Loading...
 

After the Close - Stocks surged on the last trading day of June on surprisingly promising news out of Europe. Investors have been worried for years about the deteriorating fiscal situation across the Atlantic. But the European Summit that ended today brought over a fresh breeze in that proposals put forth are designed to address Spain’s and Italy’s short-term borrowing needs, while initiating a broader push for greater fiscal integration in the euro zone over the long term. 

The breakthrough was music to investors’ ears, pushing the venerable Dow Jones Industrial Average up 278 points, or 2.2%. For the month of June, the Dow rose 3.9%, recovering from a painful correction in May that saw stocks give up most of the sharp gains they had achieved in the first four months of the year.

The NASDAQ was a big winner on the day, as well, jumping 86 points, or 3.0%. Market breadth was overwhelmingly bullish in the session that just ended, with six stocks rising for every one falling on the New York Stock Exchange.

At the midway point in 2012, the Dow is 5.4% to the good and the NASDAQ is up nearly 13.0%.

Every stock market sector advanced today, with shares of industrial companies, such as United Technologies (UTX Free United Technologies Stock Report) and Deere (DE) making among the biggest moves. Tech stocks, including Oracle (ORCL) and priceline.com (PCLN) also had a big day. The energy and basic materials sectors enjoyed a nice bounce, too, as prices for oil, copper, and gold surged. Consequently, it was a good day for shares of companies like Schlumberger (SLB), Chesapeake Energy (CHK), Dow Chemical (DOW), and Barrick Gold (ABX). 

Today’s relief rally was based on the greater commitment shown on the part of Europe’s leaders to keep their currency union together. If Europe can get its act together, that would take a major concern off the table for investors here.

But the market’s focus will soon shift to the type of results Corporate America is able to produce. Earnings season begins in the second week of July, and prospects are not as uplifting as they might be, with the economy in low gear. Even so, there is a feeling in certain quarters that, if business conditions were to slow further, the Federal Reserve might be prompted to take corrective action. Such a course would likely please investors.    

Next week is shortened by the July 4th holiday on Wednesday. Trading could be light as many on Wall Street will be taking time off.   -Robert Mitkowski

At the time this article was written, the author did not have positions in any of the companies mentioned.
   
-

12:15 PM ET - The U.S. stock market opened sharply higher today, and has been able to extend its gains as we move through the session. At roughly noon in New York, the Dow Jones Industrial Average is up 218 points (1.7%); the S&P 500 Index is ahead 25 points (1.9%); and the NASDAQ, which is leading the market again, is tacking on 67 points (2.4%).  Buying of equities is widespread, as advancing stocks are ahead of decliners by a wide margin on the NYSE. All of the market sectors are making contributions, with big advances in the conglomerates, energy, and technology issues. While there are no weak sectors, the utilities are logging a more measured advance relative to other groups.

Technically, today’s move puts the S&P 500 Index over its 50-day moving average located at 1,340. This is considered a positive development by many technicians, assuming the market can remain above this level. The next area of resistance may be found near 1,360, since that area was hit a few sessions ago. The VIX is lower by about 8% today, to a reading of 18, which suggests a bullish tone. It will be important to watch traders’ behavior at the close of the session. Hopefully, we will see some commitment to the rally.

Investors are likely taking their cue from the international markets. On the Continent, the bourses are all moving higher. Notably, Germany’s DAX, and France’s CAC-40 are up over 4% today. Gains are bit less dramatic for Britain’s FTSE 100. This likely reflects news that leaders in the region are taking action to improve the debt situation in Italy and Spain. The euro is up 1.8%, to about 1.27.

Today’s economic news was largely overlooked. Personal income rose 0.2% for the month of May, which was a bit better than many had expected. Personal spending was unchanged.  Elsewhere, the Chicago PMI came in at 52.9 for the month of June, which met expectations.  Elsewhere, the University of Michigan’s Consumer Sentiment Survey provided a reading of 73.2 for June, which was just slightly lower than the consensus forecast.

