the company's plan for what is effectively a 2-for-1 stock split with a new class of nonvoting shares didn't create much excitement. One reason: It solidifies the control of founders Larry Page and Sergey Brin over the company. A second: It's not a cash dividend, which many investors want. Google's earnings, however, beat Street estimates; revenue was in line.
Before the close, investors shrugged off a Labor Department report that initial jobless claims moved up to 380,000 last week. Producer prices were little changed in March. Once energy and food prices were taken out, prices moved a little higher than expected. And, while gold (-GC) and crude oil (-CL) were higher, the AAA national average price of gasoline fell for the sixth straight day, to $3.907 a gallon, suggesting the big 2012 price run-up may have peaked.
The Dow Jones industrials ($INDU) rose 181 points to 12,987. The Standard & Poor's 500 Index ($INX) jumped 19 points to 1,388, pushing past 1,377, an important resistance level, which might have set off some selling. The Nasdaq Composite Index ($COMPX) was up 39 points to 3,055.
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The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, gained 32 points to 2,740. Apple (AAPL), which has the biggest influence on the index, was actually off $3.43 to $622.77.
European stocks also rallied strongly, in part because worries eased -- for Thursday anyway -- about debt problems in Spain and Italy.
A broad rally but modest volume
All 10 sectors of the S&P 500 were higher. So were 25 of the 30 Dow stocks, 465 S&P 500 stocks and 93 Nasdaq-100 stocks.
Hewlett-Packard (HPQ), up $1.69 to $25.10, was the leader among the 30 Dow stocks after technology market researcher Gartner said personal computer sales unexpectedly grew in the first quarter, with HP among the leaders.
Among stocks hitting all-time highs were Starbucks (SBUX), Sherwin-Williams (SHW) and Chipotle Mexican Grill (CMG)
The Dow's gain over the last two days is 271 points, the best two-day gain since Dec. 21. It was good enough to win back Tuesday's loss but not enough to move the index into the black for the week. The index is off about 0.6% for the week. The S&P 500, which also had its best two-day gain since Dec. 21, is looking at a 0.8% loss. The Nasdaq is off 0.8% for the week after its best two-day gain since March 8.
The Dow is off 1.8% in April, with the S&P 500 down 1.5% and the Nasdaq off 1.1%.
In addition to the importance of reports from China, Friday brings the Labor Department's March Consumer Price Index report. Also, the Reuters/University of Michigan Consumer Sentiment Index.
As important are first-quarter earnings reports from banking heavyweights JPMorgan Chase (JPM) and Wells Fargo (WFC), due before the open. JPMorgan is expected to earn $1.18 a share, down from $1.28 a year ago. Wells Fargo is seen earning 73 cents a share, up from 67 cents a share a year ago. Shares are up 34.9% and 23.4% this year, respectively.
Geopolitical concerns may creep into the picture after North Korea launched a long-range missile early Friday local time.
Futures trading suggests Thursday's excitement won't carry over into Friday, with the major indexes looking to open slightly lower.
What Google's stock 'split' means
Google's stock split isn't a pure stock split. Instead, it's the creation of a new class of nonvoting shares that will be distributed to shareholders on a one-for-one basis. The Class C shares will trade on Nasdaq, assuming shareholders agree to the idea at the company's June annual meeting.
In a letter to shareholders, founders Brin and Page Page said the company's board made the decision because investors wanted it. The company did not, however, not establish a cash dividend, which many investors have sought. Google has more than $44 billion in cash or equivalents on its balance sheet.
The plan reflects the belief of Page and Brin that "maintaining this founder-led approach is in the best interests of Google, our shareholders and our users."
Google's Class A shares are the shares that trade under the ticker "GOOG." Page, Brin and Executive Chairman Eric Schmidt effectively control the company through their holdings of Class B shares. The new plan would ensure their control.
First-quarter earnings of $10.08 a share after one-time charges beat Street estimates of $9.65 a share. Revenue was up 24.5% to about $8.14 billion once payments to advertisers were deducted and in line with Street estimates.
