Dow jumps 340 on European, economic news

The blue chips are briefly up more than 400 points. Announcement of a deal to fix Europe's debt crisis sets off a global rally. US growth improves but is still anemic. Higher oil prices boost Exxon profits.

By Charley Blaine Oct 27, 2011 12:40PM

Charley BlaineUpdated: 11:23 p.m. ET

 

U.S. stocks -- and stocks worldwide -- jumped today on hopes that a new deal to fix Europe's debt crisis will lead to more global financial stability.

In the biggest rally since since Aug. 11, the Dow Jones industrials ($INDU) were briefly up as many as 415 points and closed above 12,000 for the first time since Aug. 1. The Standard & Poor's 500 Index ($INX) and the Nasdaq Composite Index ($COMPX) moved into positive territory for the year for the first time since Aug. 3.

European stocks soared on the news, which broke after 3:30 a.m. local time in Brussels, Belgium, where leaders of the eurozone nations were holding their second summit in three days.

An irony of the glee that pervaded markets today was that the euro rose sharply against the dollar. As a result, commodity prices rallied strongly. Gold (-GC) nearly reached $1,750 an ounce. Light sweet crude oil (-CL) in New York jumped above $93 a barrel and is up 17% for the month.

The Dow closed up 340 points, or 2.9%, to 12,209. The S&P 500 climbed 43 points, or 3.4%, to 1,285, and the Nasdaq surged 88 points, or 3.3%, to 2,739.

 

Article continues below.

After the close, Hewlett-Packard shares were up 0.3% to $27.08, on top of a 4.9% gain to $26.99 in regular trading. The company said it was abandoning a plan to spin off its computer business.

 

Breaking the PC business off would have required one-time expenses of about $1.5 billion, Cathie Lesjak, the company's chief financial officer, told The Wall Street Journal.
 
In addition, factors such as reduced purchasing power and the elimination of joint branding opportunities would have cost HP about $1 billion a year, Lesjak said.

 

The Dow is looking at a record

The Dow is up about 11.9% for October -- its best October ever and potentially its best monthly performance since January 1987. The S&P 500, up 13.5%, is looking at its best October and best monthly performance since October 1974. The Nasdaq, up 13.4% for the month, is enjoying its best October since 1974 and best month since October 2002.


The S&P 500's 20.3% gain from its intra-day low on Oct. 4 to today's high of 1,292.66 is a rarity. A 20%-plus gain in 17 trading days has occurred has occurred only six times in the last 60 years, the Global Macro Monitor blog noted. (Thanks to The Big Picture blog for the reference.)


Does that mean there's more to come. Maybe and maybe not. Half the time, the market's gone down over the next three months.


Futures trading sees stocks opening modestly lower on Friday.


Commodities move higher

Gold settled up $24.20 to 1.4%, to $1,747.70 an ounce, its highest settlement since Sept. 21, when the metal finished at $1,808.10. It peaked at $1,749 an ounce. Silver (-SI) jumped $1.807, or 5.4%, to $35.12 an ounce. Copper (-HG) had surged 20.2 cents, or 5.8%, to $3.692 a pound.

Crude oil was up $3.31, or 3.7%, to $93.51 a  barrel. Brent crude jumped $3.31 or 3% to $112.22.

Financial stocks were the market's strongest sector, thanks to gains in big banks. Shares of Citigroup (C) were up 9.7% to $34.17. Bank of America (BAC) added 9.6% to $7.22 -- its highest price in a month. JPMorgan Chase (JPM) had gained 8.3% to $37.02.

All of the 44 domestic indexes that Market Dispatches tracks are higher, led by indexes tracking securities brokers, steel makers and insurance companies. Morgan Stanley (MS) shot up 17% to 19.41. U.S. Steel (X) soared 11.9% to $24.97.


Something to worry about

If you're looking for something to worry about, it's volume.


New York Stock Exchange volume barely reached 1 billion shares. That essentially means the bulk of today's buying came from short-sellers -- traders who had bet the market would go lower. They were buying in a panic because of the quickness of the market turn overnight.  


Some of the biggest gains -- in metals and bank stocks, for example -- came because short-sellers were forced to buy shares to cover their positions.


