Dow jumps above 13,000 on stimulus hopes
The Dow surges 188 points as hopes build that the Federal Reserve and European Central Bank will start new stimulus plans. GDP in the US grows at just a 1.5% rate in the 2nd quarter. Facebook briefly falls nearly to $22; Starbucks slumps.
Updated: 6:53 p.m. ETStocks jumped today after the government reported the economy is sputtering and traders bet that central bankers in the United States and Europe will soon try new rounds of economic stimulus.
The Dow Jones industrials ($INDU) topped 13,000 for the first time since May 8. But, due to profit-taking in the last 10 minutes of trading, the blue chips weren't able to manage their second 200-point gain in a row. After rocky sessions on Monday and Tuesday, the major averages ended the week higher.
Gross domestic product grew at an annualized 1.5% in the second quarter, a touch better than the 1.2% rate most economists had expected. It's still an anemic growth rate and not expected to get better for a while. The report boosted hopes that the Federal Reserve will engage in a new round of stimulus after its two-day meeting on Tuesday and Wednesday. Fed watchers cautioned that a Fed move next week is hardly a sure thing. Hopes also grew for more action Thursday by the European Central Bank to support the euro.
Meanwhile, Facebook (FB) briefly hit a new low of $22.28, and Starbucks (SBUX) shares slumped after the two companies' earnings reports disappointed investors. Amazon.com (AMZN) was higher as worries about revenue weakness and aggressive spending were overshadowed by a rising gross margin. Oil giant Chevron (CVX) was up slightly after beating Street estimates.
The Dow closed up 188 points to 13,076 after jumping as many as 230 points. The Standard & Poor's 500 Index ($INX) gained 26 points to 1,386, and the Nasdaq Composite Index ($COMPX) was up 65 points to 2,958.
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The Nasdaq-100 Index ($NDX) was up 62 points to 2,647. Apple (AAPL), the biggest influence on the index, was up $10.28 to $585.16 -- after opening the day lower.
Since Tuesday, the Dow has jumped 3.7%, with the S&P 500 up 3.6% and the Nasdaq up 3.3%.
| Markets for the week | ||||||||||||
| 7/27/2012 | 7/20/2012 | % chg. | YTD chg. | |||||||||
| Dow Industrials | 13,075.66 | 12,822.57 | 1.97% | 7.02% | ||||||||
| S&P 500 | 1,385.97 | 1,362.66 | 1.71% | 10.21% | ||||||||
| Nasdaq | 2,958.09 | 2,925.30 | 1.12% | 13.55% | ||||||||
| Russell 2000 | 795.38 | 791.54 | 0.49% | 7.35% | ||||||||
| Crude oil | $90.13 | $91.83 | -1.85% | -8.80% | ||||||||
| (per barrel) | 0.00 | 0.00 | 0.00% | 0.00% | ||||||||
| U.S. Dollar Index | 82.77 | 83.57 | -0.97% | 2.79% | ||||||||
| 10-yr. Treasury | 1.56% | 1.46% | 6.51% | -16.89% | ||||||||
| Gold | $1,618.00 | 1,582.80 | 2.22% | 3.27% | ||||||||
It's the Draghi rally
The reason for the rally over the last two days is that traders believed ECB President Mario Draghi, who said Thursday he would do whatever it takes to save the euro. His comments in London set off a 212-point Dow rally on Thursday and today's 188-point gain.
Whether he can deliver will be clear on Thursday when the ECB meets next week to decide on interest-rate policy for the eurozone. The two-day Fed meeting and the ECB meeting may well be next week's most important market catalysts.
The Draghi rally got a second-day wind on reports that the ECB boss and Jens Weidmann, president of the German Bundesbank, spoke today and will meet before the ECB meeting to work out the details of coordinated sovereign debt purchases planned by the ECB and eurozone governments. For the coordination to happen, German support is crucial.
The Dow finished the week up nearly 2%, with the S&P 500 up 1.7% and the Nasdaq up 1%. It was the third weekly gain for the Dow and S&P 500, second in a row for the Dow and the Nasdaq.
For the year, despite all the volatility since May, the Dow is up 7%. The S&P 500 is up 10.2%, and the Nasdaq is enjoying a 13.5% gain.
Oil and gold move higher
The euro rally sets off a commodities surge.
Crude oil (-CL) settled up 74 cents to $90.13 in New York as the dollar fell against the euro. Crude finished down 1.9% for the week but is off 8.8% this year.
Gold (-GC) was up $2.90 to $1,618 an ounce. For the week, gold was up 2.2% and is up 3.3% for the year. Silver (-SI) and copper (-HG) were also higher.
Interest rates were higher, with the 10-year Treasury yield hitting 1.555% from 1.428%.