While revenue was up 24% from a year ago and earnings were up 26%, two key success measures seemed contradictory. Paid clicks grew 39% from a year ago and 7% from the fourth quarter. Cost per click fell 12% from a year ago and 6% from the fourth quarter.
About 54% of revenue came from outside the United States, up slightly from a year ago.
The company expects to make significant capital improvements.
Crude moves above $103; gold jumps over $1,680
Crude oil settled up 94 cents to $103.64 a barrel as traders speculated that central banks will stimulate economic growth. Brent crude was up $1.47 to $121.65 a barrel.
Natural gas (-NG), which had dropped to its lowest levels in 10 years on Wednesday finished lower again Thursday at $1.983 per million British thermal units, off a tenth of a penny.
Gold, meanwhile, settled up $20.30, or 1.2%, to $1,680.60 an ounce. Silver (-SI) was up $1.004, or 3.2% to $32.525 an ounce, and copper (-HG) climbed 8.1 cents, or 2.2%, to $3.7155 a pound.
The dollar was lower against major currencies. Interest rates were higher, with the 10-year Treasury yield at 2.049%, up from Wednesday's 2.028%.
|Energy prices -- New York close|
|Thur.||Wed.||Month chg.||YTD chg.|
|Crude oil (-CL)||$103.64||$102.70||0.60%||4.87%|
|Heating oil (-HO)||$3.1663||$3.1149||-0.12%||8.65%|
|Natural gas (-NG)||$1.9830||$1.9840||-6.73%||-33.66%|
|(per mil. BTU)|
|Unleaded gasoline (-RB)||$3.3567||$3.2955||1.47%||26.32%|
|(per gallon; AAA)|
China helped stocks; Friday may be a different story
The China effect on the markets stems from this: Thursday's rally was helped in large part by speculation that China would report year-over-year growth of at least 8.3%, perhaps more. That would be better than expected and better than U.S. growth.
But the Chinese government reported a year-over-year growth rate of 8.1%, a bit lower than hoped and the lowest level since 2009. It was also lower than the fourth-quarter year-over-year gain of 8.9%.
Futures trading was suggesting a down open for U.S. stocks.
Chinese growth has been a major factor in global growth over the last two years, to the point that Chinese real estate got sucked up into a bubble not unlike the real-estate bubble that hit the United States, Spain and other markets.
The government responded by raising reserve requirements on banks to cool off lending. That fed into concerns about global growth that have weighed on stocks, particularly in the last week or so.
Not so Thursday. You can see the China effect at work on materials, energy and industrials stocks, the strongest sectors of the S&P 500 today.
Freeport-McMoRan Copper & Gold (FCX) was up $2.11 to $37.89. Most of the copper from its Grasberg mine in Indonesia goes to China. U.S. Steel (X) jumped $2.06 to $29.37. Schlumberger (SLB) added $2.22 to $70.34. Chevron (CVX) was up $1.64 to $102.59. Coal-producer Alpha Natural Resources (ANR) jumped $1.45 to $16.08.
Caterpillar (CAT) rose $4.69 to $106.44. That gain contributed 33 points to the Dow Thursday.
The Fed mostly helped stocks
The Fed's role in today's rally is just about as important as China's. Bill Dudley, the president of the New York Federal Reserve Bank, told a business audience in Syracuse, N.Y., today that the economy is showing signs of life. But he cautioned against too much optimism.
So, he supports the Fed's expectation that interest rates will remain at or near 0% until 2014.
Dudley's comments came after Fed Vice Chairman Janet Yellen also said in a New York speech that she sees low rates for another two years. Her concern: "An exceptionally large fraction of those now unemployed -- more than 40% -- have been out of work for six months or more."
If they can't find jobs, their job skills deteriorate and the economy is forced to support them for longer stretches of time.
Getting the economy to grow more quickly becomes a necessity, "The risk that continued high unemployment could eventually lead to more-persistent structural problems underscores the case for maintaining a highly accommodative stance of monetary policy," Yellen said.
