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.
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.
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.
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
"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.
Who writes this " Mumbo Jumbo " anyway ? Aren't the problems that brought the market down this year still around today ?
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.
'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!
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 ??
"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.
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After enjoying a smooth rise in stock prices since May, investors are about to be hit with another bout of volatility.
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