S&P 500 tops 1,400 as optimism grows

The Dow gains 51 points as decent earnings and hope for a European debt solution give markets a boost. Fossil and Chesapeake Energy are big gainers. Disney earnings beat estimates. Oil jumps, but gold dips.

By Charley Blaine Aug 7, 2012 12:17PM
Charley BlaineUpdated: 9:03 p.m. ET

Stocks finished higher today for the third straight session but, like Monday, lost some steam toward the close on hopes for a roadmap to end Europe's debt crisis and more easing by the Federal Reserve and other central banks.

The rally pushed the Standard & Poor's 500 Index ($INX) to its first close above 1,400 since May 3. The Nasdaq Composite Index ($COMPX) closed above 3,000 for the first time since May 3.

Energy stocks, buoyed by crude oil nearing $94 in New York, and industrial shares led the market. The market also was cheered by strong earnings from watch-and-accessories retailer Fossil (FOSL) and drugstore chain CVS Caremark (CVS) and stronger-than-expected production guidance from natural gas producer Chesapeake Energy (CHK).

But results from Walt Disney (DIS) appeared to disappoint investors. The entertainment giant reported earnings of $1.01 a share, up from 78 cents a year ago and ahead of the Street estimate of 93 cents a share. Revenue, up 4% from a year ago to $11.09 billion, missed the Street estimate of $11.3 billion. Shares were off 63 cents to $49.18 after hours after rising 16 cents to $49.81 in regular trading.

The Dow Jones Industrial Average ($INDU) closed up 51 points to 13,169 and ended the day 110 points below its its post-2008-09 crash high -- 13,279.32 -- set on May 1. The S&P 500 gained 7 points to 1,401. The Nasdaq was up 26 points to 3,016. The index had briefly topped 3,000 on Monday for the first time since May 4.

Article continues below.
Meanwhile, the Nasdaq-100 Index ($NDX) was up 23 points to 2,717. Apple (AAPL), the largest influence on the Nasdaq-100, was off $1.64 to $620.91.

The surge, which some are calling the Draghi rally, began July 26 when Mario Draghi, the president of the European Central Bank, said he would do "whatever it takes" to save the euro. The S&P 500 is up about 4.7% since then, with the Dow up 3.9%. The Nasdaq is up 5.7%.

The big questions about this rally are how long can it last and what does it mean.

The short answer is that the rally will last until the domestic economic data goes sour or the sense that Draghi may be able to marshall enough support among the 17 eurozone nations -- but especially Germany -- fades away.

The economic fundamentals in Europe are weak, especially in Italy, Spain and Greece. The U.S. fundamentals aren't great, but they aren't awful. But the fiscal cliff is a big worry. The New York Times reported today that many businesses are concerned enough that Congress may do nothing about fiscal policy, allowing tax rates to rise along with sizable spending cuts.

What the rally means is that many traders may be willing to entertain the idea that the world may not end this fall -- and that cooler heads will find away to mitigate the effects of the fiscal cliff.

The government will report on labor productivity and crude oil inventories on Wednesday. The big earnings reports are department store operator Macy's (M), fashion retailer Ralph Lauren  (RL) and media giant News Corp. (NWSA).

Futures trading suggests a modestly lower open for stocks on Wednesday.

Do not weep for Disney
The stock is up nearly 33% this year and is the second-best performer among the 30 Dow stocks after Bank of America (BAC), which is up 38%.

Disney had a strong quarter. The action film "The Avengers" has grossed more than $1.46 billion since its April release and is the world's top-performing film this year and third-best ever.

The filmed entertainment business saw operating profit jump from $49 million to $313 million.

The company had revenue gains in all its businesses except its interactive business. Its parks-and-resorts business saw revenue jump 9% to $3.44 billion. Operating profit was up 21% from a year ago.

Part of the gain was due to domestic growth, but it also benefited from Japan's recovery from the March 2011 earthquake, which shut down the Tokyo Disney Resort. When reopened, the resort struggled.

