Market recovery may give next week a lift

The rally shows its strength by shrugging off weakness in Japan and worries about next week's Fed meeting. Exxon, Chevron and Whole Foods report results.

By Charley Blaine Jul 26, 2013 7:31PM
 Trading floor © Image Source/SuperStockThe stock market offered a showy proof of its resilience Friday, and that may help stocks face a busy and potentially volatile five days in the week ahead.

The Dow Jones industrials ($INDU) were down as many as 150 points just before 11 a.m. ET. But the blue chips stormed back, ending up 3 points. Moreover, the index ended the week higher -- its fifth straightly weekly gain.

The Standard & Poor's 500 Index ($INX) and Nasdaq Composite Index ($COMPX) also recovered their morning losses. The S&P 500 was up 1 point to 1,692, and the Nasdaq rose 8 points to 3,613.

The big week will be built around a Federal Reserve meeting Tuesday and Wednesday, the July jobs report on Friday and important reports on manufacturing, auto sales and construction spending in between. The week's big earnings reports include Exxon Mobil (XOM) on Thursday and Chevron (CVX) on Friday.

Here's some additional good news on Friday's recovery: Absent bad days Monday, Tuesday and Wednesday, the Dow could end July with its second-best monthly gain of the year. The S&P 500 and Nasdaq are on track for their best monthly gains of the year.

As of Friday, the Dow was up 4.4% for July, while the S&P 500 is up 5.3%. The Nasdaq is up 6.2%. The major averages have had just one down month -- June -- this year, which has been, as we know, one heck of a year. The Dow is up 18.7% for the year, with the S&P 500 up 18.6% and the Nasdaq up 19.7%.

The market opened lower on Friday because of sell-offs in Japan (due to a surprisingly large inflation report) and Europe. But the selling briefly turned into a rout -- because of the perverse way the stock market sometimes works.

The issue was a better-than-expected report on consumer confidence. If consumers will buy stuff, the theory says, that will boost the economy more than expected. And the Federal Reserve will have to raise rates.

The selling ended as Wall Street began to appreciate what Jon Hilsenrath was saying in The Wall Street Journal (registration required) about what the Fed's policy-making arm may do next week. The committee won't raise rates, Hilsenrath's story suggested. The committee won't hint of a rate increase. The committee won't taper their $85-billion-a-month bond-buying program.

FOMC members will use the meeting to discuss how to communicate their plans more precisely going forward. And they'll talk about what they might do if inflation falls below 2%, which has been the Fed's target for some time. If inflation gets too low, it could turn into deflation and send prices down and worsen the nation's employment picture.

But this is stuff to deal with, something that may not happen and stuff that won't happen any time soon, in any event. And that, says Brian Sozzi, chief executive of Belus Capital Advisors, soothed investors, letting the market come back.

The week's ups and downs
On the upside, of course, was Facebook (FB), whose revenue and earnings smashed all estimates. The stock was up 31% for the week and went from down nearly 3% for the year to up 28%.

Starbucks (SBUX) reported big earnings and strong guidance. It climbed nearly 12% and hit new highs.

Netflix (NFLX) ended the week down 6.9% after domestic subscriber growth wasn't as big as expected.

Amazon.com (AMZN) was gained 2.2% despite reporting a second-quarter loss and projecting a third-quarter loss. But if your revenue is rising 22% from a year ago, investors may be forgiving.

And how about Halliburton (HAL)? The oil services giant has agreed to plead guilty to a charge of destroying evidence in the 2010 Deepwater Horizon spill. The shares were up $1.64 to $45.98 on Friday. Maybe some of the gain came from the plea. Buying back $3.3 billion in shares probably helps, too.

Some concerns
There are some developments to watch going forward, including:
  • How high can the market rise? The market has had one 5% pullback this year. There will be more before year-end.
  • Politics may weigh on investors. There's talk that some Republicans would rather shut the federal government down than fund the Affordable Care Act. Germany has an election in September.
  • The market technicals are looking stretched. The relative strength indexes -- momentum measures -- for the major averages are nearing 70, often cited as a signal something is overbought. The Russell 2000 Index is sporting an RSI of 80.
What's ahead in the markets next week
The probability of a big, surprising decision not happening should put a floor under the stock market in the week ahead. In addition to the Fed meeting, the week's big event is the July jobs report on Friday.

 There's also Tuesday's first look at second-quarter gross domestic product, a snapshot of how the economy performed in the period. The consensus is that the economy mostly stumbled along. Many reports during the quarter suggested a robust first-quarter had morphed into a mediocre second.

Two events on Thursday will get a lot of attention: the Institute for Supply Management's Manufacturing Index for July, and automakers' reports on July sales.

Next week's earnings reports include:

Monday: Franklin Resources (BEN) and Anadarko Petroleum (APC).

