Stock Market News for July 8, 2010 - Market News

Stocks rallied sharply on Wednesday, building on to Tuesday’s modest gains, as a better-than-expected earnings outlook from State Street fueled optimism about the approaching earnings season.  The Dow Jones industrial average rallied 275 points, closing above the 10,000 threshold for the first time since June 28.   

State Street’s STT solid outlook sent shares in big banking companies higher as worries about slowing economic growth and Europe’s shaky finances seemed to disappear for a while.  Wednesday saw all 30 DJIA components marking gains on the day.  Money-manager State Street’s forecast that it expects to earn 92 cents a share on revenues of $2.2 billion during the just-concluded quarter appeared to be the main catalyst behind the indexes’ surge.  State Street jumped 9.9%.

Global economic recovery optimisms also got a boost on reports that China’s AgBank had mopped up nearly $20 billion in a hugely oversubscribed initial public offering.  Financials strengthened on the news even as Bank analyst Dick Bove upgraded shares of Citigroup C, noting the shares a "definite buy."

However, volume remained light due to lack of market-moving data and many participants noted the rally was also a result of investors picking up beaten down stocks.  So a combination of bargain hunting and State Street’s upbeat forecast made the day for stocks.  Shares in oversold sectors such as industrial and technology shares also gained with the broader market.   

The broader S&P 500 index jumped 3.1% to 1,060.27, the Dow Jones Industrial Average gained 2.8% to 10,018.28 and the tech-heavy Nasdaq Composite rallied 3.1% to 2,159.47.  On the New York Stock Exchange advancing shares beat those that fell in price by a six-to-one margin on volume of 1.34 billion shares.  The Vix, a measure of market volatility, eased 8.4% to 27.16.

Demand for riskier assets sent safe havens such as US Treasuries lower.  The benchmark 10-year declined in price, with a 14/32 drop as its yield rose to 2.984%, but remained below the key benchmark of 3%.  The euro also strengthened against the dollar, hitting a six-week high of $1.2650, up 0.2%.  The greenback fell to a two-month low against a basket of currencies, off 0.2%.

All thirty DJIA components closed higher on the day, with gains of more than 5% in Cisco CSCO, JP Morgan JPM and American Express AXP.  Shares in General Electric GE, Bank of America BAC, Disney DIS and Hewlett-Packard HPQ rose 4% or more.

S&P500 industry sector action showed all ten groups higher: basic materials (+4.5%), financials (+4.4%), technology (+3.8%), oil and gas (+3.4%), industrials (+3.4%), utilities (+3.1%), consumer services and consumer goods (+2.6%), health care (+2.0%), telecommunications (+0.7%).

Yesterday, Family Dollar Stores FDO reported estimate-beating third quarter earnings results, but its fiscal year earnings outlook of $2.53 to $2.58 a share fell a little short of consensus estimates of $2.59.  And even as markets worried about consumer spending and its effect on the economy, the comparable store sales for June appeared to be telling a different story.  Yesterday’s 8.4% surge in Walgreen’s WAG sales was followed by a 4% jump from Costco COST today.

This morning the International Monetary Fund raised its global growth projection for 2010 to 4.6% from 4.2% in April while maintaining its 4.3% outlook for 2011.  However, the IMF was concerned about the financial stress and sovereign debt issues and their impact on the economies.  It cautioned that "recent turbulence in financial markets - reflecting a drop in confidence about fiscal sustainability, policy response, and future growth prospects - has cast a cloud over the outlook."