Crude oil nears $94 a barrel
Crude oil
(-CL) settled up $2.27 to $93.67 a barrel in New York. Brent crude added $2.52 to $111.46  in London.. Natural gas (-NG) was up 5.6 cents to $2.94 per million British thermal units. The price of natural gas is up 5% this quarter after jumping nearly a third in the second quarter.

Worries about oil supplies from Iraq and Mexico were supporting prices, and a fire at Chevron's (CVX) Richmond, Calif., refinery briefly boosted wholesale gasoline futures above $3 a gallon before they settled at $2.998 a gallon.

Energy stocks moved higher. Anadarko Petroleum (APC) was $2.31 to $70.53. Exxon Mobil (XOM) was up 47 cents to $87.92. Chevron was up 64 cents to $111.95.

Gold (-GC) settled down $3.40 to $1,612.80 an ounce. Silver (-SI) and copper (-HG) were higher.

Interest rates were higher, with the 10-year Treasury yield rising to 1.628% from 1.558% on Monday. The dollar was lower against major currencies.

Energy prices -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Crude oil (-CL)

$93.67

$92.20

10.25%

-5.22%
(per barrel)











Heating oil (-HO)

$2.9980

$2.9409

10.63%

2.88%
(per gallon)











Natural gas (-NG)

$2.9640

$2.9080

4.96%

-0.84%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.9913

$2.9222

13.66%

12.56%
(per gallon)











Brent crude 

$111.46

$108.94

14.52%

4.30%
(per barrel)











Retail gasoline

$3.6340

$3.6190

8.90%

10.93%
(per gallon; AAA)












A Fed president helps move markets
The market took a cue in part from Federal Reserve Bank of Boston President Eric Rosengren. In interviews with The Wall Street Journal and CNBC, he called for an aggressive, open-ended bond-buying program that the central bank would continue until economic growth picks up and unemployment starts falling again.

Rosengren's decision to speak out "is a sign of the momentum building inside the Fed for a new phase of action," the Journal said today.

A bond-buying program, which gets the admittedly wonky nickname quantitative easing, would aim to drive down long-term interest rates, drive up stocks and push down the value of the dollar, which many officials believe would spur activity.

There has been open hostility to the idea among other presidents of the 12 Federal Reserve banks who worry about more inflation and a sense the Fed is trying to manipulate the November election.

Fossil and Chesapeake are among top performers
Fossil shares jumped $21.98 to $91.77 after the company projected 2012 adjusted profit above expectations. It was the top performer among S&P 500 companies.


Chesapeake Energy, up $1.67 to $19.37, was the second-best S&P 500 performer thanks to its bullish forecasts on production and  asset sales. CEO Aubrey McClendon predicted that natural gas prices were at the start of a new uptrend after bottoming at $1.84 per million British thermal units this spring.


Pfizer (PFE) and Johnson & Johnson (JNJ) were down 52 cents to $23.74 and 55 cents to $68.29, respectively. The companies said late Monday they were halting most efforts at devising an Alzheimer’s drug following a second trial failure.


Standard Chartered Bank (SCBFF), the big British bank, was off $3.18 to $19.22 in New York after New York state's top banking regulator threatened to strip the London company of its license to do business there, alleging that a unit illegally handled at least $250 billion in transactions with Iranian entities. The British shares fell 244.37 pence, or 16.7%, to 1,225.63. The company has lost about 25% of its market value in two days.


Chip stocks rise on a Goldman upgrade

Freescale (FSL), LSI (LSI) and Applied Materials (AMAT) were the leaders in a big rally in chip stocks after Goldman Sachs upgraded the companies.


Goldman argued that the downside to Freescale's estimates is limited given soft guidance and a lean supply chain, and (more importantly for peers) the firm expects earnings to be "up significantly" in 2013 and 2014 thanks to a new chip industry up cycle.


Also moving higher: Micron Technology (MU), NXP Semiconductors (NXPI), Marvell Technology (MRVL) and Atmel (ATML).