Tuesday: Aetna (AET), BP (BP), Merck (MRK) and Pfizer (PFE), and Martha Stewart Living Omnimedia (MSO).

Wednesday: MasterCard (MA), Humana (HUM), Exelon (EXC), Marriott (MAR) and Whole Foods Market (WFM).

Thursday: Exxon Mobil, Apache (APA), ConocoPhillips (COP), Burger King (BKW), Clorox (CLX) and American International Group (AIG).

Friday: Chevron, Ruth's Hospitality Group (RUTH) and Viacom (VIAB).

More from Top Stocks
41Comments
Jul 26, 2013 10:14PM
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It's interesting to watch us march ever further into fantasy land.  The only recovery there is, is the 1.2 trillion worth of created money entering the financial world.  If that stops, the market stops.  But articles, such as this one, continue to blather on as though it is all real.  The vast majority of Americans are not experiencing any thing near a recovery with a relatively small segment enjoying the good times on the backs of us.  The sad thing is there isn't any voice for us as we slide ever further into the void of non existence. 
Jul 26, 2013 8:58PM
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"Here's some additional good news on Friday's recovery: Absent bad days Monday, Tuesday and Wednesday, the Dow could end July with its second best month gain of the year"  Does ANYONE ELSE realize what an STUPID, IDIOTIC statement this is.  It's like saying, well, except for the murders we had in Chicago [or anywhere else] on Monday, Tuesday, and Wednesday, we had a pretty good week of no murders. 

 

God!! the things these shills say to "RAH, RAH, RAH," the market.  Hey you shills, the stock market SUCKS big time and the ONLY thing keeping it where it is, is worthless fiat PAPER that helicopter benny is throwing at wall street.  And that IS NOT going to last forever.

Jul 26, 2013 9:21PM
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Burn it down. Down to the ground. Burn it to cinders so no assses can be found. Burn the corruption the lies and the sin, trash the Federal Reserve so FREEDOM can begin again. Any IDIOT could have caused more economy and opportunity by dropping $85 billion a month from an airplane. The market no longer connects with America and needs to be severed from it.
Jul 26, 2013 10:47PM
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...

 

Who writes this " Mumbo Jumbo " anyway ?   Aren't the problems that brought the market down this year still around today ? 

Jul 26, 2013 11:24PM
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Stop blaming and go with the flow. Get out of your narrow minded self and invest or not to invest(its up to you) but accept the present and MOVE ON...The world will be what it is come tomorrow or day after. If you cannot adjust ,you will fall by the wayside... and Good ridance!!!!!!!!!!!!!!!!!!!!!When you fall, don't just sit there , get up brush off the dust and move on.
Jul 27, 2013 8:04AM
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A good sign for the market.....the Federal Reserve has obtained an energy grant from Barry Obama to install a solar-powered energy source for the printing press in case the local power company cuts off service due to insufficient funds in the account.
Jul 26, 2013 7:57PM
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Charley, you are nothing but a "tool" and a "shill".  The "markets" invest with "cronies" and "computers".  The so-called "middle class" does not invest, period, as they cannot other than what they have left in their 401K's and pension plans and any "choices they make is not going to make one bit of a difference. .... which is also controlled and do not want to hear other.  You "pundits" are phony ... the "markets" are phony.  Our "idiot" is office is a phony and it all coming out now.

Go ahead and preach charts and BS....we are not listening.  "Contrive" this....go away and stay away ... you and your cronies. 

 

Jul 26, 2013 9:02PM
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Sorry Classic Lady, I think it's WAY too late for Obama [or anyone else] to save us now. We're heading for hyperinflation and there's NO getting around that except for ONE thing and it's the one thing a politicians doesn't DARE to do.  It's called the gold [or silver, or whatever commodity you want] standard.  That way, the politicos CAN'T screw with the money supply.  BUT that's precisely WHY THEY WHINE THAT THEY CAN'T.
Jul 26, 2013 9:07PM
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'There's talk that some Republicans would rather shut the federal government down than fund the Affordable Care Act.' --- oh if any of them would have the balls to do that I'd be very impressed

 

considering the fact that Obama unaffordable care will cripple further and already devastated economic state of the nation, but leave it to the pigs at msn to make it sound like the end of the world, due to the Republicans when it's the democraps that have been destroying this nation since the first creepin' communist vermin franklin d rossevelt himself, wasn't it he who sold us out at Yalta to that animal stalin? wasn't it he who handed Europe over to that Russian filth on a silver platter and effectively plunged us into a 60yr cold war, and don't kid yourselves nothings' changed, there's a cold war goin' on alright STILL, except this time we've got a communist pig in the white house 'pretending' there isn't by appeasing his comrades in Russia, especially Putin, who's got ZERO respect for Obama and it's obvious when they're in pictures together, we're dismantling our nuclear arsenal while China and Russian are doubling up on theirs, there is no better time than now to do that, sound familiar, hmmmm lets' see, what other idiot democraps did the same thing?? hmmm why of course, the peanut farmer himself, jimmy 'I have no clue' carter!

