Stock Market News for Jan 17, 2011 - Market News

On Friday, markets surged with both the Dow Jones and S&P recording new highs. The S&P ended with seven straight consecutive weeks of gains as banks leading the rally and JP Morgan returned encouraging earnings figures. Rising financial stocks also helped ease worries from a disappointing report about low retail sales and weak consumer sentiment because of rising gasoline prices

 

The Dow rose by 0.47% and closed at 11,787.38. The S&P 500 gained 0.74% and ended the day at 1,293.24 The Nasdaq composite edged up 0.73% and closed at 2,755.30. On the New York Stock Exchange, breadth of the market was marginally on the negative side and consolidated volumes stood at 4.4 billion shares. The CBOE Volatility Index (VIX) fell to 15.40.

 

Coming to the economic front, US retail sales and business inventories came in far below expectations and Consumer Prices increased by 0.5% last month. Majority of the increase in prices was due to rise in gasoline prices, which meant the threat of inflation was less than perceived. Gasoline prices increased to $3.09 a gallon, the highest rise since October 2008.

 

On the international front, gains made by the market due to a strong rally from financial stocks were offset by losses from materials due to the unfavorable impact of demand tightening from China. The Central Bank of China has decided to go ahead with increasing the banks' reserve requirement ratio as a move to curb inflation.

  

On a sectoral basis, banks were lead gainers in trade on Friday as JP Morgan JPM posted better than expected results. Key shares in the financial sector to gain include PNC Financial Services Group PNC which rose 5.1%, Morgan Stanley MS which gained 2.4% and Wells Fargo & Co. WFC which increased by 2.7%. In other news, shares of Sterling Bancshares Inc. SBIB rose 2.9% amidst reports of setting itself on for auction. Other financial and bank stocks which increased substantially were Bank of America Corp BAC which rose by 3.3% and American Express AXP increased by 2.6%. Only AIG AIG closed in the red because of a problem with a troubled insurer. The stock fell 5.58% to $54.00. But, the bank-led rally may not continue for long as the sector faces the prospect of stiff technical resistance.

 

On to news about earnings and estimates, financial major JP Morgan JPM posted results before market hours beating Wall Street's expectations handsomely both on the revenues and earnings front. The company reported earnings of $1.12 per share and with sales of $26 billion, which rose substantially by 13%. Analysts had earlier projected a profit of $0.99 cents and revenues of $24.4 billion. Lennar LEN, soared 6% during the week after the company announced their quarterly results that beat the Street's estimate and presented a very robust 2011. A few big names which are expected to post their earnings next week are Citigroup C, Goldman Sachs GS, Morgan Stanley MS and Bank of America BAC.

 
Coming to individual counters, drug maker Merck & Company MRK slumped 1.33% after it announced Thursday that it would discontinue clinical trials of its anti clotting drug vorapaxar. Shares of Johnson & Johnson JNJ, Intel INTC and Verizon Communications VZ were the biggest laggards in the Dow. BP BP traded marginally in positive territory after the company announced a share swap agreement with Russian state-controlled oil company Rosnett after the closing bell. Shares of the company rose by 3.6% to $49.25 because of the reports. 

 
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