Sharp Advance in Market Averages

123jump.com Staff
18 Apr, 2006
New York City

Sharp gains in market averages reflected enthusiam of investors on interest rates. Recent Fed minutes of meetings suggested that Fed may be near completion of rate hike campaign. Caterpillar, International Paper and Alcoa rose more than 3%. Home builders, retailers and industrials advanced. Copper closed at new high and oil reached near $72. Brazil and India led emerging markets with more than 2.5% gains.

[R]4:30PM Market averages rose on interest rate optimism.[/R]

- Dow up 195 points Nasdaq up 45 points and S&P 22.32 points at close.
-Crude oil up 95 cents to $71.35 per barrel and gasoline up 5 cents to $2.22 per gallon.
-Gold up $4.50 to $623.30, Silver up 43 cents $13.78 and copper up 7 cents to $2.97.
- Yield on 10-year bond 4.968% and on 30-year bond rose to 5.053%.

Market averages rallied across all cap sizes and in most industries. All thirty stocks rose in Dow Jones Industrial Average and 26 of 30 rose more than 1%. On NYSE 2,591 rose and 714 declined on 2.5 billion shares trading volume and on Nasdaq 2,194 gained and 861 stocks fell on trading volume of 2.2 billion shares.

Interest rates, earnings and prices in metals and oil prices mattered to traders. It was the comments in the March 27-28 Fed minutes of meeting. The several board members debated that further rate rise may not be necessary. Board members also suggested that the Fed may be near completion of the rate hike campaign. Market averages rose in the morning and catapulted in the afternoon on the news on Fed meeting. Large caps stock mostly advanced and all thirty components of Dow rose. Twenty Six of the thirty Dow stocks rose more than one percent. Caterpillar, Alcoa and International Paper rose more than 3%.


[R]3:30PM Emerging markets enjoyed another day of gains.[/R]
Emerging markets rose for the second day this week led by a strong gain in Brazil, India and Mexico. In fact four largest markets in Latin America, Brazil, Mexico, Chile and Argentina rose at least 1% at close. Brazil rose 2.8% and crossed 39,000 index level for the first time on strong buying from international buyers. Brazilian economy is expected to rise between 3.5% and 4% and several traders believe that Central Bank is to lower interest rate of 16.5% by 0.75% in Wednesday’s meeting. Petrobras rose 1.4% and airlines Gol and TAM rose 2% and 6% respectively. In Mexico investors bought shares on optimistic outlook on earnings and IPC index rose 1.3% near close.

In Russia RTS index rose 1% on higher oil and metals prices in Europe. Norway and South Africa also gained as price of oil passed $72 per barrel and gold rose $6 in the European markets. RTS index closed at record level to close at 1,600.01. Russia is preparing to launch IPO of Rosneft, one of the largest oil companies in the world, worth $20 billion. In India Sensex rose 2.44% and Indonesia gained 2.21% at close. Led by mining stocks Australia gained 1.3% to 5,200 and Hong Kong advanced to 16,637 on 1.3% rise. Indian companies have so far surprised the market with better than expected earnings and on GDP growth rates of higher than 8%. Reserve Bank of India left the short-term rate unchanged to 5.5%.

[R]3:00PM Interest Rate drive rally sparks stocks in the tech and large cap sectors[/R]
Market averages are at their best levels on the news that the Fed may not hike interest rates in the near future. The released transcript of the Fed meeting on March 27-28 chaired for the first time by a new Chairman Bernanke suggested that intense discussion among members of the board. The tone of the discussion suggests that the several board members feel that further tightening may hurt the economy. The fifteen rate-hikes since June 2004 are expected to slowdown economy and keep inflation under control. According to the transcript “most members thought that the end of the tightening process was likely to be near.” Nasdaq is up 1.3% and Dow is up 1.4% when less than one hour trading was remaining.

[R]12:30 European markets closed mixed.[/R]
European markets closed mixed, reflecting surging commodities prices and disappointing first-quarter earnings report from Philips Electronics which declined after reporting quarterly profit at the low end of forecasts. Sharply higher oil prices sparked investors’ worries ahead of the earnings season. However, U.K. stocks advanced, lifted by mining and oil companies. Oil producers were the leading gainers with Total, BP, and Royal Dutch Shell each rising more than 1%. The German DAX 30 dropped 0.3%, the French CAC 40 edged down 0.1%, while London FTSE 100 climbed 0.2%.

