Dow up 212 on ECB pledge to save euro

Facebook shares slump as earnings disappoint. Stocks gain as the European Central Bank's president pledges to do 'whatever it takes.' Starbucks misses Street estimates. Visa and 3M results beat forecasts. Jobless claims drop.

By Charley Blaine Jul 26, 2012 12:25PM
Charley BlaineUpdated: 7 p.m. ET

Stocks shot higher at the open -- and stayed there for the day -- after European Central Bank President Mario Draghi pledged to do "whatever it takes" to save the euro. And the rally held through to the close, with the Dow Jones industrials ($INDU) rising more than 200 points.

But earnings disappointments from Facebook (FB) and Starbucks (SBUX)after the close may weigh on the market Friday. Starbucks cut its outlook, saying economic trends are weakening. The government also will issue its first report on second-quarter economic growth before the open. That may also show conditions weakening.

At 7 p.m. ET, Facebook shares were down $2.78, or 11%, to $23.09 from a regular close of $26.85. Facebook earned 12 cents a share in the second quarter, its first as a publicly traded company. That was in line with Street estimates, but it was unchanged from a year ago. Revenue was $1.18 billion, up 32% from a year ago and a touch better than expected. Advertising revenue was $992 million, up 28% from a year ago.

Starbucks shares were down 105 after hours. Amazon.com (AMZN) was initally lower after hours but was up $2.29 to $222.30 at 7 p.m. ET.

The Dow closed up 212 points to 12,888. The Standard & Poor's 500 Index ($INX) jumped 22 points to 1,360, and the Nasdaq Composite Index ($COMPX) gained 39 points to 2,893. The Dow had been up as much as 255 points shortly after 10 a.m. ET, with the S&P 500 up as much as 24 points and Nasdaq showing a gain of as much as 51 points.

Article continues below.
The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was up 36 points to 2,585. Apple (AAPL), which represents about 17% of the market capitalization of the index, had dropped to as low as $570.06 but recovered to $574.88, a loss of 9 cents. It had been as high as $580.40. Its lackluster performance is a residue of its earnings miss Tuesday.

Stocks globally -- as well as the euro -- surged after the ECB's Draghi suggested policymakers may intervene in bond markets as surging yields in Spain and Italy threaten the existence of the 17-nation eurozone. The ECB mothballed a bond-buying program in March as it pushed governments to do more to control their deficits.

Twenty-nine of the 30 stocks in the Dow were higher. The laggard was Cisco Systems (CSCO), down 4 cents to $15.38. In addition, 441 S&P 500 stocks were ahead on the day. Eighty-eight Nasdaq-100 stocks were higher.

As bullish as all that sounds, a weak report Friday on Gross Domestic Product, a snapshot of the economy's health, could stall the rally. Economists expect the report to show growth declined from 1.9% in the first quarter.

Futures trading suggests a flat open for U.S. stocks.

Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$89.39

$88.97

5.21%

-9.55%
(per barrel)











Heating oil (-HO)

$2.8694

$2.8467

5.89%

-1.54%
(per gallon)











Natural gas (-NG)

$3.0900

$3.0520

9.42%

3.38%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7370

$2.7162

4.00%

3.00%
(per gallon)











Brent crude 

$105.26

$104.38

7.63%

-1.97%
(per barrel)











Retail gasoline

$3.4900

$3.4850

4.09%

6.53%
(per gallon; AAA)












Facebook hurt by lack of guidance
Why were Facebook shares tanking? One issue: The company offered no guidance for the third quarter or for all of 2012. It's hard to get away with that today, especially with a business that's getting little revenue from mobile users.

If the after-hours loss holds on Friday, Facebook shares would be down 37% from $38, the  price for its initial public offering in mid-May.

The company lost $743 million, or 8 cents a share, down 11% from earnings of a year ago, under generally accepted accounting rules. Most of the loss was due to stock-based compensation, the company.

Excluding those charges, the company earned $515 million, or 12 cents a share, unchanged from a year ago. The 33% revenue gain would have been 36% if the dollar hadn't been so strong.

