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.
Updated: 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.
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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%|
|Heating oil (-HO)||$3.1037||$3.0210||11.67%||22.02%|
|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; 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.|
|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%|
|U.S. Dollar Index||75.011||76.473||-5.14%||-5.39%|
|(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%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
|Crude oil (-CL)||$93.96||$90.20||18.64%||2.82%|
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!
"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!
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...................................buy 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"?
Exxon mobil profits up 41% yet their stock hardly moves today. I know the reason. Yet they imprison Marth Stewert. The game is rigged.
I see these huge gains in the market yet when I receive my portfolio statement it never shows any gain.
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!
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.
Exxon and Shell report BILLIONS in profits for JUST the quarter and nobody thinks they are gouging us on the price of gasoline?
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
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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[BRIEFING.COM] S&P futures vs fair value: -0.50. Nasdaq futures vs fair value: +4.20. The S&P 500 futures hover in-line with fair value after the November retail sales report (+0.7% actual, +0.6% Briefing.com consensus) boosted futures off their lows. The report also helped major European indices surge off their lows as they look to avoid registering losses for the third day in a row.
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