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.

By Charley Blaine Apr 12, 2012 1:15PM
Charley BlaineUpdated: 12:53 a.m. ET,  Friday

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.

Article continues below.
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%
(per barrel)











Heating oil (-HO)

$3.1663

$3.1149

-0.12%

8.65%
(per gallon)











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)











Brent crude 

$121.71

$120.18

-0.95%

13.35%
(per barrel)











Retail gasoline

$3.9070

$3.9150

-0.46%

19.26%
(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.
Treasury yields











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%
Currencies











U.S. Dollar Index

79.449  79.993  0.39%  -1.33%
British pound

1.5954  1.5913  -0.35%  2.68%
(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%
yuan

            
Canada dollar

$1.004  $0.997  0.14%  2.31%
(in U.S. $)

          
U.S. dollar 

$0.997  $1.003  -0.13%  -2.25%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,680.60

$1,660.30

0.52%

7.26%
(per troy ounce)











Copper (-HG)

$3.721

$3.640

-2.73%

8.28%
(per pound)











Silver (-SI)

$32.5250

$31.5210

0.13%

16.51%
(per troy ounce)











Wheat (-ZW)

$6.3925

$6.2800

-3.25%

-2.07%
(per bushel)











Corn (-ZC)

$6.3750

$6.360

-1.01%

-1.39%
(per bushel)











Cotton 

$0.8980

0.883

-4.39%

-2.05%
(per pound)











Coffee

$1.8425

1.8265

-0.41%

-19.77%
(per pound)











Crude oil (-CL)

$103.64

$102.70

0.60%

4.87%
(per barrel)










 

106Comments
Apr 12, 2012 1:31PM
avatar
This country would be a whole lot better off if suddenly the Oil Speculators dropped off the face of the earth. These maggots are like parasites who are feeding off the working and poor people in this country. Even if the Iran situation is resolved, it will mean nothing because they will find some other BS reason to keep oil prices high. The sad thing is that our useless government will do nothing about it.
Apr 12, 2012 4:26PM
avatar

I can't put gas in my car. I can't put food on the table at a reasonable price. Natural gas is at a new low, but my bill has not gone down. AND... I am fully employed with a 40+ hr a week job and a decent second job for 20 hrs a week. (Just to make ends meet)

I'm confused...

How are things getting better?

Apr 12, 2012 1:46PM
avatar
I'm holding out until the Fed cuts interest rates to negative numbers and banks will have to pay me interest on my next mortgage.
Apr 12, 2012 5:13PM
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Jobless claims rose by an ADDITIONAL 13 K last week, stocks soar!!!!!!!!

 

Here's the deal folks.  The market crash of 2008 gave all businesses and government an excuse the ERASE a majority of the work force(stocks rally).  With these employees out for good( no more benefits), yes good, all that extra cash goes into their pockets(stocks rally), in addition to all the tax dollars they pocketed from the bailouts(stocks rally).  The workforce that survived will work longer hours for less pay until corporate throws you in the trash as well(stocks rally).  Show no loyalty, do your paid hours, get what you can when you can, have a plan B and you'll be alright.   Pity the rich, don't envy these fools, and by no means vote for them.. 

Apr 12, 2012 1:42PM
avatar
Low rates???? Even 0% won't help those who don't have a job!  
Apr 12, 2012 1:45PM
avatar

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. 

Apr 12, 2012 3:27PM
avatar

I personally am totally finished investing with anything that has anything to do with wall street or the nations big 5 banks.  The fall of 08 and continuing decline of Americans citizenship rights and the complete disregard for the laws by wall street and the big banks have made it obvious that investing in these dinosaurs is investing in your own financial downfall.  They both cheat and lie and steal becuase they have no fear of the government.  Why?  Because they have bought and paid for the gov.  And I mean Republicans and Democrats alike.  If your not wealthy in this country anymore your rights are disappearing quickly.  The banks  are in the middle of the biggest land grab in history.  And they plan on renting the properties back to the very families they are forclosing on.  And what average idiot is going to invest in wall street again after so manys 401k retirement funds were raided, devalued and trashed.  These crooks care less if your life is ruined.  They actually think it is a feather in their caps if they can steal your house.

It is the spring of Occupy Wall Street.     Long live OWS

Apr 12, 2012 1:51PM
avatar

"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. 