Crude oil prices jumped to a record high of $72.20 on growing tensions between Iran and the West over Iran’s nuclear program. Light sweet crude May delivery rose 30 cents to $70.70 a barrel. London Brent climbed 40 cents to reach $71.84. European gold hit a 25-year high on fears of oil disruptions. In London gold climbed to $616.30 per troy ounce from $606.10. In Zurich the precious metal rose to $618.03. In Hong Kong gold closed at $616.70. Silver jumped to $13.60 from $13.17. The U.S. dollar traded lower vs. major currencies. The euro traded at $1.2277, up from $1.2258. The dollar bought 1187.63 yen, down from 117.76. The British pound was quoted at $1.7764, up from $1.7694.


[R]11:30AM Stocks showed strength, despite surging oil.[/R]
Market showed strength and the three major averages firmly traded in the positive, despite sharply higher oil prices. Crude for May delivery advanced to $70.60 a barrel on concerns that the nuclear dispute with Iran could lead to oil disruptions. The concerns about higher oil prices were offset by tame inflation data Energy stocks benefited from the continued increase in the price of oil, with the oil service sector up 1.3%, while the oil sector gained 1.2%. Natural gas stocks rose to drive the sector up by 1.7%. Airline stocks also moved to the upside, as reflected by the 1% gain shown by the Airline Index, rebounding from 5.6% decline yesterday. Gold, brokerage, and disk drive stocks also posted significant gains. The gains by gold stocks come as the price of oil continued higher, rising to another 25-year high. Meanwhile, housing stocks showed weakness after the Commerce Department said housing starts fell 7.8 % to a seasonally adjusted annual rate of 1.960 million units in March from a revised 2.126 million unit rate in February.


[R]10:30AM Major averages advanced by 0.5%.[/R]
Strong corporate earnings and tame inflation data helped stocks trade in the positive territory. Stocks advanced, despite surging oil prices which hit a new intraday high of $70.88 a barrel. Shares of major oil companies posted gains with Exxon Mobil Corp. ((XOM)) rising 0.9% and Valero Energy Corp. higher by 1.8%. Other early gainers included Merrill Lynch & Co. Inc.((MER)), which reported sharply lower Q1 earnings but still beat analyst estimates. The stock rose 1%. IBM Corp.((IBM)) added 0.8% ahead of the announcement of its quarterly results after the closing bell. Dow component Johnson & Johnson ((JNJ)) said Q1 earnings rose 16%, helped by a break-up fee from its failed effort to acquire Guidant Corp. higher sales of medical devices. The stock added 0.2%. In morning trading, the Dow Jones industrial average gained 53.95, or 0.5%. The Standard & Poor''s 500 index rose 6.52, or 0.5%, and the Nasdaq composite index rose 11.11, or 0.5%. Benchmark 10-year Treasury notes rose 6/32 in price and their yield fell below the key 5% level to 4.99%.


[R] 9:45AM Stocks opened above the flat line.[/R]
U.S. stocks opened higher, boosted by strong corporate earnings and economic data, which showed tame inflation in March., easing concerns about further interest rate increases. A report from the Labor Department showed that wholesale prices rose by 0.5% in March, in line with economist estimates. Excluding food and energy prices, prices rose by 0.1%, slightly less than expected. Health insurance stocks contributed to the strength in the market, with the sector rebounding from recent weakness, supported by Humana ((HUM)), up 5.2%. Shares of UnitedHealth ((UNH)) advanced 0.7% on Q1 earnings growth and raised full-year earnings guidance. Some brokerage stocks moved higher, with shares of Jefferies ((JEF)), up 6% after it reported better-than-expected Q1 earnings growth, announced a 2-for-1 stock split, and raised its quarterly dividend. Early strength was also visible among energy stocks, benefiting from a continued increase in the price of oil, currently up at $70.55 a barrel. Meanwhile, housing stocks moved to the downside after a report from the Commerce Department showed a bigger-than-expected decrease in March housing starts.

