Dow rises 73 as Greece OKs austerity measures
Greece's vote to raise taxes and cut spending boosts the euro; oil and metals move higher. Big risks remain, though. Bank of America rises after settling a huge mortgage dispute. Stocks may have their best week since March.
Updated: 8:30 p.m. ETStocks surged for the third straight day -- and appear headed to their best weekly performance since March -- after Greece's parliament approved legislation to implement austerity measures and Bank of America (BAC) reached a settlement with mortgage holders.
The Greek vote pushed the euro higher against the dollar. Crude oil (-CL) and gold (-GC) both advanced.
Two other factors pushed stocks higher: window-dressing in advance of the end of June and the second quarter and some panic by bearish investors forced to cover short positions.
Financial stocks were the market leaders on the Bank of America news and, later, on news the government agreed to higher swipe fees on debit-card purchases. Metals stocks were also among the day's top performers in part because of an upgrade for U.S. Steel (X) and AK Steel (AKS). Energy shares rose on higher oil prices.
The Dow Jones industrials ($INDU) closed up 73 points to 12,261 after rising as many as 96 points earlier in the day. The Standard & Poor's 500 Index ($INX) gained 11 points to 1,307, its first close above 1,300 since June 3. The Nasdaq Composite Index ($COMPX) was up 11 points to 2,740.
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The rally briefly appeared to lose strength after Apple (AAPL) shares sagged. The shares topped out at $336.37 around 11 a.m. ET and fell to a low of $331.88 at 2:58 p.m. before moving back to $334.04, down slightly on the day. One issue may have been rumors that Apple was going to offer a free iPhone.
Meanwhile, interest rates moved higher after a weak auction of 7-year Treasury notes. The 10-year Treasury yield was at 3.108%, up from 3.045%. The 10-year yield was at 2.87% on Friday.
Callway CEO resigns; stocks may open lower
After the close, Calloway Golf (ELY) shares slumped 6.2% to $5.94 after CEO George Fellows resigned for personal reasons. Board member Tony Thornley will replace him on a temporary basis.
The golf-equipment maker said it expects layoffs at all levels because it's struggling. Second-quarter revenue will be about $270 million, down from $330 million a year ago, with a loss of about $55 million. That includes a writedown of $46 million in deferred tax assets.
The company earned $25 million in the year earlier quarter. Calloway said its U.S. operations are losing money.
Stocks look to open lower on Thursday. The market will digest the weekly report on jobless claims and an widely watched assessment on the economy, the Chicago Purchasing Managers Index.
Earnings are due from Darden Restaurants (DRI), college operator Apollo Group (APOL) and spice distributor McCormick & Co. (MKC). McCormick shares closed up 0.4% to $51 after hitting an all-time high of $51.13 today.
Stocks looking to end June strongly
The Dow is up 2.7% this week, with the S&P 500 up 3.1% and the Nasdaq up 3.3%. The gains for the Dow and Nasdaq, if they hold, would be their best since the week of March 21. The gain for the S&P 500 would be the best for the index since the week of Nov. 1.
With a day to go in the month, the Dow is down 2.5%, with the S&P 500 down 2.8% and the Nasdaq off 3.3%. But for all the turmoil so far in June, the quarter isn't awful. The Dow is off 0.4%, with the S&P 500 down 1.4% and Nasdaq off 1.4%.
The Nasdaq-100 Index ($NDX.X), up 9 points to 2,294 today, is off 3.3% for the month but 1.9% for the quarter.
| Energy prices -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $94.77 | $92.89 | -7.72% | 3.71% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $2.9247 | $2.8415 | -3.87% | 15.37% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $4.3150 | $4.3540 | -7.52% | -2.04% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.9349 | $2.8156 | -6.84% | 19.64% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $112.40 | $108.78 | -3.71% | 18.63% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.5430 | $3.5510 | -6.27% | 15.33% | ||||||||
| (per gallon; AAA) | ||||||||||||
Bank stocks push higher
Bank stocks were initially higher after Bank of America agreed to settle claims over soured mortgages. They moved up still further on news this afternoon that the Federal Reserve may limit the fees that banks can charge retailers for swiping debit cards to 21 cents, a higher cap than initially proposed.
Shares of Visa (V)and MasterCard (MA) jumped 15% to $86.57 and 11.3% to $309.70, respectively, tops among S&P 500 stocks. American Express (AXP) rose 2.6% to $50.92.
Bank of America agreed to pay $8.5 billion to a group of 22 bondholders, including BlackRock (BLK), MetLife (MET) and the Federal Reserve Bank of New York, demanded refunds.
Bank of America was up 3% to $11.14 and was the top performer among the 30 Dow stocks, followed by American Express. Rival JPMorgan Chase (JPM) was third, up 2.3% to $40.45.
