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After The CloseStocks surged in a big way today on word that measures taken by European leaders may have, at least temporarily, put that region’s financial troubles behind it, and as the U.S. economy turned in its best showing in some time. Wall Street’s reaction was typical of the way trading has been conducted lately, with sharp moves in either direction occurring regularly, depending on whether the day’s news was good or bad.

It remains to be seen if either Europe or the United States can sidestep a prolonged period of economic underperformance. But for now, investors are delighted that the worst-case scenario--a deep downturn in business conditions led by rapid deterioration in the global banking system--has apparently been avoided.

Financial stocks were among the day’s leaders, with shares of Bank of America (BAC - Free BofA Stock Report), JPMorgan Chase (JPM - Free JPMorgan Stock Report), and General Electric (GE - Free GE Stock Report), a conglomerate with large financial operations, as some of the Dow Jones Industrial Average’s best performers. The banking sector was hit hard over the past several months on worries that Europe’s woes would be transmitted to these shores through the financial system. The ``Grand Plan’’ just arrived at in Europe lessens the likelihood that will occur.   

Shares of cyclical stocks, such as aluminum maker Alcoa (AA - Free Alcoa Stock Report), chemicals giant DuPont (DD - Free DuPont Stock Report), and heavy equipment manufacturer Caterpillar (CAT - Free Caterpillar Stock Report) also shined on the thinking that the global economy is now more likely to get back on track. 

All in all, it was a day that investors had been awaiting for some time, given the worries that Europe’s fiscal woes had caused. With that cloud lifted for the time being, the Dow Jones Industrial Average rocketed 339 points and the NASDAQ soared 88 points, although the markets closed modestly off their best levels of the session. Oil prices jumped more than $3 a barrel, as well. However, the bond market experienced a minor selloff, as investors sought higher returns from stocks.

Tomorrow brings the release of economic indicators that will provide data on personal income and spending for September, which are both expected to have increased substantially over the August figures. We’ll also get the latest readings on the employment cost index, for which a modest decline is forecast, and for the University of Michigan consumer sentiment index, where a slight rise is projected.

Earnings season also begins to wind down on Friday, with reports from Dow components Chevron (CVX - Free Chevron Stock Report) and Merck (MRK - Free Merck Stock Report) on tap. What the numbers say for the economy and earnings will help determine if Wall Street can build on today’s super-charged rally. - Robert Mitkowski  
        
At the time this article was written, the author did not have positions in any of the companies mentioned.


 

2:10 PM ET - Stocks continue to surge, as we make our way through the afternoon, on upbeat tiding from Europe. The Dow is ahead by about 335 points (2.82%), with even larger percentage gains on the other major indexes. The S&P 500 is up 42 points (3.24%) and the NASDAQ is leading the market higher, up 93 points (3.49%). Technically, the S&P 500 is attempting to push through its 200-day moving average, located at 1,274. This is widely seen by technicians as a bullish signal, suggesting that the market has resumed an upward direction. Whether or not the market will encounter some resistance at this widely watched area remains to be seen. Also it is worth mentioning that the Dow has moved over the “psychologically” significant 12,000 level, and this may help sentiment, as well. - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

 

12:30 PM ET - The U.S. stock market gapped higher at the opening bell today. The move was a carryover from a strong session in Europe. The German DAX and the French CAC-40 both ended up over 5%, while Britain’s FTSE-100 tacked on almost 3% for the session. The reason: Traders are no doubt, relieved that the summit talks in Europe have resulted in some positive progress. According to the latest reports, the rescue fund will be expanded to about $1.4 trillion and bondholders of Greek debt will likely have to accept a 50% write down on their investment. Banks in the region will also have to boost capital reserves.

Notably, the euro is also up 1.9% to $1.42 –a seven-week high. It is critical to watch the euro, and the level of the U.S. dollar relative to other currencies, such as the yen, which has been quite strong, despite intervention efforts by the Bank of Japan. A weaker U.S. dollar has been aiding American companies selling products internationally. It also stimulates demand for commodities, which are traded in U.S. dollars. Notably, today, oil is up over 3%, to $93.31 per barrel. 

Meanwhile, today’s economic reports were largely favorable. According to the Department of Commerce, gross domestic product increased about 2.5% during the third quarter, which was slightly less than expected, but far better than the 1.3% increase logged last quarter. On the employment front, initial jobless claims for the week ended Oct. 22nd came in at 402,000, which met expectations. The figure was a slight improvement over last week’s reading. There was also some improvement in continuing claims. In the housing arena, pending home sales for the month of September declined about 4.6%, which was a bit more than anticipated. The housing figures have been quite erratic. For example, this reading stands in sharp contrast to the favorable new home sales data put out yesterday.

The market may also be getting a lift from some decent earnings releases. After the close yesterday, Internet company Akamai (AKAM) reported better-than- expected results, sending that stock up sharply. Oil giant Exxon Mobil (XOM - Free Exxon Mobil Stock Report) also put out a decent report. However, that stock is hardly reacting to the news. Elsewhere, Procter & Gamble (PG - Free Procter & Gamble Stock Report) put out a solid report, but Wall Street was not impressed, as that stock has not moved much either.

At roughly noon in New York, the markets are surging forward. The Dow Jones Industrial Average is up 310 points (2.62%); the S&P 500 Index is ahead by 36 points (2.91%); the NASDAQ is advancing 73 points (2.74%). Market breadth is strong, as advancers are well ahead of decliners on the NYSE and on the NASDAQ. All of the market sectors are having a good day. The basic material and financial names are the obvious leaders.