The hot stocks make a comeback

A number of beat-up momentum stocks are running hot after their summer of discontent, with investors apparently setting their tolerance for risk a bit higher without any clear-cut catalysts, Seeking Alpha noted.


Favored momentum stocks Chipotle (CMG), Tesla Motors (TSLA), Lululemon (LULU), Deckers (DECK) and Green Mountain Coffee Roasters (GMCR) showed outsized gains this afternoon.


Short hits from the markets -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.080%

-10.00%

800.00%
5-year Treasury note 

0.703%

0.647%

17.36%

-15.30%
10-year Treasury note

1.623%

1.558%

-2.17%

-13.25%
30-year Treasury bond

2.716%

2.646%

-1.70%

-5.99%
Currencies











U.S. Dollar Index

82.25

82.302

0.61%

2.15%
British pound

1.5649

1.5605

-0.34%

0.72%
(in U.S. $)

 








U.S. $ in pounds

£0.639

£0.641

0.35%

-0.71%
Euro in dollars

$1.24

$1.24

-1.63%

-4.16%
(in U.S. $)

 








U.S. $ in euros

€ 0.805

€ 0.806

1.65%

4.34%
U.S. $ in yen 

78.80

78.26

-1.18%

2.21%
U.S. $ in Chinese

6.39

6.37

0.29%

1.03%
yuan











Canada dollar

$1.003

$1.000

2.12%

2.26%
(in U.S. $)

 








U.S. dollar 

$0.998

$1.000

-2.06%

-2.21%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,612.80

$1,616.20

0.54%

2.94%
(per troy ounce)

 








Copper (-HG)

$3.441

$3.389

-1.60%

0.13%
(per pound)

 








Silver (-SI)

$28.0860

$27.8630

1.72%

0.61%
(per troy ounce)

 








Wheat (-ZW)

$8.8900

$8.9325

17.40%

36.19%
(per bushel)

 








Corn (-ZC)

$8.0050

$8.050

26.11%

23.82%
(per bushel)

 








Cotton 

$0.7540

0.7572

5.71%

-17.76%
(per pound)

 








Coffee

$1.7265
$1.755

1.14%

-24.82%
(per pound)

 








Crude oil (-CL)

$93.67

$92.20

10.25%

-5.22%
(per barrel)










 
302Comments
Aug 7, 2012 1:03PM
avatar

HOPE!!

I HOPE I win the lottery but I won't.

I HOPE gas prices go down but they won't.

I HOPE everyone on Wall Street loses their a** but they won't.

HOPE is destroying America!! Why don't these so called smart people base things on facts and not HOPE? Why is everything on Wall Street UNEXPECTED? I thought only smart people worked there? We the American people are suffering because of these STUPID people causing prices to go up on everything so we can't help the economy by spending money on other things besides food and gas. They tried a little experiment by dropping the gas prices to see if people would spend more, guess what, we don't have it to spend you bunch of jackassses. I'm not saying Romney will be the answer but we sure as h*** have to get that clown Obama out of office. He has destroyed this country beyond repair. Don't tell me he can't do anything about gas and oil prices either, just as soon as he mentioned about a investigation the prices dropped a lot. I can't understand our Government letting people get by with what they do, they are just as crooked as the rest of them.  We need to clean house in DC and put some honest people that will help the middle class because we are what makes this country. Come on America, don't sit around and take this crap anymore, let's get back to the way it was when we were #1. We were built by God fearing people not a bunch of cheating liars like we have now.

Aug 7, 2012 1:12PM
avatar
All this on hope???  Nothing has actually been done yet!  Remember the tech bubble?  Remembe rthe housing bubble?  Unless the speculative statements actually become reality, the market is in for a BIG letdown.  And, why is oil going up when there actually is an over supply in the world with no increased demand?  Can you say manipulator? 
Aug 7, 2012 12:57PM
avatar

Another FED quote, another 100 points.  I feel like a sucker for not being in the market but all it will take is a negative FED quote and it will all collapse.  The gains are entirely contingent on statements by a few people that have nothing whatsoever to do with the actual companies you are buying and selling in the market. 

