Dow up 96 on Fed hopes, housing cheer

While housing starts fall, single-family starts rise. Microsoft shares jump on Surface announcement. FedEx pledges cost cuts. JC Penney shares tumble after president resigns. European stocks rally. Crude oil moves over $84.

By Charley Blaine Jun 19, 2012 12:21PM
Charley BlaineUpdated: 8:21 p.m. ET

Stocks rallied today for the third time in the past four sessions as hopes grew that the Federal Reserve would move to add more stimulus to the economy. In addition, investors appeared to like the pledge of cost-cutting from FedEx (FDX) and Microsoft's (MSFT) introduction of its new Surface tablet device.

The Dow Jones industrials ($INDU) finished with a 96-point gain to 12,837, just missing its fourth finish of better than 100 points in the last six sessions. Still, the major averages have already recovered about half of their losses in May.

European stocks were higher as well, as the worries about Greece and Spain eased -- at least for today. Spanish and Greek stocks were up around 3%. The gains helped the euro rally against the dollar.

Meanwhile, homebuilding shares climbed after the Commerce Department reported that single-family housing starts rose 3.2% in May over April, although multifamily starts were lower. Building permits reached their highest level since September 2008.

The Dow had been up as many as 157 points before profit-taking set in ahead of the Fed's announcement, due Wednesday at 12:30 p.m. ET. The Standard & Poor's 500 Index ($INX) added 13 points to 1,358, and the Nasdaq Composite Index ($COMPX) was up 34 points to 2,930.

Article continues below.
The Nasdaq-100 Index ($NDX) was up 28 points to 2,621, powered by gains in Microsoft, Oracle (ORCL) and Google (GOOG). Apple (AAPL), normally the biggest influence on the index, was up $1.63 to $587.41 The shares had reached as high as $590 before falling back.

After hours, shares of La Z Boy (LZB) were up 3.6% to $13.60, from a regular close of $13.13, after fiscal-fourth-quarter earnings were better than expected. Adobe Systems (ADBE) shares were down 4.3% to $31.47 from a regular close of $32.89 after the company's third-quarter earnings and revenue guidance were weaker than expected.

Futures trading suggests a flat open for stocks. The Fed decision will change everything.

Love that 50-day moving average
Today's rally was a victory for technical bulls. The Dow, S&P 500 and Nasdaq are all trading above their simple 50-day moving averages, one of the most important indicators of investor confidence.

Moreover, as Tom McClellan of the McClellan Market noted, the CBOE Volatility Index ($VIX) dropped under its 50-day moving average on Monday for the first time since early May -- a signal investors may be feeling better about markets. At least for now.

With today's gains, the major averages are now up more than 6% since hitting a recent bottom on June 1 for the S&P 500 and Nasdaq and June 4 for the Dow.

The Dow is up 5.1% for the year, with the S&P 500 8% and the Nasdaq up 12.5%.

Crude oil moves higher; gold slips
Crude oil (-CL) in New York was up 76 cents to $84.03 a barrel after trading as high as $84.75. Brent crude in London was off 17 cents to $95.91 a barrel.

Wholesale gasoline futures were down 17 cents to $2.6415 a gallon and are now down 0.6% for the year. Crude oil is off 15% for the year, natural gas is off 14.9% and heating-oil futures are down 9.6%.

The national average price of gasoline was at $3.497 a gallon, down from Monday's $3.505, according to AAA's Daily Fuel Gauge Report. It's the first time the average has been under $3.50 since Feb. 10. While the price is still up 6.8% from a year ago, it is still down 11.2% since peaking at $3.936 a gallon in early April.

Gold (-GC) settled down $3.80 to $1,623.20 an ounce. Silver (-SI) was off 21 cents to $28.46 an ounce. Copper (-HG) added 3.95 cents to $3.435 a pound.

Interest rates were higher as stocks pulled cash from bonds. The 10-year Treasury yield climbed to 1.62% from 1.584% on Monday. The Spanish 10-year bond yield drifted down to 7.035% after hitting a record 7.158% on Monday.