Total expenses quadrupled from a year ago, and that will probably continue as the company tries to figure out how to generate revenue from its mobile platform.

Facebook's results came after shares of online game developer Zynga (ZNGA) were crushed today, falling $1.90 to $3.18 after results late Wednesday disappointed investors. Shares were continuing to fall after hours.

Starbucks sees economic head winds
Starbucks earnings rose 19% to $333.1 million, or 43 cents a share. But Wall Street expected 45 cents a share. Revenue of $3.3 billion was up 13% from year ago.

The company expects earnings of 44 to 45 cents a share, below the 46 to 47 cents predicted last month. In addition, Starbucks expects earnings of $2.04 to $2.14 a share for fiscal 2013, well below the $2.28 a share currently expected by analysts.

Shares were down 9.9% to $47.23 after rising $1.99 to $52.40 in regular trading.

Amazon revenue hit by rising dollar
Amazon.com earned 1 cent a share, down from 41 cents a share a year ago. The Street was looking for 2 cents a share.

Revenue of $12.83 billion was up 29% from a year ago but slightly lower than the Street estimate of $12.9 billion. The rising dollar knocked reported revenue down by $272 million.

One reason for the skinny profits is that Amazon is spending heavily on its Kindle Fire tablet device and on expanded fulfillment centers.

Planned upgrades to the Kindle Fire may have curbed sales of Amazon’s top-selling product to just 670,000 units, BusinessWeek suggested. The Kindle’s share of the tablet market slipped to 4% in the first quarter, from 17% in December, according to IDC.

Amazon has opened up eight fulfillment centers so far this year and plans to build 10 more.

Oil and copper move up
Crude oil settled up 42 cents to $89.39 a barrel in New York. Gold settled up $7 to $1,615.10 an ounce. Interest rates were higher, with the 10-year Treasury yield rising to 1.428% from Wednesday's 1.406%.

Some of the rally may be due to currency traders covering short positions in the euro, said Art Cashin, head of floor trading at the New York Stock Exchange for UBS Financial Services. The euro had dropped to as low as $1.2062, its lowest level against the dollar since May 2010.

If history is a guide, the abruptness of the day's move may be short-lived.

Draghi's big moment
The ECB's Draghi made his pledge at a pre-Olympics investment conference in London. "Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough," he said.

Speculation had been rising that the ECB, which holds a policy meeting next week, is considering new measures to tackle the eurozone's debt crisis as countries such as Spain and Italy struggle to fund themselves and evidence grows of a regionwide economic slowdown.

One tactic may be to buy Spanish and Italian bonds, whose yields have been rising sharply in recent weeks. The Spanish 10-year bond had yielded as much as 7.75% this week but was off to about 7.2% Thursday.

Many analysts, however, were skeptical that Draghi's pledge had any substance behind it.

Jobless claims move lower
U.S. initial jobless declined more than expected last week, down 35,000 to 353,000, and orders for durable goods rose for a second month, up 1.6% in June. Much of the gain was due to airliner orders for Boeing (BA).

At the same time, pending home sales fell 1.4% in June from May, the National Association of Realtors said. The result was a disappointment; analysts had expected a gain of 0.2%.

The decline, the Realtors said, was due to a dwindling supply of foreclosed homes available for sale. While foreclosure activity has been rising in recent months, it takes time for lenders to make the properties available for sale.

There has been heavy investor demand for foreclosed properties. Investors believe they can earn better returns from rents than they can elsewhere.

Another big day of earnings
3M (MMM), the maker of Post-It Notes, and Visa (V) , the largest payments network, were up $1.84 to $90.59 and $4.57 to $126.77, respectively, on better-than-estimated earnings.

Sprint Nextel (S) jumped 68 cents to $4.05, and MetroPCS Communications (PCS) surged $2.31 to $8.59 after their results beat Street estimates.

MetroPCS was the top S&P 500 performer, followed by Akamai Technologies (AKAM), which reported strong earnings late Wednesday, and Sprint.