That buying may have run its course by the end of the day. The proof: the late selling that knocked as many as 137 points off the Dow between 3:26 p.m. and 3:56 p.m. ET. The index did gain 43 points in the last few minutes of the session.


Energy prices -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Crude oil (-CL)

$93.96

$90.20

18.64%

2.82%
(per barrel)











Heating oil (-HO)

$3.1037

$3.0210

11.67%

22.02%
(per gallon)











Natural gas (-NG)

$3.7640

$3.7750

2.67%

-14.55%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.7072

$2.6253

6.66%

10.35%
(per gallon)











Brent crude 

$112.08

$108.91

9.07%

18.29%
(per barrel)











Retail gasoline

$3.4440

$3.4410

-0.03%

12.11%
(per gallon; AAA)












The plan has big risks
The European debt solution has three components:

  • Banks that own Greek debt have agreed to write down 50% of the value of the bonds in hopes of getting Greek debt down to 120% of gross domestic product by 2020. It's around 160% of GDP now.
  • Many big banks will be required to raise new capital. A sticking point: Where will the new capital come from?
  • The European Financial Safety Facility, the rescue fund for governments, is to be expanded to 1 trilliion euros or $1.4 trillion.

Other components of the plan include a potentially bigger role for the International Monetary Fund, a commitment from Italy to do more to reduce its debt and a signal from leaders that the European Central Bank will maintain bond purchases.


There are plenty of questions and skepticism about the plan. Just getting Greece in shape is going to be a major task. Its finances are a mess, and it is in the throes of a recession so severe that many analysts don't think Greece will be able to continue using the euro as its currency. There are worries the recapitalization of Europe's troubled banks will be too little, too late.

 

Worse, as Capital Economics said today, the plan does not attack "the peripheral economies’ deep-seated economic problems and fundamental lack of competitiveness within the single currency."

 

Growth is better, but other issue remain

First, the good news: The economy grew 2.5%, as expected, in the third quarter, according to an initial reading on gross domestic product. That's up from 1.3% in the second quarter.

The report, said Capital Economics, "would seem to make a mockery of fears that emerged early in the quarter that the economy was entering a recession."

Consumer spending was stronger, particularly at the end of the quarter. Business investment jumped by an annualized 16.3%, and exports grew.

The bad news is that the growth rate is unlikely to be so robust going forward. Cuts in federal, state and local government spending will be a big drag on the economy.

Now, the bad news: The Labor Department's weekly jobless claims report showed initial claims falling by 2,000 to 402,000 in the week ended Oct. 22. To produce real job growth requires claims to fall to 350,000 or less.
 

The National Association of Realtors said pending-home sales fell 4.6% in September from the prior month, disappointing  expectations for a flat reading.

 

Exxon's big quarter
Dow component Exxon Mobil (XOM) topped Wall Street’s profit expectations by a penny with third-quarter earnings of $2.13 a share. Shares rose 1% to $81.88.

Exxon sold oil in the United States for an average of $95.58 a barrel, up 35.2% from a year earlier. Internationally, it charged $107.32 a barrel, up 45.4%. It also charged more for natural gas.

Revenue for the quarter jumped 31.5% to $125.3 billion. For the first nine months of 2011, Exxon's revenue came to $364.8 billion -- larger than Greece's GDP of about $325 billion.

Rival Chevron (CVX) reports Friday; shares were up 2.1% to $108.97.

Shares of Royal Dutch Shell (RDS.A) rose 1.3% to $73.31 after the oil company said third-quarter profit doubled on higher oil prices.

Meanwhile, Dow component Procter & Gamble (PG) met analysts’ estimates with fiscal-first-quarter earnings of $1.03 a share. The company said sales rose 9% to $21.92 billion, topping the Street estimate of $21.53 billion. The stock, however, was up only 0.5% to $65.26.

Aetna (AET) shares were up 5% to $40.83 after the health insurer's third-quarter earnings of $1.40 a share beat the consensus estimate of $1.15 a share. The profit gain came on  lower-than-expected usage.

