Dow jumps 103 on improving housing picture

Stocks rally as investors cheer the biggest gain in housing starts since 2008. IBM and Qualcomm results cheer investors. American Express sees some consumer caution. Intel leads chip stocks higher.

By Charley Blaine Jul 18, 2012 12:48PM
Charley BlaineUpdated: 5:24 p.m. ET

Stocks rallied for the third day in the last four, paced by a strong surge in semiconductor and software stocks and helped by the biggest monthly gain in housing starts in nearly four years.

In addition, Federal Reserve Chairman Ben Bernanke told a congressional committee that the Fed was ready to help support the  economy if conditions require, but he didn't offer specifics. Bernanke made a similar pledge in testimony Tuesday before the Senate Banking Committee.

The rally came as earnings from Intel (INTC), Honeywell (HON) and Stanley Black & Decker (SWK) cheered investors. Bank of America (BAC) results generated little enthusiasm. Crude oil (-CL) was higher in New York as domestic inventories were lower than expected. Gold (-GC) was lower.

After the close, IBM (IBM) earnings per share beat Street estimates, and shares were higher. Qualcomm (QCOM) shares were higher despite warning about slowing demand for smartphones and a shortfall in supply of chips. American Express (AXP) shares were off slightly. Revenue growth was 7%, "slower than the increases we’ve seen in the recent quarters," CEO Ken Chenault said in a statement. But the credit-card company beat Street estimates.
 
The Dow Jones industrials ($INDU) were up 103 points to 12,909, their second gain of 100 points or more in three days. The Standard & Poor's 500 Index ($INX) was up 9 points to 1,373. It hit 1,375 early in the afternoon, the best level in two months. The Nasdaq Composite Index ($COMPX) gained 33 points to 2,943.
The Nasdaq-100 Index ($NDX) had gained 34 points to 2,626, led by gains in Intel, Microsoft (MSFT) and Qualcomm and graphics-chip-maker Nvidia (NVDA). (Microsoft is the publisher of MSN Money.) Apple (AAPL) was off 68 cents to $606.26.

The Federal Reserve's Beige Book report offered a snapshot of an economy that's growing modestly at best. Activity for many businesses has softened in recent months. There was concern about the worsening drought in the Midwest and other areas. Housing activity seems to be getting better.

Intel jumped 83 cents to $26.21 after posting earnings that beat estimates while scaling back its annual sales forecast. EMC (EMC) rallied $2.16 to $25.08 after announcing a new chief executive officer at VMware (VMW). EMC owns a majority stake in the software maker. VMware was up $9.69 to $89.98.

IBM raises guidance
IBM said it earned $3.51 a share, up from $3.09 a year ago and ahead of the Street estimate of $3.42 a share. Revenue of $25.8 billion was a touch below the estimate of $26.3 billion.

The company raised its full-year earnings estimate to $15.10 a share at least. It had been $15 a share.

Shares were up $3.48, or 1.9%, after hours to $191.73. The regular close of $188.25 was up $4.60.

Qualcomm says smartphone growth boosting results
Qualcomm shares jumped $2.94, or 5.3%, after hours to $58.99. The company said its fiscal-third-quarter earnings were up 17% to 69 cents a share, with revenue up 28% to $4.6 billion as the company benefited from rapid growth of smartphone demand.

It sees growth moderating a bit in the latter half of the year because of shortages of new chips, which are made in Taiwan. For the fiscal year, Qualcomm sees earnings of $3.61 to $3.67 per share. It had projected $3.61 to $3.76 earlier this year. It sees $18.7 billion to $19.1 billion in revenue, a change from earlier guidance of $18.7 billion to $19.7 billion.

Qualcomm shares rose $1.59 to $56.05 in regular trading.

American Express sees consumer caution
American Express shares were off 49 cents to $57.80 after slipping 39 cents to $58.29 in regular trading.

As noted, the company said credit card transactions were up 7% from a year ago, less than expected. Most analysts attributed the slower growth to increasing consumer caution. At the least, American Express described the economic outlook at "uncertain."

The company earned $1.15 a share, or $1.3 billion, up from $1.10 a share a year ago, or $1.295 billion. Revenue from credit cards was up 5% to $6.84 billion, up from $6.535 billion. A rising dollar depressed international revenue.



Gold settled down $18.70 to $1,570.80 an ounce. Silver (-SI) settled down 22.1 cents to $27.10 an ounce. Copper (-HG) was up 1.85 cents to $3.474 a pound, largely because of housing gains.