 

How many Central Bank officials are there, hundreds?  Any one of them can make a statement on any given day that will cause the markets to go up or down by billions.   It's too easy to fix that game.

 

I know some people are making alot of money right now but to me, it sure feels like the Tech Bubble did.  Only worse. 

 

 

 

Aug 7, 2012 3:10PM
avatar
Just spent a few days in southeastern Kansas.  Literally a wasteland of fast food restaurants, used car lots, and Wal Mart stores.   Crops are dead or dying.  And what's left of the working population can't find the energy to smile.  All the while the DOW is rising toward 14K and gas remains $1 a gallon over fair value.  Guess what folks? Obama was absolutely right.  The public sector is doing just fine.
Aug 7, 2012 1:22PM
avatar

So what is easing?  It's the Federal Reserve and other central banks lending, and in many instances GIVING cash to major commercial banks in order to keep cash flowing and thus stimulating the economy.  Where does this money come from??? Debt issued by the fed reserve in the form of treasury notes, or other debt instruments issued by other central bank.  Right now the US buys over half of its own debt.  How is that????? We print more cash!!  Wake up America, your cash is being diluted!  It’s the greatest toy the Democrats ever had, a tax with X% capacity.  Evita tried the same scam with Argentina and the end result was people purchasing loafs of bread with wheelbarrows full of cash.  When will we realize that the answer to massive debt is NOT stacking up more?  When will we stop leveraging our futures for the entitlements we elect today?

Aug 7, 2012 1:11PM
avatar
well the reason why the past stimulus is not doing anything for the overall economy is that banks are using the money to fund the stock market, once there is no more stimulus hopes then the market will drop like a rock.  until then, its to 14000. 
Aug 7, 2012 3:07PM
avatar

Please correct me if I'm wrong but yesterday wasn't the stock market falling because of the worries about Europe and if those problems were around yesterday wouldn't they still be around today????

 

Just who in the hell is directing these markets????????????????????????

Aug 7, 2012 3:35PM
avatar
How many of you are aware that the Fed dumped $600 million, including not only Treasury, but also Agency and MBS securities into the "market" today?  THAT'S your "S&P 1400" right there.  In the mean time Spanish and Italian sovereign bonds are back near 7%, and big ETF short interest (QQQ, SPY) is the lowest in decades.  This WILL end badly folks, don't be fooled by shill-boy Charlie and his corporate media employer.
Aug 7, 2012 3:55PM
avatar

How much debt did we incur to raise the market 62% Since Obama took over? Take away the phoney money and the market would be alot ,ALOT lower.

Aug 7, 2012 1:27PM
avatar

A rally based on European "Hopium", what a deal!

 

There is no "European debt solution" on the boards. Draghi might print some money, but he can't keep doing it unless the German taxpayers decide to become tax slaves to other countries. Ain't gonna' happen!

Aug 7, 2012 1:37PM
avatar
"well the reason why the past stimulus is not doing anything for the overall economy is that banks are using the money to fund the stock market, once there is no more stimulus hopes then the market will drop like a rock.  until then, its to 14000.  "


That is the reason the bailouts are not working. Banks are hording the cash.