 

Leaders and laggards
Akamai Technologies (AKAM) gained 15.4% to $27.45. The operator of server networks that let businesses speed data delivery forecast fourth-quarter sales of $303 million to $315 million. That topped some analysts' estimates. Pushing the business: Growing demand for new services, such as security protection.

Ancestry.com (ACOM) lost 9% to $21.84. The online provider of family histories forecast fourth-quarter revenue may be as little as $103 million, compared with the average analyst estimate of $104.5 million.

Logitech International (LOGI) advanced 14.8% to $10.34. The world's biggest maker of computer mice confirmed its forecast after three profit warnings in the past seven months. 


Norfolk Southern (NSC) rose 7.7% to $75.16. The second-biggest eastern U.S. railroad posted a quarterly profit that beat analysts' estimates on higher revenue per unit and volume.

United Continental Holdings (UAL) fell 1.1% to $20.11 after falling to as low as $19.47. The parent of United Airlines and Continental Airlines posted a third-quarter profit that lagged behind analysts’ estimates as higher fuel expenses overcame rising fares during the summer travel season.

McDermott International (MDR) sank 25% to $10.97. The offshore oil and gas contractor forecast third-quarter revenue of no more than $880 million, falling short of the average analyst estimate of $889.5 million.


Short hits from the markets -- New York close



Thur.

Wed.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0100%

0.010%

-50.00%

-91.67%
5-year Treasury note 

1.202%

1.062%

24.56%

-40.38%
10-year Treasury note

2.395%

2.203%

24.48%

-27.53%
30-year Treasury bond

3.446%

3.224%

17.97%

-21.00%
Currencies











U.S. Dollar Index

75.011

76.473

-5.14%

-5.39%
British pound

1.6108

1.5967

3.40%

3.22%
(in U.S. $)











U.S. $ in pounds

£0.621

£0.626

-3.29%

-3.12%
Euro in dollars

$1.42

$1.39

6.37%

6.09%
(in U.S. $)











U.S. $ in euros

€ 0.704

€ 0.719

-5.99%

-5.74%
U.S. $ in yen 

76.05

76.25

-1.41%

-6.54%
U.S. $ in Chinese

6.38

6.35

0.06%

-3.52%
yuan











Canada dollar

$1.009

$0.996

5.66%

0.55%
(in U.S. $)











U.S. dollar 

$0.992

$1.004

-5.28%

-0.55%
(in Canadian $)











Commodities

 

 

 

 
Gold (-GC)

$1,747.70

$1,723.50

7.73%

22.96%
(per troy ounce)











Copper (-HG)

$3.692

$3.490

17.13%

-16.98%
(per pound)











Silver (-SI)

$35.1120

$33.3100

16.72%

13.50%
(per troy ounce)











Wheat (-ZW)

$6.4400

$6.1950

5.70%

-18.92%
(per bushel)











Corn (-ZC)

$6.5150

$6.37

9.96%

4.66%
(per bushel)











Cotton 

$1.0432

1.0032

4.12%

-27.96%
(per pound)











Coffee

$2.3775

2.369

3.87%

-1.14%
(per pound)











Crude oil (-CL)

$93.96

$90.20

18.64%

2.82%
(per barrel)










 
154Comments
Oct 27, 2011 1:11PM
avatar
Okay, everyone is back from lunch now.  It shouldn't take long before phrases "investor fears", and "uncertainty of European debt deal" start appearing in these articles.  Anyone wanna bet it doesn't pull back significantly?  I'd be surprised if it closes above 12k!  Freaking "broken record", that's what it is!
Oct 27, 2011 3:35PM
avatar
Why is oil so high.......easy, SPECULATION.  Dont these MORONS get it....oil is causing the economy to flutter.  If oil was where it should be ($50bbl) then we would see a dramatic improvement in the economy. 
Oct 27, 2011 1:07PM
avatar

But let’s consider the real news:

— There are no details on how the ECB will raise the money needed to fund the bailout mechanism to the tune of $1.4 trillion. The ECB is very reluctant to just print money like our Fed has done in the past, so where will the money come from? Nobody knows!