Whole Foods Market (WFM) shares surged $9.57 to $94.10 after it reported strong second-quarter results and raised its guidance for the 2012 fiscal year. Today, at least four analysts boosted their price targets for the stock, Seeking Alpha noted. S&P Capital IQ loves the balance sheet and sees same-store sales "growing in upper single digits through FY 2013 with share gains reflecting consumer adoption of a healthier lifestyle."

Exxon shares are up, but issues are growing
Exxon Mobil (XOM) was up $1.28 to $86.52 after the company reported a 56.4% increase in earnings. But nearly half of the increase came from sales of assets. Excluding one-time gains, Exxon earned $1.80 a share, or 15 cents lower than expected. Sales rose 1.5% to $127.4 billion.

Exxon has been struggling with lower oil and natural gas prices. The company spent $35 billion on the 2010 acquisition of XTO Energy that enabled it to surpass Chesapeake Energy (CHK) as the largest U.S. gas producer. Since that deal closed, gas has fallen 33% to about $3.08 per million British thermal units.

Rival Chevron (CVX) reports before Friday's open. Shares were up $2.21 to $108.27.

Short hits from the markets -- New York close



Thur.

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Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.1000%

0.100%

25.00%

900.00%
5-year Treasury note 

0.583%

0.555%

-20.03%

-29.76%
10-year Treasury note

1.428%

1.406%

-13.92%

-23.68%
30-year Treasury bond

2.490%

2.467%

-9.88%

-13.81%
Currencies











U.S. Dollar Index

82.859

83.641

1.35%

2.90%
British pound

1.5723

1.5501

0.13%

1.19%
(in U.S. $)

 








U.S. $ in pounds

£0.636

£0.645

-0.13%

-1.18%
Euro in dollars

$1.23

$1.22

-2.47%

-4.99%
(in U.S. $)

 








U.S. $ in euros

€ 0.812

€ 0.823

2.54%

5.25%
U.S. $ in yen 

78.37

78.15

-1.72%

1.65%
U.S. $ in Chinese

6.41

6.39

0.56%

1.30%
yuan











Canada dollar

$0.992

$0.985

1.02%

1.16%
(in U.S. $)

 








U.S. dollar 

$1.008

$1.015

-1.00%

-1.15%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,615.10

$1,608.10

0.68%

3.08%
(per troy ounce)

 








Copper (-HG)

$3.394

$3.375

-2.95%

-1.24%
(per pound)

 








Silver (-SI)

$27.4460

$27.4660

-0.60%

-1.68%
(per troy ounce)

 








Wheat (-ZW)

$8.8400

$9.0325

16.74%

35.43%
(per bushel)

 








Corn (-ZC)

$7.7625

$7.880

22.29%

20.07%
(per bushel)

 








Cotton 

$0.7139

0.6951

0.08%

-22.13%
(per pound)

 








Coffee

$1.7405

1.763

1.96%

-24.21%
(per pound)

 








Crude oil (-CL)

$89.39

$88.97

5.21%

-9.55%
(per barrel)










 

307Comments
Jul 26, 2012 12:58PM
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Can't wait to cast my vote AGAINST OBAMA IN NOVEMBER!!!
Jul 26, 2012 1:47PM
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Lets see if I got this right.

Countries which can't pay their debts are going to get money lent they can't pay back and that has people investing in the stock market. That makes perfect sense to whom; I have no idea. Then the taxpayers have to bailout these investors.

That's just plain wrong no matter how you look at it.

Jul 26, 2012 2:40PM
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So the ECB is going to do whatever it takes to save the euro.

 

Is the IMF willing to do whatever it takes to save the ECB?

 

And is the US willing to do whatever it takes to save the IMF?

 

And is the rest of the world willing to forgive us our debts to save the US?