The stimulus is not working because they never work long term. It's an expensive, temporary boost that cost millions of dolloars per job created. Go back and look at what was in the stimulus....frisbee golf and duck ponds and a WHOLE LOT OF EARMARKS. 
Aug 7, 2012 3:29PM
avatar
Throwing money again at the biggest problem our country faces and these idiots have no clue as to what should really happen. The fraud that was going on in the housing market has not been addressed. If you were illegally foreclosed on, and were told that there was an independent study to find out if there was such and action.  Robo signing, massive illegal miscues the big banks and loan companies were involved in. MERS, a company that was stopped from doing business in California by electronically hoarding the truth. That study produced massive illegal transactions by these banks but you hear nothing about it on the campaign trail. The banks control our very life as we know it and they are still operating the same way.  When you sign a promissory note, the signee is the creditor not the borrower. That note is securitized and it becomes a financial instrument. They have given us no consideration on what comes next, and that is they trade that note on the Mortgage Back Security Exchange making miillions on just one of those notes, they steal your identity, and we are supposed to just give up..because they are controlled by the Federal Reserve Bank.  A bank that is private but has the power to do what they want to us...God Help Us. This would be a great time to vote for Ron Paul
Aug 7, 2012 1:28PM
avatar

Please!  Get your proverbial heads out of your as.!  This is all a con...we are headed to total

 economic disaster...stimulus or not....not to mention cultural disaster.  Noone invests other than 401K's and what is put into pension plans that are being destroyed right now, both!  There is no "optimism"..this is all contrived BS.  No volume, devalued dollar and the the crisis overseas that is growing not diminishing.  You all cannot be that dam. dumb!  We are a "nanny" nation now and this will not improve!  What are some of you smokin'!

Aug 7, 2012 2:38PM
avatar

The guys at the FED are pretty smart so I'm sure they know we are screwed.  They are just trying to make the landing as soft as possible. There WILL be a landing and it will be at a lower standard of living than we have been enjoying.  If they can make the process slow and gradual, people might not notice that they have lost as much.  A slow landing also allows the big boys time to position themselves to remain in control as things contract.   At the altitude where the FED flys, stability is the goal.  

 

We are all being taxed by currency devaluation and the funds are going to back to the banks to cover what they lost in the housing bubble.  Plain and simple.   When the banks have made back what they lost, they will cash out and the market will drop back to where it should be.  Your money will be worth 50% less but the average citizen will have no idea how they were screwed.  It won't be a fair process, even for the banks.  Some will do better than others but overall, all the money they lost in the housing bubble will be recovered.  In real terms, the economy will still be the same size but wealth will be taken from the public and given back to the system.  So, in effect,  all that money Joe made when he sold that house to Bob in 06 will get called back in.   Joe will still be better off than Bob but they will  have both paid the tax.

 

This theory assumes there is a goal and an end game in all this monetary craziness.  Maybe there's nothing going on but politics and knee jerk reactions.  I hope they are smarter than that.

 

Now the real question for this investment page.  How can the little guy profit from all this? 

 

  

 

       

 

  

Aug 7, 2012 2:28PM
avatar

Just another phony day on Wall Street.............It's already been confirmed that Knight Captial is another Bear Stearns in the making and we all know they are pumping funny money in to prop them up now.

 

why doesn't MSN report some real news for once.

Aug 7, 2012 1:41PM
avatar
Stocks will take another nose dive because someone in Europe will break wind and someone on Wall Street is close enough to hear it.
Aug 7, 2012 1:31PM
avatar

Another fire prices jump !!!  WOW ! ANY ONE AREADING PAPER OR WATCHING NEWS would have known it was going to raise prices even if someone farted in nigeria gas goes up even though what' s in the tanks was cheaper !!!!!  They goe up fast but go down A penny when they fall

BUT there is no eveidence of GOUGING EVER ( FOUND).  MORE WASTED MONEY IVESTIGATING WHY??  MAYBE SOMEONE NEEDS TO INVESTIGATE THE INVESTIGATORS?? WITHOUT IT COSTING US WITH WHAT THEY GET TO RUN THEIR OFFICE SHOULD BE ENOUGH TO PAY FOR IT' SINCE THEY DO NOT HAVE TO PAY FOR THEIR HEALTH CARE ??

Aug 7, 2012 2:05PM
avatar
AS the old saying goes.....hope in one hand and s**t in the other one. See which one fills up faster.
Aug 7, 2012 2:56PM
avatar

Sick people sometimes do bad things.  Blaming a particular political party is ignorant.

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