Dow jumps 123 on Best Buy results, China growth

Stocks enjoy their best day of the month on better-than-expected retail sales and strength in China. Pandora rates a $2.6 billion valuation. Best Buy results beat estimates, and JC Penney snags a top Apple executive.

By Charley Blaine Jun 14, 2011 1:03PM
Charley BlaineUpdated: 9:50 p.m. ET

For today at least, everybody was a bull. Stocks jumped on  earnings from Best Buy (BBY), retail sales and industrial output in China -- all of which were better than expected -- and a key hire at JC Penney (JCP).

The result was the best day for stocks so far in June, with the major averages sporting gains of 1% or more. But late-day selling sapped some of the rally's strength. Crude oil (-CL) and gold (-GC) were higher, and the 10-year Treasury yield topped 3% for the first time in a week.

But before you get too excited, consider: Short-covering -- short-sellers buying stocks to lock in profits -- was a big force in today's rally. A key to the market's prospects was whether the Standard & Poor's 500 Index ($INX) could close decisively above 1,288, an important resistance level. The index closed at 1,287.87. It may take more work to get the index to 1,300.

The Dow Jones industrials ($INDU) closed up 123 points, or 1%, to 12,076, the best gain since May 31.  The S&P 500's gain was 16 points, or 1.3%. The index ended with its best gain since April 20. The Nasdaq Composite Index ($COMPX) was up 39 points, or 1.5%, to 2,679, its best day since April 20.

Article continues below.
But the finish did not radiate confidence. The Dow gave up a quarter of its gain in the last hour of trading. The Nasdaq's gain shrank by 15% in the last hour. So Wednesday will be an important day of trading. Futures trading suggests a down open.

The government will issue its monthly Consumer Price Index report, and the Federal Reserve Bank of New York will report on manufacturing in New York state.

Pandora goes public at $16; generates $2.6 billion valuation
Trading is expected to begin in shares of Internet radio operator Pandora, whose initial public offering of 14.7 million shares priced at $16 a share late today.  That was twice what was originally expected. The IPO puts a $2.6 billion value on the company.

It will start trading Wednesday on the New York Stock Exchange with the ticker "P."

The valuation comes despite the company's modest size and will reignite the debate over whether a bubble is emerging around social networking sites.

Pandora had only $55.2 million in revenue in its 2010 fiscal year and $89 million in the first nine months of its 2011 fiscal year and has never earned a profit for a full year.

The company lost $16.8 million in fiscal 2010 but broken even in the first nine months of fiscal  2011. The fiscal year ends on Jan. 31.

Rally moves crude prices higher
Crude oil settled up $2.07 to $99.37 a barrel but was drifting lower in electronic trading. Gold settled up $5.40 to $1,521.20 an ounce in New York and was higher still in electronic trading, and silver added 40.3 cents to $35.14 an ounce. The 10-year Treasury yield pushed to 3.099% from Monday's 2.991%.

While Best Buy's results were welcome, the rally really began overnight in Asia after China reported stronger-than-expected industrial output. Japanese stocks promptly moved higher. European stocks were also stronger.

The rally was quite broad. Twenty-four of the 30 stocks were higher, along with 90 stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks. The index was up 28 points, or 1.3%, to 2,250.

Advancers were ahead of decliners 3.3-to-1 on Nasdaq and 5-to-1 on the New York Stock Exchange. Volume was fairly average.

Energy, industrial and consumer discretionary stocks were the strongest S&P 500 sectors. None of the 10 sectors was falling back.

Home Depot (HD), Caterpillar (CAT), Boeing (BA) and Alcoa (AA) were the Dow leaders. Home Depot, up 4.5% to $34.75, was rising on the coattails of Best Buy.

JC Penney, Lorillard (LO) and Cabot Oil and Gas (COG) were the top S&P 500 stocks. Baidu (BIDU), Green Mountain Coffee Roasters (GMCR) and Chinese online travel siteCTrip.com International (CTRP) were the top Nasdaq-100 stocks.