In corporate news, Nike (NKE) shares are off, after the sneaker maker posted weaker-than-expected figures. Research in Motion (RIMM) stock is trading lower after the struggling technology company posted a wider-than-anticipated quarterly loss.   - Adam Rosner

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

-

Stocks to Watch from The Survey Shares of smartphone maker Research In Motion (RIMM) are trading sharply lower in the premarket. After the market closed yesterday, the company reported a wider-than-expected loss in the May period, announced plans to cut up to 5,000 jobs (roughly 30% of its workforce), and said that its newest offering, the BlackBerry 10, would not hit stores until the first quarter of 2013, thereby missing the crucial holiday shopping season. Research In Motion wasn’t the only company to disappoint investors last night. Indeed, Nike (NKE) stock also tumbled in the premarket, after the athletic footwear and apparel giant released May-quarter results that fell short of investors’ expectations. Management cited a lower gross margin, increased SG&A spending, and a higher tax rate for the lackluster performance. On the other hand, homebuilder KB Home (KBH) delivered better-than-expected May-period results, and the stock is trading sharply higher on the report.

In other news, Anheuser-Busch InBev (BUD), the world’s largest brewing company, has agreed to purchase the balance of Mexico-based brewer Grupo Modelo that it does not already own for $20.1 billion. Grupo Modelo owns a 50% interest in Crown Imports, which InBev plans to sell to wine, spirits, and beer producer Constellation Brands (STZ) for $1.85 billion. Shares of BUD moved nicely higher on the news, while STZ stock is soaring in the premarket. – Matthew E. Spencer

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

-

Before The Bell -The seesaw trading week on Wall Street continued yesterday and is likely to persist today in the favor of the bulls (more below). Yesterday, jitters about the European Summit and the uncertainty of the U.S. Supreme Court’s ruling in favor of the Affordable Care Act prompted a selloff both here and abroad. However, as the day progressed the bargain hunters emerged and the losses were pared significantly in the Dow 30 and the broader S&P 500 Index, both of which were only down 0.2% at the closing bell. The setback for the NASDAQ Composite (-0.9%) was a bit more pronounced, as some of the technology names, including heavyweights Apple (AAPL) and Google (GOOG), were weaker.

Meanwhile, the final trading day of the week is shaping up to be a very good one for the bulls. The international markets are up sharply, particularly in Europe, and the strong performance is likely to carry over to our shores. The primary catalyst is news that Europe's leaders appear to have finally come up with a number of short-term initiatives and a long-term plan that shows they are serious about solving the euro zone’s sovereign debt-problems. The European Union has agreed to let funds intended to bail out the struggling nations be funneled directly to struggling banks as well. In a nutshell, the plan is designed to alleviate the problem of struggling banks piling debt onto already stressed governments. European Council President Herman Van Rompuy called the decision a "breakthrough" that should help nations like Spain and Italy, whose borrowing costs have risen to near unsustainable levels despite their efforts to cut spending and reform their labor markets. The major European bourses, including gains of more than 2.5% so far for Germany’s DAX and France’s CAC-40, are up considerably as trading enters the second half on the Continent.

Turning back to the U.S., the economic news this week, including decent reports on durable goods orders and pending home sales, has been a bit more market supportive. And, just a short while ago, the Department of Commerce reported that personal income for the month of May rose 0.2%, which was in line with the consensus expectation—and thus the report, in our opinion, should not have an adverse effect on domestic stocks today. 

The U.S. markets are poised to open markedly higher when trading commences in less than a half-hour from now—the U.S. futures are currently suggesting such. Meanwhile, the price of crude oil, which has moved hand in hand with the equity markets in recent sessions, is up sharply this morning, to the tune of nearly $3.50 a barrel on the New York Mercantile Exchange. The main impetus has been the aforementioned news from Europe. The rest of the commodities markets should also get a nice boost from this morning’s weakness of the dollar versus the euro. The demand for commodities, which are priced in greenbacks, tends to be greater when the dollar is lower as they become more attractively priced in overseas markets. – William G. Ferguson

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