Bank of America will set aside another $5.5 billion to pay additional claims on mortgage security disputes. The moves will result in the banking company losing $8.6 billion to $9.1 billion in the second quarter.
The losses stem largely from mortgages underwritten by Countrywide Financial, the big mortgage lender that Bank of America bought in 2008. Countrywide had gotten into trouble after its big subprime mortgage business crashed.
A boost in pending home sales
The market also got a boost from a report on pending home sales from the National Association of Realtors. The organization said signed contracts jumped 8.2% in May from April. The trade group's pending-home-sales index was at 88.2. A reading of 100 means the market is roughly equivalent to the market in 2001, when statistics were first kept.
The report is considered a leading indicator because they track contract signings. Purchases of existing homes are tabulated when a sale closes, typically a month or two later.
A problem with the report, according to Jamie Coleman at ForexLive, is that contracts signed nowadays may not lead to actual sales if buyers are unable to get financing. And that's been a big problem. Studies have suggested lenders are rejecting more loan applications.
The news did nothing for homebuilding stocks. They slumped after KB Home (KBH) reported a miserable quarter. Shares plunged 15.4% to $10.08. Losses grew, and revenue fell 27%. The company's backlog, an indication of future business, fell 24%, while cancellation rates edged up to 25% due to tightened credit standards. Ryland (RYL) fell 3.9% to $16.57. Pultegroup (PHM) was off 3.9% to $7.58.
The miserable plight for the Greeks
The big question about the Greek vote today is how much of it will come to pass. In other words, the crisis is temporarily averted, at best, and could worsen.
The plan calls for tax increases, 15% pay cuts for government employees and closing nearly 2,000 schools. As important is the Greek government's agreement to privatize a host of state-owned ventures including ports, airports, highway concessions and the like.
Privatization was a key element of the first big Greek bailout plan a year ago. Not a single sale has occurred, however, said Diego Iscaro, a senior economist at IHS Global Insight, in a note to clients. And the Greek government is supposed to raise 5 billion euros, $7.2 billion, from asset sales.
If the Greek government is unable to make any sales, more financing may be withheld, and the Greek government could be forced to balance its budget by simply not paying workers.
Crude oil and gold move higher
All that is in the future. Today, the euro and pound are both rallying against the dollar, and commodity prices are moving higher as a result.
Crude oil settled up 2% to $94.77 a barrel in New York. Brent crude added $3.45 to $112.23 a barrel. Exxon Mobil (XOM) was up 0.8% to $80.25. Oil-services giant Schlumberger (SLB) added 1% to $85.21.
Because of the upgrades, U.S. Steel was up 5.9% to $45.85; AK Steel rose 5.2% to $15.51.
Gold settled up $10.20 to $1,510.40 an ounce. Silver (-SI) jumped $1.112 to $34.75 an ounce. As a result, Freeport-McMoRan Copper & Gold (FCX) was up 2.3% to $51.62 and is up 6.8% this week alone.
| Short hits from the markets -- New York close | ||||||||||||
| Wed. | Tues. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.010% | 0.030% | -80.00% | -91.67% | ||||||||
| 5-year Treasury note | 1.693% | 1.599% | 0.30% | -16.02% | ||||||||
| 10-year Treasury note | 3.108% | 3.045% | 1.90% | -5.96% | ||||||||
| 30-year Treasury bond | 4.371% | 4.333% | 3.68% | 0.21% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 75.074 | 75.490 | 0.51% | -5.31% | ||||||||
| British pound | $1.6062 | $1.6003 | -2.47% | 2.92% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.6226 | £0.6249 | 2.54% | -2.84% | ||||||||
| Euro in dollars | $1.4432 | $1.4374 | -0.01% | 7.87% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.6929 | € 0.6957 | 0.01% | -7.29% | ||||||||
| U.S. $ in yen | 81.04 | 81.02 | -0.73% | -0.41% | ||||||||
| U.S. $ in Chinese | 6.49 | 6.47 | -0.25% | -1.96% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $1.031 | $1.020 | -0.33% | 2.72% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $0.971 | $0.980 | 1.86% | -2.64% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,510.40 | $1,500.20 | -1.72% | 6.26% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $4.2095 | $4.0920 | 0.77% | -5.34% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $34.7500 | $33.6380 | -9.28% | 12.33% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $6.4125 | $6.4025 | -18.02% | -19.26% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $6.9800 | $6.8300 | -6.62% | 12.13% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $1.6214 | $1.6091 | 2.19% | 11.97% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $2.6025 | $2.5790 | -1.64% | 8.21% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $94.77 | $92.89 | -7.72% | 3.71% | ||||||||
| (per barrel) | ||||||||||||
swc5150-
Yes, we live in a dangerous world, so maintaining a strong military is essential. However, mostly for political reasons, our military wastes huge amounts of money. They could easily slice $100B or more from the defense budget without adversely affecting our security.