Yellen's and Dudley's views aren't shared by all at the Fed. Also speaking Thursday, Narayana Kocherlakota, president of the Federal Reserve Bank of Minneapolis, said in a Thursday speech that he thinks the Fed should start moving to end its low-rate policy by the end of this year or early 2013.
Leaders and laggards
AT&T (T) gained 39 cents to $30.84 after the company’s shares were raised to the equivalent of "buy" at JPMorgan Chase. The nine-month share-price estimate is $33.
McKesson (MCK) jumped $3.44 to $91.34 and hit a 52-week high of $92.69. The largest U.S. drug distributor based on revenue rose to its highest level since 1998 after the company won a $31.6 billion contract from the Department of Veterans Affairs.
Avid Technology (AVID) fell $1.78 to $8.50. The maker of software for digital audio and video production said first-quarter revenue was about $152 million, missing the average analyst estimate of $161.3 million.
Illumina (ILMN) slipped $3.06 to $49.51. Swiss pharmaceutical equipment maker Roche Holding (RHHBY) sent a letter to shareholders of the maker of DNA analysis equipment, indicating negotiations may lead to a higher offer than the $51-a-share all-cash bid.
Rite Aid (RAD) rose 2 cents to $1.72. The third-biggest U.S. drugstore chain reported a fourth-quarter loss of 18 cents a share, wider than the average analyst estimate of a loss of 14 cents a share.
|Short hits from the markets -- New York close|
|Thur.||Wed.||Month chg.||YTD chg.|
|13-week Treasury bill||0.0900%||0.090%||28.57%||800.00%|
|5-year Treasury note||0.890%||0.878%||-14.67%||7.23%|
|10-year Treasury note||2.049%||2.028%||-7.54%||9.51%|
|30-year Treasury bond||3.207%||3.185%||-4.13%||11.01%|
|U.S. Dollar Index||79.449||79.993||0.39%||-1.33%|
|(in U.S. $)|
|U.S. $ in pounds||£0.627||£0.628||0.35%||-2.61%|
|Euro in dollars||$1.32||$1.31||-1.21%||1.74%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.759||€ 0.763||1.23%||-1.71%|
|U.S. $ in yen||80.97||80.87||-2.43%||5.02%|
|U.S. $ in Chinese||6.32||6.31||0.05%||-0.04%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$103.64||$102.70||0.60%||4.87%|
Are the Repubs still running for the big house?? Don't hear very much except Santorum quit and that's about it. The sounds of silence!! Really it is enjoyable not to listen to or read all the garble.
Low rates???? Even 0% won't help those who don't have a job!
You don't understand how financing and interest rates impact the labor market, do you? Lower rates spur borrowing. Borrowing spurs capital improvement projects, home buying, vehicle purchases, etc. Those purchases increase demand in other industries (home improvment, lumber, materials like alum. and copper, etc, etc, etc) and the increase in demand affects hiring.
The 1 %'ers control the market the average investor get fleeced.
Funny, I've been in the market for over a decade (since my early 20s) and I've yet to be fleeced... Maybe you just don't know what you're doing. More likely you don't even participate in equities investing.
"Stocks Jump On Hopes For Low Rate"
Here we go again with "Hope". The real reason stocks went up today is because the "Thieves of Wall St" who control the market wanted it to go up.
The China effect on the markets stems from this: The government will report first-quarter gross domestic product late tonight eastern time. The report is expected to show at least 8% growth from a year ago or higher.
Wasn't just a few weeks ago that China said their GDP was going to slow down over the next few years? Personally, I could care less what China says, I don't believe a word they say and they are not to be trusted.
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[BRIEFING.COM] The major averages ended higher across the board as the S&P 500 advanced 0.8%.
Equities climbed steadily since the opening bell as investors prepared for tomorrow's policy decision from the Federal Reserve. Although chatter in recent weeks has included speculation the Fed would look to taper its asset purchases, today's broad gains suggest investors expect mostly reassuring words from Chairman Bernanke at tomorrow's press conference.
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