Jul 26, 2012 1:45PM
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The only reason U.S. jobless rate drop is there is no one left working to lay-off.
Jul 26, 2012 4:05PM
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Let us all sit back and wait until the main engine of the European economy, Germany, finally says it has had enough and withdraws it's support for the Euro. The sad thing about this statement..."Believe me it will be enough", is that there is no way for it to be enough. When austerity measures are brought up each country experiences uprisings by people who have been given everything during this economic crisis. With the current debt in Greece, Spain and Italy standing at close to 100% of GDP and no end in sight for any economic recovery, this is sending good money after bad. Who knows how long the Euro can stand? It will continue to be devalued over time until it is worth nothing more than the paper it is printed on.
Jul 26, 2012 3:28PM
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So let me get this straight...The Eurobank's president "PLEDGES"  to do "whatever it takes" & the Stock Market soars 200+ points.  So a jack ****(Mario Draghi) opens his mouth and based on this everything is good. Meanwhile for the last 6-9 months all we have heard is gloom & doom from the European Central Bank.  Something smells stinky!!!!!

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If you or me wrote hot checks like Bernanke and the Japanese Central bank and now the European Central bank write for trillions of dollars a year.

 

WE WOULD BE THROWN IN JAIL. So how do these guys get away with it.

 

Heck is almost anyone on the street in a small town population < 25,000 was randomly selected and it's not Jackson Hole during the financial meetings they have there once a year. And they were given the ablitity to write trillion dollar checks to people and have the banks honor the checks like they do Bernanke's checks.

 

Then the US economy would probably get off the ground as that random person would probably write a check for $200,000 to each American and then when those Americans spent that money the economy would boom.

 

Instead Bernanke gives the money to the Wall Street bankers who then put 99 percent of it into their own pockets and the rest of the 1 percent into their friends pockets which does not include you or me.

 

The Federal Reserve has failed horribly trying to get the real economy going folks.

 

People have lost their jobs paying close to $80K plus a year and are either on unemployment or working a $14,000 minimum wage job and not even enough to keep food on the table for a famliy of 4.

 

Yep Bernanke you are a total failure.

Jul 26, 2012 1:20PM
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So printing more money out of thin air is a positive in what way? 
Jul 26, 2012 3:19PM
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  Mon-Stock surge on Euro news-  
  Tues- Stocks dive on Greek crisis
  Wed  Stocks gain as EU promises action
  Thurs Stocks fall on Spanish news
  Fri-    Stocks climb on Central bank promise

Sat, Sun, brokers and insiders spend time on yachts preparing for another grueling week  counting commissions.
Jul 26, 2012 3:18PM
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Tomorrow the market will be down by 200.

The stock market used to be a place where people could go to invest.  Now it's only another place to gamble.

Jul 26, 2012 2:39PM
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Does anybody really understand why  the stock market fluctuates so greatly from day to day?....Think about it.....It all comes down to the big corporate insider trading making huge profits! The average person who doesn't play the market day to day is the real loser because we have always been told to "stay in it for the long haul". That's BS! They want us to stay in it for the long haul so we can absorb the loses while they buy back the stock at a lower price...When are we gonna wake up and put a stop to this thievery?
Jul 26, 2012 1:43PM
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"Stocks shoot higher on ECB pledge to save euro"

 

This week market goes down 300 points, throw in the European hope comment.

 

Two weeks ago market goes down 300 points, throw in the Fed hint comment.

 

One month ago stocks goes down 300 points, throw in the Spain bailout comment.

 

Two months ago market goes down 300 points. throw in the Fed hint comment.

 

Three months ago market goes down 300 points, throw in the Greece bailout comment.

 

Four months ago market goes down 300 points, throw in the Fed hint comment.

 

I'm wondering if there is a pattern here, or am I hopeless about all this hope.

 

 

Jul 26, 2012 3:47PM
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Long term National Unemployment is still at 8.2%

 

Today's unemployment report drop............There's nobody left to lay off. 

 

Put your resume on jobsite and get inundated with spam.

 

Put your resume in a company website and you'll get a rote message telling you your qualifications are great but they've chosen another candidate or they won't respond at all and just leave it in the black hole.