Facebook is a loser but rebounds off its low
Facebook's shares got so low that they appear to have attracted buyers. Shares had jumped from that $22.28 low to $23.71. That was still down $3.14 on the day and down 36% since its May initial public offering at $38. More than 70 million shares had changed hands by noon; the daily average has been 46.6 million shares.
The company reported slowdowns in payments growth, user growth in North America and Europe and U.S. ad impressions, along with huge spending increases.
Starbucks was off $4.93 to $47.47 after missing Street estimates on its fiscal-third-quarter earnings and guiding lower for the third quarter. The company saw an abrupt change in U.S. consumer behavior in June as well as slowness in European business and higher commodity costs because of the U.S. drought.
It was the worst performer among S&P 500 and Nasdaq-100 stocks .
Amazon.com shares, meanwhile, were up $17.31 to $237.32, despite the company missing estimates and warning it may show an operating loss in the third quarter. What caught investors' attention was its 29% increase in revenue from a year ago.
| Energy prices -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $90.13 | $89.39 | 6.09% | -8.80% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $2.8905 | $2.8694 | 6.66% | -0.81% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $3.0150 | $3.0900 | 6.76% | 0.87% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.7967 | $2.7370 | 6.27% | 5.24% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $106.47 | $105.26 | 8.87% | -0.85% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.4880 | $3.4900 | 4.03% | 6.47% | ||||||||
| (per gallon; AAA) | ||||||||||||
Economy: Consumers pare back
Household purchases, which account for about 70% of the world’s largest economy, grew at the slowest pace in a year.
Consumers are cutting back just as Europe’s debt crisis and looming U.S. tax-policy changes dent confidence, hurting sales at companies from United Parcel Service (UPS) to Starbucks to Procter & Gamble (PG). Cooling growth makes it harder to reduce unemployment, helping explain why Federal Reserve Chairman Ben Bernanke has said policy makers stand ready with more stimulus if needed.
Another report today showed consumer confidence in July dropped to the lowest level this year. The Thomson Reuters/University of Michigan final index of sentiment declined to 72.3 this month from 73.2 in June. The gauge was projected to hold at the preliminary reading of 72, Bloomberg News said.
All was not bad in the report. There was a 7.2% gain in business investment, and the government spending at all levels rose 1.4%. Both were better than expected, Paul Dales of Capital Economics wrote in a note to clients. Moreover, revisions suggest the economy has been stronger in the last few years than thought. The economy shrunk 4.7% during the recession; earlier estimates had said the decline was 5.1%.
A big day for bulls
All of the 30 Dow stocks were higher, led by pharmaceutical giant Merck (MRK), whose second-quarter earnings were better than expected. Sales of vaccines and treatments for diabetes and HIV were the catalysts.
Meanwhile, 484 S&P 500 stocks were higher, along with 93 Nasdaq-100 stocks.
Expedia (EXPE), up $9.19 to $54.90, was the second-best S&P 500 performer and top Nasdaq-100 performer. Shares jumped on strong earnings. Hotel bookings rose 22% in the quarter from a year ago. It also boosted its dividend to 13 cents a year.
The top S&P 500 performer was coal-producer Alpha Natural Resources (ANR), up $1.18 to $7.02.
The week ahead: The Fed, the ECB and jobs
Next week is important for economic reports and earnings.
Two big central banking events are on tap: the Federal Reserve's policy decision on Wednesday afternoon and the European Central Bank policy announcement on Thursday. The latter will be closely watched after Draghi's dramatic declaration this week to support the euro no matter what.
His vow was ratified today when German Chancellor Angela Merkel and French President Francois Hollande made a similar pledge after a teleconference.
The economic reports will be dominated by the July jobs-and-unemployment report, due Aug. 3. Capital Economics, the London-based economic consulting firm, estimates payrolls will rise by 100,000 jobs, with the unemployment rate holding at 8.2%.
Also scheduled:
- The S&P/Case-Shiller Home Price Index for 20 cities and the Chicago Purchasing Managers Index, due Tuesday.
- The government's report on personal income and spending in June, due Tuesday.
- The Labor Department's weekly report on jobless claims, due Thursday.
- The Institute for Supply Management's manufacturing index, due Wednesday and the ISM non-manufacturing index, due Friday.
- Auto manufacturers' July sales due Wednesday.
- Monday: Anadarko Petroleum (APC), Honda Motor (HMC), HSBC (HBC), Martha Stewart Living Omnimedia (MSO).
- Tuesday: Aetna (AET), Chrysler Group, Pfizer (PFE), Goodyear Tire & Rubber (GT), U.S. Steel (X).
- Wednesday: America Tower (AMT), MasterCard (MA), Time Warner (TWX).