Stocks moving higher today include: Kadant (KAI), Acme Packet (APKT), Deutsche Bank (DB), Morgan Stanley (MS), and Dow Chemical (DOW). Stocks headed lower include: McDermott (MDR) on weak earnings, Triquint Semiconductor (TQNT), Avon Products (AVP), Nii Holdings (NHID), and BMC Software (BMC). - Adam Rosner

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

 

10:30 AM ET - It continues to be all about Europe, as that unending soap opera takes daily and moment-to-moment twists and turns. Now, this morning, the saga is turning around in favor of the bulls--and doing so dramatically. This latest twist, which is headlined by an eleventh-hour deal to stave off a technical default by Greece, although it will still mandate a so-called voluntary 50% “haircut” for holders of Greece's debt, is sending the buy alarms off all over the world.
 
Specifically, after multiple-percentage point gains in Europe's bourses, as those indexes have surged to multi-week highs, along with the recently triumphant euro, the sellers are fleeing en masse in New York. Thus, after just an hour into the trading day, the Dow Jones Industrial Average is up by some 210 points; the NASDAQ is climbing by 50 points; and the Standard and Poor's 500 index is gaining more than 23 points. Winners are swamping losers and new highs are overwhelming new lows, as to be expected. Of course, earnings are also playing a largely supportive role, as are the latest economic metrics highlighted by a report issued earlier this morning showing that the nation's gross domestic product climbed by 2.5% in the third quarter.
 
However, for today, at least, and for much of the past month or two, the focal point of Wall Street's bulls and bears has been on Europe, as the old world continues to supply the basic ingredients for each day's market action in the new world.    - Harvey S. Katz     

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.

 

B efore The Opening Bell - The rallying cry on Wall Street these days, by both the bulls and the bears, could well be the same of the long-running television soap opera, "As The World Turns.'' Indeed, it seems to be the ebb and flow of the dailiy tidings out of the troubled euro zone, rather, for the most part, than earnings and the economy at home that tell the tale of the tape, to use an old sports metaphor.
 
That, in fact, has once again been the investment story so far this week--and never more so than this morning. Thus, after optimism flared about a pending euro-zone deal on Monday, the global markets soared. Subsequent pessimism on Tuesday then took the measure of the bulls, as the Dow Jones Industrial Average tumbled by 207 points. Then, yesterday, amidst further uncertain economic news and spotty earnings at home, optimism about the on again, off again, bailout for Greece, sparked a late rally that saw the Dow surge by another 162 points.
 
Now, this morning, hope has become reality--or so it seems--as European ministers, working late into the night have apparently fashioned a deal that will keep Greece, the most troubled nation on the troubled Continent, from defaulting on a technical basis. Here, in short, are the outlines of the just-hammered out deal. Greece's bondholders will need to take a ``voluntary'' 50% reduction in the value of their debt; there will be a much larger--$1.4 trillion--infusion into the bailout fund; and according to Greece's Prime Minister, a number of banks in that nation will not need to be nationalized.
 
The two leaders of this efforts, France's President Nicolas Sarkozy and Germany's Chancellor Angela Merkel both expressed satisfaction at the deal, as if there could be any other public reaction to this compromise accord, which still must bear the test of the finer points. In fact, some economists have already noted that key aspects of the agreement, including the mechanics of boosting the European Financial Stability Facility, or the official name of the bloc's rescue fund, and providing Greek debt relief, would take weeks to pin down. Thus, the devil could still be in the details. The deal also, we think, will necessitate the acceptance of at least a modicum of austerity in the affected nations, something that has not yet been able to win popular support, to say the least. However, for now hope abounds and stocks are soaring around the world.
 
Meanwhile, as the world turns, now goes back, at least momentarily, to focus on the United States, where just moments ago, the U.S. Department of Commerce reported that the nation's gross domestic product rose by 2.5% in the third quarter. Expectations had this metric gaining 2.7%. However, boosted by final sales, which gained 3.6%, durable goods spending, which added 4.1%, and business investment, which surged 16.3%, it was the best quarterly advance in a year.
 
However, the partying--at least as far as the GDP is concerned--may not last, as recently poorer metrics, ranging from consumer confidence, to durable goods orders, to industrial production, suggest that growth will come in closer to 1.0%-1.5% in the current period. However, for now, the economic bulls have the latest win. They also have had slightly better news on the employment front, as initial jobless claims edged a bit lower in data issued moments ago for the latest week.
 
Then there is earnings, which are coming in fast and furious, and which, for the most part, have been supportive, albeit with some high-profile misses. Those misses, which are more prevalent than they had been in more recent quarters, are being punished severely by skittish investors, who seem to have a ``what have you done for me lately'' attitude.
 
Finally, there are the markets, which are floating on air this morning, following the 11th hour accord in Europe. Indexes around the world are rallying by two and three percentage points. And over here, we are keeping up the beat, with the Dow futures ahead by well over 200 points; the NASDAQ futures ahead by 50 points; and the S&P 500 futures in the black by 31 points. It will, therefore, likely be a bullish stampede at the opening bell in less than an hour from now, so fasten your seatbelts for what is likely to be an initially scintillating move, especially if you are long equities. - Harvey S. Katz     

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.