 

Put your resume on a job board and you will start getting all kinds of wierd phone calls, identity thieves.  And, even if you tell prospective employers to "contact you by phone" you will only hear from them by e-mail.

 

Put your resume on a job board and you will be inundated with commercials and ads.

 

Put your resume on a job board and they will ask unemployed people to pay to upgrade your ranking in the online resume world so employers see your first...............I though that was illegal!

 

Put your resume on a job board in one state, and you will be contacted by recruiters from all over the country with jobs located several hundred miles away...............what are they trying to do, force homeowners to sell their homes to make the housing reports look better? We already know they purposely rotate people in and out of the job market.

 

Hmmmm?  Did I miss anything?

Jul 26, 2012 3:29PM
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All bull crap....The ECB will say anything at this point.....! Now you know it has reached the critical stage....ECB is getting desperate....Remember Spain...we do not need a bailout and two weeks later Spain collapsed into asking for a bailout and now 4 of their regional provinces need bailouts as well. This is all for show to continue to prop up the PUMP AND DUMP...and kill the shorts...! He have crossed this level 14 times this year.......basically going no where...! This is a diversion to help Spain and Italy with borrowing interest rate cost.
Jul 26, 2012 1:55PM
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I have said and will continue to say that the central banks will continue to prop things until the end.  Since they do this by giving money to banks which in turn loan it to their own investment arms, we will see a huge transfer of wealth from savers to the banking system.  This is how they are going to get over their  housing boom  f-ups.  In the meantime, the money you have saved is worth less every time they increase the money supply.  The new money can only flow into the stock market because there are no investment alternatives for the banks (they aren't loaning)  The powers that be have decreed that the stock market IS our economy.

 

Sure some people are going to make a few bucks timing these FED announcements, but the majority of the public can't trade as rapidly or as often as is required to play this game with the banks.  They will just lose because they will still be invested long after the bigs have cashed out and tanked the market for good.

 

It's still just musical chairs, when the FED music stops there's not going to be enough chairs for everyone and the big boys won't be caught standing.

 

Very convenient that we now have a drought on which to blame our rising food prices.  There has been a drought in Colorado for ten years and food never shot up like they are forecasting.  Looks like lipstick on a pig to me.  You can't keep printing money without inflationary impacts. 

 

Jul 26, 2012 3:10PM
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ONCE UPON A TIME there were three little idiots. thier names were phil gramm, jim leach, and tom bliley. they were right-wing-nuts. they got a law passed called the gramm leach bliley act. GLB deregulated the banks, and did away with the glass steagall act which had protected America from the bankers for over 60 years. that was in 1999. the bankers got fat and everyone else got screwed. GLB IS ONE OF THE MAIN REASONS FOR THE DEPRESSION WE JUST HAD. WHY ISN'T ANYONE TRYING TO REPEAL IT ???
Jul 26, 2012 4:21PM
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The only reason the markets are up today is the central banks in Europe pumped trillions of Euro's of funny money into it!  You see, it takes trillions of dollars, Euro, Yen to move the markets this high in one day.

 

So my advice.............sell, sell, sell into this rally!

Jul 26, 2012 1:48PM
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Only Wall Street could be up on an E.U. promise to print more money.
Jul 26, 2012 5:13PM
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Hey Gustavo......You try KEYNESIAN economics in your own life.......get lots of credit cards and max 'em out buying things that make other people think you have lots of money.....in fact....throw in a bit of liberalism and donate 50 or 60 percent of your borrowings to the government as voluntary taxes since those rascally Repulicans won't vote to mandate higher taxes.

In a year or two lets see how that all works out for ya'.

Jul 26, 2012 2:37PM
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As Europe's economy tanks and dollar gains on the Euro printing the US stock market will decline because of both decline in economy and because of increased value of dollar relative to the Euro.

 

At which point, more dollar-inflationary "stimulus", which should be called a "simulus" instead of a "stimulus" because it will only simulate real stock market gains due to inflation.

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