The military is forced to buy weapons it doesn't want and keep bases open it doesn't need. We've spent over $2T in the Iraq and Afghanistan wars. We continue to pay the lion's share of NATO, which is itself a relic of the cold war. It's time the Europe "mans up" and pay its own way.
Many politicians refuse to even consider cutting defense spending, because it's the single biggest source of pork, and politicians don't want to cut anything that might affect their re-election.
Let's go back to the debt, all cost are fungible now.
Isn't it great, Durbin is working on the debt/budget issues. I believe his state, IL is going bankrupt. Yes he's an expert on deficit spending and debt accumulation.
How did we get into this mess? By putting in inept politicians for the last 40/50 years. Now we're being told "more debt is good because it will prevent a default". We can't give the kids anymore of our money!
Andrew Jackson said one of his greatest accomplishments was paying off the Federal debt. Anyway we can reanimate him?
Active RIA, we need to put everything on the table. A good start is congress’s retirement and health care benefits. If Social Security and Medicare are good enough for the masses then they are good enough for the elite. One wonders if they would be playing chicken with the bond ratings of the good faith and credit of the USA, if they had real skin in the game.
swc5150
To your comment that the US won't go into default. Money is already being shuffled to meet current debt servicing requirements. Yes, there is a substantial risk the our country will not pay what it owes after Aug 2, since it doesn't take in enough. So, what gets cut? Social Security checks? Food Stamps. While, that might not be a default in your mind, it sure as hell is if you happen to be living on it. Second comment. Just how many of these "rich" actually EARN their money? Keep their speculative profits? Indeed. Apparently you've failed to notice that every time these" job creators" get to keep more of their money, the unemployment rate goes up..I'm not advocating a confiscatory tax rate, just a bit of fairness would be appreciated. Perhaps I'd feel differently if those folks actually had to go out and do something real to earn money. Instead, they gamble, often with other peoples money. For that, they should be taxed.
SWC...
Technically Social Security is a pyramid scheme. It hopes that there are enough suckers at the bottom to pay off those that never contributed enough to collect. Like W's Medicare Part D today. The people collecting contributed ZERO toward it. They are living on the money you put in today. Like all Ponzi and Pyramid scheme (illegal, except when run by the government) because they always fail. Social Security is like that. All the people that contributed nothing yet collected for decades are now dead, Your future depends on future generations paying for you. Not a very likely prospect.
If Social Security were not a pyramid scheme the government would let you control the money. But since does not exist, the ssystem would collapse quickly if people stopped paying in.
i think we can agree on this one - a little early remembrance for July 4th - Happy Independence Day! 
Reflection
Lord, I pray that I never take my freedom for granted. May I always remember that my freedom was purchased at a very high price. My freedom cost others their very lives. Lord, bless those who have served and continue to give their lives for our freedom. Meet their needs and watch over their families. Amen...
hey jesuitmonk,
I'm a huge supporter of the military, and would gladly buy warbonds to protect the US, and take up arms in the event of invasion. I don't believe we should have bases spread all over the world though, and do not care for the current military operations throughout the middle east. We were directly attacked by a foreign nation, which pulled us into WWII, which I see as a considerable difference.
And RIA,
As a Constitutionalist, I don't think believe the gov should provide me anything but national defense, and the opportunity to live free in liberty. Reps and Dems pass every goody under the sun for votes, and get re-elected from fear that someone will come and take them all away. The Great Experiment has been hijacked year after year for decades, and here we are - $14T in debt, with freedoms being eroded.
Seems like the releasing of a small portion of our strategic oil supplies didn't last long as speculators figured out that it wasn't really enough to change prices and started running the price back up. Oh well, it was nice while it lasted, but greed wins out in the end.
This is significant for two reasons. First, it is the first time we are seeing active attempts to curb market manipulation by the hedge fund managers in the oil markets and believe me it cost someone a lot of money. Second, it exposes the kind of gains that can be had by re-injecting speculative risk into the market. The next logical step after a few warning shots over their bows is to start lowering the leverage ratios. Change the risk reward back to risky business by lowering the returns to be had.
Ok, you guys win... I'm completely wrong and out of touch. I'm going to go back now, and work hard to provide for my family and future - and apparently that of some others. Just one thing: If I steal money out of someone's wallet, and give it to someone in need for their income, it's a crime. BUT, if the majority of 535 people and the President decide it's ok to do the same to me, it's called fairness. That doesn't seem like liberty to me? I guess I'm just living with that silly 1787 mentality.
BTW, the U.S. exceeded the 14.3T debt ceiling in April.
Cheers!
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