Jul 28, 2013 3:41PM
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MSN, why don't you boldly post a counter piece regarding the dissent for the fake market pumping/manipulation from the middle class' angle. There are ample comments stating an opposing view to those that you are representing.

One that actual poses the question of why this (QE and blind market pumping) is a better path for our nation and opens it up for debate. Will the inflation bury us or will the companies and government rise to the occasion and put all this liquidity to use and help build the middle class? Many members of the nation (perhaps even a majority) FEEL that the companies aren't going to pay it forward and that the government will squander the funds, but understand inflation is coming and wonder what that means for our society.

Then you would be serving a positive purpose to highlight the nation's economic issues and allow your viewership/audience to truly speak its mind. The market has enough help from the FED ... try to represent the people for once.

Thanks,
A Reader
Jul 28, 2013 9:28PM
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If the sun doesn't rise tomorrow, I'm sure it is President fault simply because he is who he is.  People have a hard time understanding that. I don't like politics and have no racial bias of any kind.  Honestly, if the GOP tea baggers could learn to read and write you will find that Alan Greenspan and Bush's elementary school level education of the US economy, US Infrastructure, US Job Creation Mechanisms what got us ALL into this mess.  
Jul 28, 2013 9:52PM
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Legal veteran

i highly doubt your claim of racial bias. your statement was not provoked by anyone yet you mention it and demonize the TEA PARTY.
Let me clarify something for you , THE TEA PARTY  has no political affiliation,We are CONSTITUTIONAL CONSERVATIVES that embrace the FORE FATHERS , the CONSTITUTION,and what they stand for.We support candidates with the same vision regardless of party line !
I am  an ordinary person,however I could have put this economy back on track in 2 years.  
The goal of this administration by their own admission is to RE-CREATE AND RE-STRUCTURE  this country in their own distorted  liberal vision.
Take your Demonization and racial rhetoric else where,,it will not work here
'"NEVER LET A GOOD CRISIS GO TO WASTE"   R.EMANUEL former Obama chief of staff  
Jul 27, 2013 8:40PM
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crazy             max   koo   money   pete   and  intl team player(definition=one world govt )
have been indoctrinated into the socialist / communist  / liberal  form of government

some say forgive them for they know not what they do,  but i believe there is no re-education for them
they are too far gone  

v l      I  have a great BBQ marinade
Jul 29, 2013 8:56AM
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"Rally shows strength???"   That's the funniest thing I've read in a while. Thanks for the chuckle!
Jul 28, 2013 12:36AM
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YOU GUYS COULD PROBABLY LOSE(OOPS) me with all that mumble jumbo and legalese talk, but I can try and keep up....8th grade edcations urnly go so fer.

Oburma , who ?? 

Jul 27, 2013 7:51PM
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"Here's some additional good news on Friday's recovery: Absent bad days Monday, Tuesday and Wednesday, the Dow could end July with its second best month gain of the year"

 

Since there  is NO ECONOMY, a prediction like that is literally Treason. Charley, are you foretelling that the markets are no longer subject to actual activity, just setting records for the sake of it? What is the value? Kill the leaders, re-establish a commonsense base and start over. How about we close the banks on Monday, end the Federal Reserve on Tuesday and get RID of Wall Street on Wednesday? Thursday we can gather wealthy people and roast the chests and nuts on open fires.

Jul 26, 2013 9:05PM
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Poor "Wrong-way" Charley must have drawn the number for a positive piece today since Fleckenstein has been in hiding after bankrupting his clients with his gold plays and Mirhaydari can't figure out which way is up and Jubak is busy crafting another 10-page diatribe on something negative. It's simple my friends. Bush Jr. had 6 czars watching the huge socialist government that the GOP created for us through excessive military and government hiring. President Obama had to bring in 32 MIT-trained czars to bring us back  from the brink of collapse. Wise decision. Now anybody complaining on this blog is only complaining out of racial hatred. They stayed out of the market and missed a HUGE huge Obama rally. Blame yourself!! Can we go higher? YES!!! Obama's plan and Bernanke's guidance are bringing us out of this slowly. We could have healed much faster if Congress had helped but they're just a bunch of racists using the bible as cover for their failed wars and thirst for wealth from their contributors at BIG OIL. I pray that God gives protection to Elon Musk, the resurrection of Tucker, as he puts charging stations for electric cars into all areas of the country without government help. I'm staying fully invested in stocks because I believe in my President and because we will all be successful without Congress. I hope Congress is replaced by 20 somethings so we get somebody with energy and vision in charge instead of flip-flop artists like John McCaine whose brain is as slow as his turtle body... DOW 18000!!!!!!!!!!!!!!
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