— Even Europe’s banks have no idea where they’re going to get the $150 billion of additional funding that they’re being ordered to come up with. Plus, insiders say that the requirements are so liberal that even troubled banks could avoid compliance with little if any trouble.

— And perhaps worst of all, savvy analysts and traders know that $1.4 trillion, as large as that figure is, is nowhere near enough to kill Europe’s debt crisis in its tracks. Experts predict that as much as $3 trillion will be needed!

So where’s the beef behind Europe’s latest news?

THERE IS NONE!

Oct 27, 2011 3:29PM
avatar

"Exxon sold oil in the United States for an average of $95.58 a barrel, up 35.2% from a year earlier. Internationally, it charged $107.32 a barrel, up 45.4%. It also charged more for natural gas."

....and more and more people looking for a job, many haven't seen a cost of living increase in years or had a raise.  So this makes us all feel fuzzy and wam inside when we bend over at the pumps. A-holes!

Oct 27, 2011 1:54PM
avatar
Yeah the market is rallying to new highs.....what about unemployment?  in my humble opinion, we are still in the economy rut until we start to see some improvement in the unemployment numbers.
Oct 27, 2011 3:26PM
avatar
So let me get this straight, the European (Greece) bailout might not work, ( it seems to me that Greece has just defaulted).  European banks may still collapse, unemployment in the U.S. went up, sales of homes went down,  commodity prices (inflation) surged, and the market goes up 300-400 points??? What am I missing? Bernie Madoff said the stock market is a Ponzi scheme, I think he is right.
Oct 27, 2011 2:51PM
avatar

It is this ridiculous and embarrassing day to day  and play by play reporting on the Stock Market that creates "uncertainty".  The emotionalism of money and investors is the problem--not policy and certainly not regulations which ought include Glass/Steagal re-instatement, a return to The Sherman Act and moreover............​...............a Harvard President who will prosecute Harvard annointed Bankers--even those who pull their endowments at an inconvenient time.

 

A return to Business Fundamentalism and the demotion of Mathemeticians playing "Quantifiyable Mechanics" in a world that CANNOT act within "probabilities" metrics is what causes the essence of "uncertainty".  And by the way.................​............when was the Stock Market EVER "certain" without the SEC prosecuting those creating "certainty" also known as "Insider Trading"?  The whole essence of Stock Markets is that there is not supposed to be "certainty" otherwise no one would lose money if it was predictible.

 

Here's an idea..............................invest​ in people, small businesses and real ownership in property and those who have to pay Rent as opposed to those who still own homes.  How about starting up a REIT that is non-profit other than its operating expenses, in which your Renters get credit like a Credit Union for the taxes they pay without representation?  How about that rich guys?  Or how about buying a poor kid and education and then being part of his or her life eventhough they aren't your blood relative?  Or how about this one...................................bu​y a house to live in and raise your family or to retire in and stop using it as a piggy bank?

 

Duh.................​.."certainty is for pussies and whimps who shouldn't be gambling with other people's money to beginwith and who certainly should NOT be selling insider information like some commodity being traded."  Where is Holder and why aren't Ivy Leaguers being prosecuted for Insurance Fraud, when AIG was used to fraudulently insure a known "racket"?

Oct 27, 2011 4:01PM
avatar
What is MORE IMPORTANT to understand is that the growing gap between ordinary people and the superwealthy in this nation, has minimized the American Dream. As long as our tax and legal system continues to cater to the super wealthy and big corporations, there will be no stability. After all, the ordinary people constitute the most important pillar in our economy.
Oct 27, 2011 3:38PM
avatar
And what does Greece have to do with oil????  Oh yeah...lord forbid that GREEDY SPECULATORS and their employers dont make their millions today.  C'mon people....wake up.  We are gettin rear-ended for sheer GREED and SPECULATION.
Oct 27, 2011 2:52PM
avatar

YO-HO

                 Exxon mobil profits up 41% yet their stock hardly moves today.   I know the reason.   Yet they imprison Marth Stewert.  The game is rigged.

Oct 27, 2011 2:13PM
avatar

Tomorrow's Headlines:

Dow makes 300 point fall.