Energy prices -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Crude oil (-CL)

$99.37

$97.30

-3.24%

8.74%
(per barrel)











Heating oil (-HO)

$3.13

$3.11

2.38%

22.88%
(per gallon)











Natural gas (-NG)

$4.58

$4.65

-1.82%

4.00%
(per mil. BTU)











Unleaded gasoline (-RB)

$3.06

$3.00

-2.72%

24.92%
(per gallon)












Brent crude 

$120.00

$119.10

2.94%

26.82%
(per barrel)











Retail gasoline

$3.70

$3.70

-2.22%

20.31%
(per gallon; AAA)












Best Buy's a winner; JC Penney may be a bigger winner
Best Buy was the best performer among S&P 500 stocks, 4.6% to $30.13. The company said rising demand for smartphones and tablet computers offset declining sales for televisions. Profit of 35 cents a share was off 12% from a year ago but beat Street estimates for 33 cents.

Sales by stores open at least 14 months fell 1.7%, including a drop of 2.4% in the U.S. Analysts had projected a domestic decline of 4%.

But JC Penney overtook Best Buy as the top S&P 500 performer, rising 17.5% to $35.37  on news it has hired Ron Johnson, head of Apple’s (AAPL) iconic retail stores, as its new president. He will become CEO in the next few months, succeeding longtime leader Myron "Mike" Ullman.

Johnson joined Apple from Target (TGT), where he had been vice president of merchandising for stores. Johnson has won kudos for reinventing the concept of the retail store at Apple.

China's output cheers; so does US retail sales
The news from China that cheered investors was this: China’s industrial production rose 13.3% in May. Investors shrugged off its report that inflation was rising at a 5.5% annual clip and news that China was requiring banks to boost reserves to quell inflation.

Meanwhile, the Census Bureau reported a 0.2% dip in May retail sales. That was better than the expected 0.7% decline. What really cheered the Street was that sales, excluding auto sales, rose 0.3%. The estimate had been for a 0.2% increase.

Auto sales fell 2.9%, the biggest decline since June 10. The decline reflects the disruptions caused by the March 11 Japanese earthquake and tsunami.

Some of the drop in demand last month reflected a shortage of Japanese-made vehicles after the disaster disrupted supplies. With inventories running low, companies offered smaller discounts, which also deterred buyers.


Short hits from the markets -- New York close
 
 Tues.

Mon.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.040%

0.040%

-20.00%

-66.67%
5-year Treasury note 

1.687%

1.589%

-0.06%

-16.32%
10-year Treasury note

3.099%

2.991%

1.61%

-6.23%
30-year Treasury bond

4.301%

4.205%

2.02%

-1.40%
Currencies







 

 
U.S. Dollar Index

74.692

74.874

-0.01%

-5.80%
British pound

$1.6399

$1.6383

-0.43%

5.08%
(in U.S. $)











U.S. $ in pounds

£0.6098

£0.6104

0.43%

-4.84%
Euro in dollars

$1.4443

$1.4422

0.06%

7.94%
(in U.S. $)











U.S. $ in euros

€ 0.6924

€ 0.6934

-0.06%

-7.36%
U.S. $ in yen 

80.71

80.20

-1.13%

-0.81%
U.S. $ in Chinese

6.51

6.48

0.07%

-1.65%
yuan











Canada dollar

$1.031

$1.025

-0.28%

2.77%
(in U.S. $)











U.S. dollar 

$0.970

$0.975

0.27%

-2.70%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,524.20

$1,515.60

-0.81%

7.25%
(per troy ounce)











Copper (-HG)

$4.1550

$4.0345

-0.54%

-6.57%
(per pound)











Silver (-SI)

$35.4110

$34.7370

-7.56%

14.46%
(per troy ounce)











Wheat (-ZW)

$7.3125

$7.4300

-6.52%

-7.93%
(per bushel)











Corn (-ZC)

$7.5550

$7.8250

1.07%

21.37%
(per bushel)











Cotton 

$1.5554

$1.5095

-1.97%

7.41%
(per pound)











Coffee

$2.6925

$2.6745

1.76%

11.95%
(per pound)











Crude oil (-CL)

$99.37

$97.30

-3.24%

8.74%
(per barrel)










 
44Comments
Jun 14, 2011 1:59PM
avatar

Intersteing. This mornig the headlines read we have the making of a perfect storm for a global economic crash and now stocks rally and oil surges.