- Thursday: Apache (APA), Clorox (CLX), General Motors (GM), Kellogg (K), and Kraft Foods (KFT).
- Friday: Agrium (AGU), Petrobras (PBR), Toyota (TM), The Washington Post Co. (WPO).
| Short hits from the markets -- New York close | ||||||||||||
| Fri. | Thur. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.1000% | 0.100% | 25.00% | 900.00% | ||||||||
| 5-year Treasury note | 0.661% | 0.583% | -9.33% | -20.36% | ||||||||
| 10-year Treasury note | 1.555% | 1.428% | -6.27% | -16.89% | ||||||||
| 30-year Treasury bond | 2.642% | 2.490% | -4.38% | -8.55% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 82.765 | 82.859 | 1.24% | 2.79% | ||||||||
| British pound | 1.5738 | 1.5691 | 0.22% | 1.29% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.635 | £0.637 | -0.22% | -1.27% | ||||||||
| Euro in dollars | $1.23 | $1.23 | -2.44% | -4.95% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.812 | € 0.814 | 2.50% | 5.21% | ||||||||
| U.S. $ in yen | 78.74 | 78.22 | -1.26% | 2.13% | ||||||||
| U.S. $ in Chinese | 6.40 | 6.38 | 0.47% | 1.21% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $0.997 | $0.991 | 1.43% | 1.58% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $1.004 | $1.010 | -1.41% | -1.56% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,618.00 | $1,615.10 | 0.86% | 3.27% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.426 | $3.394 | -2.02% | -0.29% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $27.4980 | $27.4460 | -0.41% | -1.49% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $8.9800 | $8.8400 | 18.59% | 37.57% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $7.9325 | $7.763 | 24.97% | 22.70% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $0.7145 | 0.7139 | 0.17% | -22.07% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $1.7370 | 1.7405 | 1.76% | -24.36% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $90.13 | $89.39 | 6.09% | -8.80% | ||||||||
| (per barrel) | ||||||||||||
Gee !
Let's hope that the Fed kicks in with another stimulus to run up our debt even more, with even less positive results than the last 2 rounds of stimulus provided.
This is nothing but an attempt by the Obama administration to falsely support stock prices until the next election. He knows that DOW 9,000 would put the finishing touches on his demise.
How about letting the "FREE" market work. Let the chips fall where they may-Let the banks eat their subprime mortgages-Let housing prices fall to the point where people can't help but to buy and we will dig our way out of this.
If the Obama admin. and the Fed keep artificially supporting things it will go on forever-Or at least till we are in worse shape than Greece.
If the Fed doesn't come through as expected, look out below.
It's already been proven beyond any doubt that the only thing so called Fed stimulus does is artificially raise stock prices.
It doesn't do anything to get consumers spending more money. It doesn't do anything to make companies hire people. It doesn't do anything to reduce taxes or regulations.
So, at the end of the day, it doesn't do anything to make the economy work better. But, it does put an artificial floor under the markets which temporarily protect large stockholders and fund managers from losses until the money runs out. The Fed does this in hopes that the economy will recover on it's own before the money has been fully diluted in the system.
As was shown the first three times, (QE 1 and 2 , plus the twist opperation), it doesn't work. The economy is still in the tank. The only thing they are working on is the hope that somehow, this time it will be different. In the meantime, it will add tens, if not hundreds of billions more to the national debt....debt that your children and grandchildren will be responsible for paying back. Can you say Greece, Spain, and Italy?
This is just more manipulation as the players try to fill their bags with loot by the end of the month. If today's rally holds July will make it back to even from the first of the month. August is a typical dead month because the entire European continent goes on vacation so there won't be a lot of trading news from the EU. If Bernanke syas no stimulus at this time the markets will pretty much tank in August. The rumor mill that causes these large rallys is usually fueled by the Federal Reserve itself to stimulate the market. The Fed leaks feeds into the Wall Street Journal and even old Charlie's column to pump the makets up. The ECB does a good job of it too since they say the same thing over and over without ever offering a solution.
Its all spin, smoke and mirrors. Bottom line is the economy is a wreck, GDP is gone and everyone looks at Wall Street as a guage of the economy when it is so far removed from reality it stinks. If anyone really wants to start getting a solution to this mess, push your Senators into reinstating Glass- Steagle as the first measure.
Geez, Charley Blaine: you're worse that our President with this "hope" stuff.
The FED is going to print up another bunch of money out of thin air, backed by nothing but . . . What?
And the ECB is going to do the same thing? And again I'll ask: What?
The injection of phony virtual money is only going to accomplish one thing (well, mainly) . . . it will dilute the value of any remaining real money that is left in the world's economy.
You know this, but you push the lie? Why is that? The country is dying, mainly because those in power won't tell the truth. Nice.
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