Energy prices -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Crude oil (-CL)

$84.03

$83.27

-2.89%

-14.98%
(per barrel)











Heating oil (-HO)

$2.6351

$2.6177

-2.52%

-9.58%
(per gallon)











Natural gas (-NG)

$2.5450

$2.6350

5.08%

-14.85%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.6415

$2.6609

-2.98%

-0.60%
(per gallon)











Brent crude 

$95.76

$96.05

-6.00%

-10.82%
(per barrel)











Retail gasoline

$3.4970

$3.5050

-3.40%

6.75%
(per gallon; AAA)












Will the Fed make a move?
The Fed has started a two-day meeting on monetary policy. A key question is if the central bank will ease monetary policy to give the economy a boost. The pressure to make a move has increased since the government reported weak May job gains, and many analysts say  the Fed may extend Operation Twist, a program of selling short-term securities and buying long-term securities to keep rates low. The program is scheduled to expire on June 30.

If the Fed makes no move, the market may sell off.

Of concern as well are the continuing European debt crisis and the worries that failure of Congress to agree on budget priorities could result in deep and unwanted budget cuts that could push the domestic economy back into recession next year.

So far, Surface gets decent reviews for Microsoft
Microsoft, the publisher of MSN Money, was up 86 cents to $30.70, thanks to the buzz about its Surface device, widely described as a bid to compete against Apple's very successful iPad.

The New York Times' Sam Grobart argued the Surface may not entirely be an iPad rival -- but a solution for tablet buyers who crave the added functionality of a notebook.

Those trying Surface mostly have good things to say about its hardware and keyboard covers, but think more hands-on use is needed for a final verdict.

FedEx says it will cut costs to boost profits
FedEx shares were up $2.50 to $91.01 after the company pledged to improve service and efficiency as slowing economic growth pressures profits. FedEx plans to restructure its express business in the fiscal year through May 31 after announcing the retirement of 24 jet freighters amid cost cuts in the domestic portion of the unit.

FedEx reported a decline in profit for its fiscal fourth quarter and a slump in full-year cargo-volume growth for the first time in more than two years.

FedEx and rival United Parcel Service (UPS) are considered economic bellwethers, transporting everything from financial documents to pharmaceuticals and auto parts.

UPS was up 37 cents to $78.16.

Leaders and laggards
Bank of America (BAC) rose 35 cents to $8.11 after Julius Baer Holding said it is in talks to buy the company’s Merrill Lynch international wealth management business.

Bon-Ton Stores (BONT) shares rose 55 cents to $5.91 following news the department-store chain is selling its $475 million private-label credit card business to Alliance Data. Terms weren’t disclosed but the deal is “consistent with industry norms.”

Oracle shares were up 84 cents to $27.96 after reporting a fiscal-fourth-quarter profit of $3.54 billion, up 8% from $3.2 billion a year ago. Adjusted earnings per share was 82 cents. That topped analysts’ estimates of 78 cents,

J.C. Penney (JCP) shares fell $2.08 to $22.25. Late Monday, the department-store operator said its recently hired president, Michael Francis, stepped down. Francis had been brought in to handle marketing and to get Penney's product lines together. CEO Ron Johnson will handle those tasks himself. Francis' departure is an acknowledgment that Johnson's new strategy hasn't caught on.

Barnes & Noble (BKS) shares fell 61 cents to $14.63 after reporting a wider-than-expected loss. Declining Nook sales were a problem. The results suggest Barnes & Noble is a victim of Apple on multiple fronts, Seeking Alpha noted.

Not only is the iPad making life difficult for all would-be tablet rivals, it's quickly eating into the e-reader market. IDC recently predicted e-reader shipments would fall slightly in 2012, while tablet shipments grow nearly 60%.

A bias to the upside
Twenty-three of the 30 Dow stocks were higher, led by Bank of America and Microsoft. The laggards were Hewlett-Packard (HPQ) and McDonald's (MCD), down 24 cents to $20.81 and 64 cents to $89.60, respectively.

U.S. Steel (X) and Nvidia (NVDA) were the top S&P 500 performers. U.S. Steel moved up as a Fed play. Nvidia is supplying chips to some models of the Microsoft Surface. J.C. Penney and Walgreen (WAG) were the laggards. A total of 474 stocks in the index were higher.

Nvidia and Sears Holdings (SHLD) were the Nasdaq leaders, with Monster Beverage (MNST) and Expedia (EXPE) the laggards. Eighty-four stocks in the index were higher.