  Why the hell do they thing sales are going up. its becuse the price of oil is comming down. and as soon as they can they speculate it back up. Not sure about everyone else and Im no expert but cant anyone besides me see that the economy is directly related the price of fuel for americans. put gas back at $2.00 a gallon and watch the economy surge.

Jun 14, 2011 3:05PM
avatar

cancerous tumor (oil price) grows as the body (global economy) grows....last week oil prices were supposedly causing markets to tumble, this week one good report causes it to grow back...the growth of both has become antagonistic. This is not an issue that has foreseeable resolution. It's like we are all in a big boat that requires punching a hole in it to get air, but every time we punch an air vent, we start filling up with water, so we bail out the water, and then we use up extra oxygen to do that work, so we need more oxygen so we punch more air holes, take on more water, and we call this a good system? How can oil futures grow on speculation? Speculation is out of control here. Reasonable projection of truth with some element of risk is sensible, but we have somehow allowed our economic market system to become driven by a sort of speculation that is more suitable for a weekend casino visit, not a viable long term economic system. 

Jun 14, 2011 3:44PM
avatar
Looks like most of you are smoking the same crack wallstreet is. None of you knows what you are doing anymore, if you ever did. Market goes down based on X,Y,Z then weeks later market goes up based on R,M,A. Why? Were you all wrong weeks ago when you though X,Y,Z meant sell? Then weeks later it starts down again because of A,B,C. Whatever. Any moron like me can see that none of you knows what you are doing. Sure you can make some money day trading just like you can betting on sports, but that doesn't mean you know what you are doing unless of course you know you are just gambling.

The market is garbage, the only reason they don't just go to Vegas is because in Vegas they would have to play with their own money.

I'm a software developer and years ago I was with a company that was going to IPO. So some wallstreet analysts came to visit on behalf of investors. They talked with a couple execs. and walked around the building. They did not talk to anyone that knows anything about software development to find out if the company was using sound practices that would sustain it's future ( they were not of course, most don't ). The analysts of course don't know anything about software development but that doesn't matter because they are smart about business right? Garbage. They recommended the company to investors and it went bankrupt 2 years later.

Yeah, I've heard it all. "You're a software developer you don't understand supply and demand." Sure I don't because it's so much more complicated than understanding multi-threading,. Whatever freaks.

All you so called market experts are right out of the Dunning Kruger Effect.

Ok, reality check over, go back to smoking your crack and patting yourselves on the back for being so smart you understand the stock market, yeah, cause it's just like rocket surgery.

Jun 14, 2011 1:40PM
avatar
Today's "rally" is tomorrow's fodder for day traders and hedge funds.
Jun 14, 2011 5:26PM
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It's pretty sad that our economy is so dependent on the success of China and other foreign countries and that our "investors" cheer when good reports come out of these foreign countries while many suffer here in America.  I've always said...our threat from China is not a nuclear weapon but rather that they would stop shipping us goods which would cripple our economy and way of life.
Jun 14, 2011 2:47PM
avatar

for the past one week we have been seeing a bearish slump in the markets. major indices lost 5-6% in the past 7 days. and the reasoning was that it was the gloomy outlook for Europe, weak employment figures in USA, supply shortages because of situation in Japan and weak growth in China. Now none of that could have changed overnight. Yet we are seeing a bull run and the reasoning is the exact opposite of what was being said till yesterday.

 

Even a dumb person can see that the market rallying or selling is all due to manipulations by the institutional investors and it is speculative in nature (if not gambling). The common man is bound to lose any which way he can...and the republicans are all gung-ho about protecting the big businesses. I say we should put in stronger regulations gverning big investors..

