Stocks rallied for the sixth straight day on Tuesday as favorable earnings reports from aluminum giant Alcoa AA and a successful auction, of $2.1 billion, of Greek debt bolstered global markets and strengthened the euro. As a result, investors overlooked Moody’s downgrade of Portugal’s credit rating. The oversold position of the market reversed with fresh funds entering the market partly due to short-term momentum. Investors sought riskier assets, including small cap stocks and commodities.
Market mavens anticipate that corporate profits increased 27% year-over-year in the second quarter while revenue was up 9%. Nonetheless, investors are expected to focus on corporate guidance for the second half of 2010. Lingering negative factors include worries about debt overhang, the weakness in the housing and labor markets, continued budget deficits of the federal government, and a widening trade imbalance in May.
Shares of insurance behemoth American International Group AIG shot up 6% following reports that its board may soon meet to consider a public offering for its life insurance business in Asia. AIG’s effort to raise funds through divestment of certain businesses is critical to its ability to repay US taxpayers.
Chip maker Intel INTC moved up about 8% in after hours trading, after declaring positive results and raising its profit forecast. Also on the move was chip maker Advanced Micro Devices AMD, which gained 5.7% in extended trading. On the downside, Apple AAPL lost 2% following complaints about the reception of the iPhone 4 and a poor review by a consumer guide. One prominent laggard was pharma major Pfizer PFE losing 1%, after a court in California allowed a lawsuit under which retail pharmacies may accuse it, and other drug makers, of conspiring to set drug prices at artificially high levels.
Banking stocks saw positive action with JPMorgan Chase JPM up 3.3% and Bank of America BAC higher 3.0%. With Senate Democrats making progress towards a rehaul of the financial regulation system, passage of the bill may yet prove to be a short-term negative factor for the banking sector.
The Dow moved up 1.4% to finish at 10,363, up 7% in six trading sessions, having retraced most of its losses in 2010. The S&P500 rose 1.5% to 1,095 and the Nasdaq was up 2% to 2,242. The improved sentiment spread to the Russell 2000 small cap index, which moved up 3.41%, thereby returning to positive territory for the year.
The market breadth was positive but volume continued to be light. On the NYSE, winning stocks beat losing shares by 7 to 1, on volume of 1.13 billion shares. Continued low volume raises the possible spectre that the positive momentum of the market may yet lose steam. In addition, the cost of protection in the options market against a decline in the market continues to increase.
Zacks Investment Research© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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