Microsoft, Oracle, Google, Apple and eBay (EBAY) contributed 15.3 points to the Nasdaq-100's gain.

Short hits from the markets -- New York close



Tues.

Mon.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.090%

28.57%

800.00%
5-year Treasury note 

0.701%

0.685%

4.47%

-15.54%
10-year Treasury note

1.620%

1.584%

2.47%

-13.42%
30-year Treasury bond

2.727%

2.679%

2.06%

-5.61%
Currencies











U.S. Dollar Index

81.586

82.216

-1.86%

1.32%
British pound

1.5746

1.5672

2.16%

1.34%
(in U.S. $)

 








U.S. $ in pounds

£0.635

£0.638

-2.11%

-1.32%
Euro in dollars

$1.27

$1.26

2.69%

-2.03%
(in U.S. $)

 








U.S. $ in euros

€ 0.788

€ 0.795

-2.62%

2.07%
U.S. $ in yen 

79.18

79.10

0.79%

2.69%
U.S. $ in Chinese

6.38

6.35

-0.08%

0.80%
yuan











Canada dollar

$0.983

$0.977

1.51%

0.21%
(in U.S. $)

 








U.S. dollar 

$1.018

$1.023

-1.50%

-0.21%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,623.20

$1,627.00

3.77%

3.60%
(per troy ounce)

 








Copper (-HG)

$3.4335

$3.396

2.02%

-0.07%
(per pound)

 








Silver (-SI)

$28.368

$28.6710

2.02%

-0.07%
(per troy ounce)

 








Wheat (-ZW)

$6.4950

$6.3025

0.89%

-0.50%
(per bushel)

 








Corn (-ZC)

$6.1250

$5.995

10.31%

-5.26%
(per bushel)

 








Cotton 

$0.7405

0.7187

3.06%

-19.23%
(per pound)

 








Coffee

$1.5880

1.515

-2.55%

-30.85%
(per pound)

 








Crude oil (-CL)

$84.07

$83.27

-2.84%

-14.93%
(per barrel)










 

156Comments
Jun 19, 2012 1:22PM
avatar

People always bring up how extra spending helped  get us out of the depression in the 20's and 30"s.But to do so now at the same percentage,people also forget we now have underfunded soc.sec.,medicare,medicade,foodstamps,welfare,pension funds for government workers,extra unemployment benifits and all the rest of the social programs we didn't have back then.So how do we pay for all this? Start cutting and raise taxes equally is my guess.

Jun 19, 2012 1:16PM
avatar
hope jump the fed's will write more bad checks (make money) from the American Bank Account.  What B.S. the rich still stealing from the rest of us.  Cash in 401K's and take the hit now, keeping 60% or wait till banks fail and lose it all. 
Jun 19, 2012 1:10PM
avatar
Now common folks, look at how much good several trillion dollars in "free" money from the fed has done for the stock market! Did you think the money was for small business or the average Joe ? Get real.  Uncle Ben is taking care of his Wall Street pals - and neither party is calling him on it because they are all on the take.
Jun 19, 2012 1:02PM
avatar

Once again Hopes are on a balance sheet to make the DOW to go up looks like Wall Street can run with this rigged market forever.

Jun 19, 2012 12:56PM
avatar
3 straight weeks of pumping the Dow without substantiation. This isn't going to go well when Reality the financial sector down to Earth.

There is no way to stabilize local to global finances without job recovery and a reining in of pariah compensation.

Jun 19, 2012 12:56PM
avatar

The Fed is artifically pumping up the stock market again with false hope.

 

This is what FED stands for: Filling Ears with Deception.

 

Fed low interest rates are killing the savings account interest rates for Main Street, while it is helping the banks on Wall Street.

 

I am fed up with the FED!

Jun 19, 2012 12:54PM
avatar
This is, what, like number 20 suckers rally this year alone?
Jun 19, 2012 12:46PM
avatar
Get out, you stay in he market, you're going to get hammered.
About 6 months there will be a worse drop than 2008.
Buy gold or silver, take physical possession, bury it in your back yards.
if the country loses it's collective mind and reelects Obama, he will attempt to make private ownership of gold illegal.

Jun 19, 2012 12:42PM
avatar
Hope? Hope we'll print more money. Hope the EU will print more money. Sound hope? It's a bubble again.
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