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 $22; Starbucks slumps.
By Charley Blaine Jul 27, 2012 12:30PM
Updated: 6:53 p.m. ETStocks jumped today after the government reported the economy is sputtering and traders bet that central bankers in the United States and Europe will soon try new rounds of economic stimulus.
The Dow Jones industrials ($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 ($COMPX) was up 65 points to 2,958.
Article continues below.
The Nasdaq-100 Index ($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) | ||||||||||||
468Comments
Jul 27, 2012 4:26PM
Jul 27, 2012 4:25PM
this stimulation of the fed is not going to solve the problem is going to makes it worse wail st is a dead horse that the fed believe and support it the fed should wake up and analyze the foundation of the problem the peoples sucked out of money and they are disable to spend and make the economy run again the corporations cannot stand back on there feet as long as the people will hold them self of spending and they are not going to do that as long they afraid of loosing there jobs or other that run out of money but job is not going to be secure without peoples spending and turn the economy back to business unless there is a secrets between the bank wall st and the fed god knows
Jul 27, 2012 4:24PM
Jul 27, 2012 4:22PM
Instead of giving all the money to banks and wall street, try giving it to the public. You would see money being spent and jobs being created. With all the bailouts, money wasn't being put to where it would do the best. People could have saved their homes, jobs could have been created, and maybe the banks would be acting like banks ,loaning money and getting people to save. Instead banks aren't giving out loans, they are playing the markets, because the government is letting them have money for free.
Jul 27, 2012 4:21PM
As long as te commodity traders and speculation rages unchecked and uncontrolled. And of course middle class wages remain flat due to this mistake of "trickle down economic" its never really going to get any better for the common people. Until big changes are made we are screwed. Trickle down economics made the rich VERY rich and crushed the rest of us. Unfortunately civil war will be the only answer this time....and it coming...and they know it.
Jul 27, 2012 4:20PM
Jul 27, 2012 4:18PM
Republicans think the government is bad because
1. the government defeated the confederacy
2. took their grand pappy’s gold and
3. Legislation favoring civil rights for women and minorities doesn’t make them feel good either.
In other words they hate this government because they long for Dixie.
Jul 27, 2012 4:16PM
Jul 27, 2012 4:13PM
This is where I come to see the moron public at its best! Yes Obama, Romney, November elections. We can sell the moron public on the confidence and they will start giving us money for the economy.
Even though there is 1.5 Quadrillion in derivatives;
Even though your in a One World Economy;
Even though your dollar has lost 40% of its value over the last 4 years.
Even though you hear its Conspiracy were in a New World Order
Even though they tell you Europe is the Greatest threat and Globalization is good in the 80s
Even though the National debt is 15 Trillion 100% to GDP
Were just going to vote in someone with an R before there name and everything is going to be good. You would have to be a Moron Jackass Idiot to believe that or a water boy for the party selling the idiot public lies.
Now here is a few solutions for the economy. First start with the arrest of Corsine for MF Global and make him a room mate with Bernie Madoff. Then start to withdraw from all this global economy stuff. We elect officials to take care of our interest and not the world. This isn't the case anymore folks; so with that said. Investigations into laws passed that feather the nest of the politicians is next.
Long prison sentences of 20 to life would serve notice that were serious. Audit of the Federal Reserve and setting mandates that the US Economy comes first is Americana. Employment isn't enough; and there worried about that. 70% of the bailout money went overseas. That's reason enough to have an audit.
Start jailing criminals including congress that made laws to assist the looting of the treasury would stop people in there tracks. You get 20 to life fed time that serves as notice. So far no one of any interest has went to jail. You go steal a loaf of bread and they will send out the calvary for you.
Seattle206723
Even though there is 1.5 Quadrillion in derivatives;
Even though your in a One World Economy;
Even though your dollar has lost 40% of its value over the last 4 years.
Even though you hear its Conspiracy were in a New World Order
Even though they tell you Europe is the Greatest threat and Globalization is good in the 80s
Even though the National debt is 15 Trillion 100% to GDP
Were just going to vote in someone with an R before there name and everything is going to be good. You would have to be a Moron Jackass Idiot to believe that or a water boy for the party selling the idiot public lies.
Now here is a few solutions for the economy. First start with the arrest of Corsine for MF Global and make him a room mate with Bernie Madoff. Then start to withdraw from all this global economy stuff. We elect officials to take care of our interest and not the world. This isn't the case anymore folks; so with that said. Investigations into laws passed that feather the nest of the politicians is next.
Long prison sentences of 20 to life would serve notice that were serious. Audit of the Federal Reserve and setting mandates that the US Economy comes first is Americana. Employment isn't enough; and there worried about that. 70% of the bailout money went overseas. That's reason enough to have an audit.
Start jailing criminals including congress that made laws to assist the looting of the treasury would stop people in there tracks. You get 20 to life fed time that serves as notice. So far no one of any interest has went to jail. You go steal a loaf of bread and they will send out the calvary for you.
Seattle206723
Jul 27, 2012 4:13PM
Obama from an obscured senator that did little To a president that also did the country did little. Only to be elected by the mainstream media propaganda. H. Clinton would have done the democratic party much better.
It is the mainstream media dictates to our lives and most Americans fall for it..
Jul 27, 2012 4:12PM
Charlie Blaine, I'd like to slap that stupid smirk off of your face. How can you be smiling? It must be easy to report the same crap every other day. How much do you get paid? O.k., I'll take the increase in my 401k, but it happened because of "hot air" and not because of any results. Yesterday it was because some clown "vowed" to save the eurozone, today it's because another clown (master puppeteer Bernanke) may soon try something. How many times have we heard this crap?
Jul 27, 2012 4:12PM
We are not Capitalists or socialists anymore...Our economy is now just based on rich people gambling. And then price gouging us to make up their losses. Bring back regulation, bring back Glass-steagall...And then lets "eat the rich". Tying up 80% of the wealth to 1% of the people of this country was the square root of stupid. Why are we standing here and taking it? Lets unite get together and wipe these greedy scumbags out!
Jul 27, 2012 4:12PM
Jul 27, 2012 4:11PM
Jul 27, 2012 4:07PM
Serious question....why do republicans think the government is so bad. Second question why has the government increased so much in size under republicans vs democrats going back to the 1900's?? I don't think the government is out to screw it's own people IMO. It's like they are paranoid of our own government lol
Jul 27, 2012 4:01PM
Jul 27, 2012 4:00PM
Jul 27, 2012 3:57PM
Jul 27, 2012 3:55PM
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