Oct 27, 2011 2:50PM
avatar
For those who say that some of us are being pessimistic and should not even concern ourselves with the market if we're not investing: it's not being 'negative', it's called PAYING ATTENTION. Look at the bigger picture. As a small business owner, the corruption, the global recession, higher oil prices, and the out of control deficits affect me directly - they affect ALL of us directly. MSN can put out out all the shiny, happy articles they want. They still don't change the facts that countries are not effectively dealing with their deficits, unemployment is still too high, and Congress and Wall Street are partying like it's 1999! I'm hanging on to my money, gold and silver. I'd be better off investing in food than in the market right now.
Oct 27, 2011 3:34PM
avatar
Exxon and the other oil companies that are robbing people and making them think that if they buy stocks they will get rich, but only the oil people get rich not the poor suckers that are so proud to see it go up one day and then cry when it goes down the next. Just like gold it is a money maker for the big boys who buy cheap and run the price up and then sell high and sticks the poor people trying to make a dollar for a loss.
Oct 27, 2011 2:32PM
avatar

Strange

                I see these huge gains in the market yet when I receive my portfolio statement it never shows any gain. 

Oct 27, 2011 3:50PM
avatar
Today: Dow up on positive EU information
Tomorrow: Dow drops to 2 year low over Greece debt problems.
Next Day: Dow up higher than in last 3 years due to lower than expected jobless claims!
Day After: Dow down in biggest single day loss in 25 years due to poor Amazon profits.

I mean does this make any sense? Gold up, gold down, dollar up, dollar down. It is an utter joke and the people in the financial industry don't seem to know any better than a chimp that walked onto the Wall St. floor and just started pecking stock picks on an iPad.

When will we ever learn? NEVER!

Oct 27, 2011 4:49PM
avatar
Exxon and Shell report BILLIONS in profits for JUST the quarter and nobody thinks they are gouging us on the price of gasoline?  Where is our Federal government to investigate these greedy, manipulative companies that are helping to bring down our economy?  And, no, I do not drive a gas hog.  I just don't like being taken advantage of by these manipulators.
avatar

OK.  Once again the anomaly disturbing the homogeneity of the financial universe involves the shortsellers.  Hmmmm... let me think about who could possibly be behind this phenomenon. 

 

Oh yeah, that would be the hedge fund managers and their second cousins (ETF managers). But there is something wrong with the paradox of why a “panic” buying spree resulted in substantially lower volume.  The author states “Short sellers were forced to buy shares to cover their positions”. Could some market genius explain why buying shares to cover positions somehow equates to lower trading volume and why?

 

Here’s a news flash…none of this makes sense! WTF doesn’t begin to explain what is happening. Nothing, and I mean absolutely nothing, can reasonably explain why the markets shot up based mostly upon “hopes” of a European consensus on a Greece bailout combined with a minimal uptick in consumer spending. The counter weight of a bleak unemployment picture and real estate market don’t support today’s activity-period!

 

Vegas is sounding better and better. At least you can determine your odds a lot better than betting on the stock market.

 

Oct 27, 2011 6:27PM
avatar
The elite has pulled another rabbit out of the hat. How can broke institutions loaning fiat money (money plucked out of the air)  through broke banks to broke countries? I wonder how much time they've bought due to the gullible public. Don't believe the numbers presented by the media. The financial system is rigged from top to bottom. Wake up you've been hood winked again.
Oct 27, 2011 5:57PM
avatar
Exxon and Shell report BILLIONS in profits for JUST the quarter and nobody thinks they are gouging us on the price of gasoline?

Smile So Apple make $26 billion (25%) selling $108 billion worth of iToy and Exxon makes $38 billion (9%) selling $440 billion worth of energy products. Why don't you ask the government to investigate Apple for gouging instead of Exxon

 

ITOYS are optional....wanna go to work on ur IPAD??  its called gas yo-yo

Oct 27, 2011 2:45PM
avatar

I have said it before and I  will say it again........

 

If 99% of these talking heads on TV would just shut up..... I think the economy would improve dramatically...

 

Whenever I watch the news...it is dour looks ... and long faces.... saying "this is troubling and that is troubling"

 

Scott Pelley is the worst on CBS.. I mean just shut up already

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