Apr 12, 2012 5:13PM
avatar
its bad enough the wall street speculators screw with the market ,why does the fed find it necessary to do the same? Yesterday oil went up because the fed (energy department) said oil stores went down, of course gas stores went up. today first time unemployment claims were 30,000 higher then the fed expected and wall street celebrates with a rally, go figure. i am sure high gas prices didn't cause any of the layoffs. the whole bunch needs to be in front of a firing squad. check that, hang them all and save money on bullets.
Apr 12, 2012 5:12PM
avatar

"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%."

 

A weak dollar is the issue. America is being controlled by too many foreign investments. That's the problem.

 

So if the next president does not try and create more domestic jobs, and support more American business objectives, you might as well move to Canada.

Apr 12, 2012 3:37PM
avatar
OK good news today market goes up..what a rosy picture this paints for the future. Tomorrow it will be Europe in turmoil, Middle East threats increase, North Korea launched rocket, Oil reserves low and the list goes on and on and on.  Better fasten your seat belts this NEW market is a volatile one!  Sell high buy low and wait for the dips to get in.
Apr 12, 2012 5:38PM
avatar
I say it drops 200 Monday, 103 Tuesday, then they manipulate the stats to report that it looks like the folks who were laid off from 80k jobs are getting hired. What they don't mention is they are having to take jobs for a third of what they were making. Wednesday they say the economy is turning around and it goes up 130. By Friday folks figure out it was all smoke and mirrors while the Dow drops another 175.

Total BS.
Apr 12, 2012 2:32PM
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It's 2014 all ready? Didn't the feds say interest rates would be low into 2014 last fall? Short memories by Wall Street I guess.
Apr 12, 2012 1:47PM
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This market is a joke and Wall St needs to be revamped on how we buy and sell stocks and invest in companies.  The 1 %'ers control the market the average investor get fleeced.  This is white collar crime at it's finest. 
Apr 12, 2012 2:27PM
avatar
LiberalH8r...

Low rates mean people INVEST capital overseas to get a better return.  It results in less investment in the USA.   It does however create borrowing opportunities for the BEST credit worthy customers to borrow to INVEST elsewhere.  What little demand is created is more than offset by future demand declining, resulting in LESS need for labor moving forward.  If the FED during this time inflates, real wages drop like a stone, squeezing families and their ability to borrow...

It also cripples the purchasing power of retires, who's income is slashed, thus reducing their 'demand' greatly....

Government cannot create DEMAND by keeping interest rates low.   Only economic GROWTH creates demand, not government....
Apr 12, 2012 2:03PM
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Smile Maybe they would even be optimistic that wall street is not a pyramid ponzi scheme. Where would the money come from if they are not printing unearned money?
Apr 12, 2012 2:09PM
avatar

Wow!  It's a great thing for the U.S. that we are going to have low interest rates because our economy, under Obama, is "fragile", meaning people still losing their homes, and at the same time we rejoice China's GDP growth.

(their the ones who own our country now).  Does anyone see the insanity going on in this administration? 

Apr 12, 2012 4:38PM
avatar
Stocks jump as top Fed officials suggest low interest rates will remain because the recovery is so fragile

  So the stock market is rallying because the economy stinks now and for the foreseeable future. Classic dissconnect between Wall Street and the economy. Seems economic fundamentals are less important then how long the fed is willing to prop up the markets. This is what I heard from a commentator and I quote..."A market on crack only wants more crack". My question is what will happen when they take the "crack" away?

Apr 12, 2012 2:16PM
avatar

"More people sought unemployment benefits last week, pushing the number of applicants to the highest level in two months."

 

Who cares?  Obviously, this has no ill effect on the market as it "soars" today on "hope".  I guess having a job or the potential for getting a job in America no longer matters as long as you have "Hope" and a money printing machine the investors will continue to "cheer".  And let's not forget that Alcoa "surprised" us with their great earnings report but it wasn't through growing their business it was partially due to comments made by their CEO on what "he thought" the future would hold for aluminum demand based in industry sector even though he had no facts, no pending orders etc. to substantiate...but he has "Hope" and as we are learning....that's good enough!!

Apr 12, 2012 3:19PM
avatar
Ban all Chinese made goods and that will get US manufacturer's producing those goods here in America which in turn will help strengthen our country rather than China, India etc.  I realize there is a wage difference etc. but let the gov subsidize those American companies so they can pay a fair wage with benefits and help get Americans back to work.  I'd rather see the gov support our manufacturing industry rather than give away trillions to banks and other financial institutions which results in no American job growth..just bonuses for banking exec's.  We may have to pay higher prices for American made goods but I feel most American's would accept that knowing they are helping to create jobs in their own country.  Besides...I would rather have a few well made American products that a bunch of Chinese crappy items.
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