Jun 14, 2011 2:22PM
avatar
Investors shrugged off its report that inflation was rising at a 5.5% annual clip. Yep just shrug it off today, they can all freak out tomorrow.
Jun 14, 2011 6:37PM
avatar
get rid of the market manipulators...back in the day these bozo's would have been hanged by the gov't for their selfish and damaging acts against the american investor...and the american economy....
Jun 14, 2011 6:46PM
avatar
go ahead you multi-national traitors and you not so smart wall street thieves, sell america out to the chinese, I hear they have a special place in Qdong providence just for you.....
Jun 14, 2011 6:40PM
avatar
why o why do we have to kowtow to china? and why o why do we all by all buy their posionous cheap defective junk?
Jun 14, 2011 7:55PM
avatar
as all the jobs have gone offshore, as China roars to life as an agressive lion, we American's weep as our family's are worn down from lack of prospects. We in defeat listen to the wallstreet players crowing about their winning streak. America is going the way of the used to be's and the fools believe all is fine. There will be no turn around....Bernanke wants to raise the debt limit again. Looks like that is what America makes the most of...debt. The day of reckoning is coming and we are defenseless and broke.
Jun 14, 2011 6:33PM
avatar
since when is it a good day for anyone when we are cheering down numbers instead of growth numbers...what a crock of bS!
Jun 14, 2011 5:35PM
avatar
Good God!  you mean traders today aren't upset that the price of yak dung in Outer Mongolia may or may not decline in the year 2096??
Jun 14, 2011 1:45PM
avatar
All's well until some idiot starts a rumor and the market goes with it!!!  Does not take much to spook it!
Jun 14, 2011 2:20PM
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Lets see last week China was sinking with their economy, stocks way down, bla jobs reports and now everything today is looking GREAT? Who is putting this mis information out there? The only ones I see are the President and news media!
Jun 14, 2011 6:44PM
avatar

Looks like Uncle Ben and Tiny Tim were ordered by Obama's goons (Axelrod, et al) to buy stocks today.  And, the talking heads on CNBC were right there to goose it along.

Jun 14, 2011 5:16PM
avatar
The DOW jumps 123 points before closing!! The only jump the DOW is really going do is    OFF THE CLIFF !!!!!!!!! TAKE YOUR MONEY AND RUN !!!!!!!!!!!!!!!!
Jun 14, 2011 2:29PM
avatar
Best Buy is up and yet over 80% of all the products they sell if not more are made outside the USA so that isn't really going to do much to create high paying jobs here in USA.  So we continue to create disposable income for Chinese workers who then spend that money on products made in their own country...so how does that benefit us here in America?  JC Penney is up because they hired the former head of the Apple stores.  Once again, one person is not going to make a big difference especially since Apple stores would do well regardless who ran them as the primary consumer who is the younger generation who grew up on Mac books, IPods, IPhones etc. would buy from the Apple stores regardless who was in charge.  This younger generation demographic group does not shop primarily at JC Penney nor will they and the same goes for Sears.  Also consumer electronics is a very low margin businesses so even though Best Buy's revenue may be up...how are their net earnings?  Retail is a sucker play.. 
Jun 14, 2011 2:35PM
avatar
THey need to get off this global economy jive. All this trade agreement stuff needs to be put on the table without  manufacturers running around screaming protectionism. thats what all the other so called trade partners are doing. We need to push protectionism and trade tariffs and deport illegal aliens or this country and its economy are sunk.  the  DOW numbers are4 a joke.. it should be at about 87 or 8800. don't be fooled .Just look at your 401k and see what a farce you were sold. Get your money out of the market before these  Wall street  SLeezebags completely rob you . our econmomy is in  the tank. BAIL OUT THEY DID.
Jun 14, 2011 1:52PM
avatar
the rally really began overnight in Asia after China reported stronger than expected industrial output
Can not think of any better reason to by American stocksSmile
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