Crude oil was up 54 cents to $89.76 a barrel in New York.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$89.87

$89.22

5.78%

-9.07%
(per barrel)











Heating oil (-HO)

$2.8776

$2.8422

6.19%

-1.26%
(per gallon)











Natural gas (-NG)

$2.9730

$2.7960

5.28%

-0.54%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7755

$2.7349

5.46%

4.44%
(per gallon)











Brent crude 

$105.18

$104.00

7.55%

-2.05%
(per barrel)











Retail gasoline

$3.4260

$3.4060

2.18%

4.58%
(per gallon; AAA)












Some cheer from housing
Housing starts hit a seasonally adjusted rate of 760,000 in June, the largest monthly rate since October 2008 as the full force of the Great Recession was hitting. The rate was up 6.9% from May and 23.6% from June 2011.

Building permits were off 3.7% from May to a seasonally adjusted 755,000. That was mostly due to a decline in permits for apartments. Single-family permits were up 4.7% to a seasonally adjusted 539,000.

The starts rate has averaged 727,000 units for the first half of the year, up 19.6% from  587,000 a year ago and 31% from 2009, when the housing market essentially collapsed. But starts have a long way to go. Normally,  about 1.5 million units are built a year.

Housing has been a surprise in 2012, with construction and sales showing signs of life.

Homebuilding shares were mostly higher. The Philadelphia Housing Sector Index ($HGX) was up slightly at 139.94. The index is up 36% this year.

Bank of America is still cutting costs
Bank of America shares were off 3953ents to $7.79. The company earned 19 cents a share in the second quarter, 5 cents better than expected. But revenue of $21.97 billion missed estimates by some $900 million. The profit gain was achieved big cost cuts.

The company said its loan book shrank from the same quarter last year, its interest income fell 15%, and each of its divisions except for mortgage lending posted lower revenue.

The company plans to cut costs by $3 billion a year in commercial lending, investment banking and wealth management.

One of the biggest reasons Bank of America is struggling showed up again today. The company said it will pay $375 million to settle a lawsuit brought by Syncora Guarantee, a bond insurer, over toxic mortgage-backed securities at the center of the 2008 financial crisis.

Syncora sued Bank of America in 2009 to recover losses on securities transactions made by Countrywide Financial, which Bank of America bought in 2008. Syncora said it had been duped into insuring the mortgage-backed securities and that Countrywide had misrepresented the quality of the underlying mortgages.

The Countrywide deal brought with it billions of dollars in problems.

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.080%

12.50%

800.00%
5-year Treasury note 

0.594%

0.618%

-18.52%

-28.43%
10-year Treasury note

1.479%

1.501%

-10.85%

-20.95%
30-year Treasury bond

2.580%

2.595%

-6.62%

-10.70%
Currencies











U.S. Dollar Index

83.196

83.168

1.77%

3.32%
British pound

1.5659

1.5654

-0.28%

0.78%
(in U.S. $)

 








U.S. $ in pounds

£0.639

£0.639

0.28%

-0.78%
Euro in dollars

$1.23

$1.23

-2.67%

-5.17%
(in U.S. $)

 








U.S. $ in euros

€ 0.814

€ 0.813

2.74%

5.45%
U.S. $ in yen 

78.93

79.07

-1.03%

2.37%
U.S. $ in Chinese

6.39

6.37

0.30%

1.04%
yuan











Canada dollar

$0.990

$0.988

0.75%

0.89%
(in U.S. $)

 








U.S. dollar 

$1.011

$1.012

-0.74%

-0.89%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,570.80

$1,589.50

-2.08%

0.26%
(per troy ounce)

 








Copper (-HG)

$3.474

$3.456

-0.64%

1.11%
(per pound)

 








Silver (-SI)

$27.0950

$27.3160

-1.87%

-2.94%
(per troy ounce)

 








Wheat (-ZW)

$9.0325

$8.8500

19.28%

38.38%
(per bushel)

 








Corn (-ZC)

$7.8425

$7.713

23.55%

21.31%
(per bushel)

 








Cotton 

$0.7193

0.7105

0.84%

-21.54%
(per pound)

 








Coffee

$1.8215

1.8185

6.71%

-20.68%
(per pound)

 








Crude oil (-CL)

$89.87

$89.22

5.78%

-9.07%
(per barrel)










 

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