[R]Wholesale prices rose in line with economist estimates.[/R]
The Labor Department said that its producer price index (PPI) rebounded by 0.5 percent in March after falling 1.4 percent in February. Economists had been expecting the index to increase by about 0.5 percent. The increase by the PPI was due in large part to a rebound by energy prices, which rose 1.8 percent in March following a 4.7 percent decrease in February. The upturn by energy prices was largely due to a rebound by gasoline prices, which rose 9.1 percent in March after falling 11.0 percent in February. Excluding food and energy prices, the PPI rose by a more modest 0.1 percent in March compared to a 0.3 percent increase in the previous month. The increase came in slightly below economist estimates of an increase of 0.2 percent. The relatively tame inflation data may help to offset recent concerns about higher interest rates. Nonetheless, traders my refrain from drawing any conclusions about inflation until after the release of the Labor Department''s consumer price index on Wednesday.


[R]A steeper-than-expected drop in housing starts.[/R]
The Department of Commerce released its report on housing starts in the month of March on Tuesday, showing that starts fell more than economists had expected. The report also showed a notable decrease in building permits. The report said housing starts fell 7.8 percent to a seasonally adjusted annual rate of 1.960 million units in March from a revised 2.126 million unit rate in February. Economists expected starts to fall to a 2.050 million unit rate from the 2.120 million unit rate originally reported for February. The drop in housing starts reflected declines in all four regions of the country, with the West showing a significant decline of 15.5 percent. The Midwest and the South showed more moderate declines while the Northeast showed a modest 0.5 percent drop. Single-family housing starts contributed to decrease, falling 12 percent to a rate of 1.591 million units in March from a 1.807 million unit rate in February. As mentioned above, the report also showed that building permits fell 5.5 percent to a seasonally adjusted annual rate of 2.059 million units from a revised 2.179 million unit rate in February. Building permits are seen as an indicator of future demand.


[R]9:00 AM Stock futures indicated a positive opening.[/R]
U.S. stock futures pointed to a higher opening, lifted by strong earnings from Merrill Lynch and UnitedHealth as well as optimism that companies like Yahoo! Inc. ((YHOO)) and International Business Machines Corp. ((IBM)), will report strong results. However a steep advance in the price of oil may limit gains. Merrill Lynch & Co. Inc. ((MER)), the largest U.S. brokerage firm, reported record Q1 revenue of 28% or $8.0 billion. UnitedHealth Group ((UNH)), health insurer, posted 20% higher quarterly profit as its acquisition of PacifiCare Health Systems fueled premium revenues and higher membership. S&P 500 futures were up 2.6 points, above fair value. Dow Jones industrial average futures were up 12 points, and Nasdaq 100 futures rose 0.25 point.

Crude oil prices jumped to a record high of $72.20 on growing tensions between Iran and the West over Iran’s nuclear program. Light sweet crude May delivery rose 35 cents to $70.74 a barrel. London Brent climbed 42 cents to reach $71.88. European gold hit a 25-year high on fears of oil disruptions. In London gold climbed to $616.75 per troy ounce from $606.10. In Zurich the precious metal rose to $616.55. In Hong Kong gold closed at $616.70. Silver jumped to $13.40 from $13.17. The U.S. dollar traded mixed vs. major currencies. The euro traded at $1.2261, up from $1.2258. The dollar bought 118.02 yen, up from 117.76. The British pound was quoted at $1.7715, down from $1.794.

Merrill Lynch, ((MER)), banking services, reported Q1 net income dropped 61% to 44 cents a share, down from $1.21 a share a year earlier on after a previously announced charge to account for stock options paid as compensation to employees, but the firm posted a record $8 billion in quarterly revenue in the period. Q1 included a charge of $1.2 billion, after tax, for the options accounting. The company beat analysts estimate for earnings of 32 cents a share, including the accounting charge.

Mattel Inc, ((MAT)), toy maker, reported that Q1 net income advanced to 8 cents a share, up from 2 cents a share a year ago. The profit figure, however, was lifted by tax benefits of 15 cents a share. Sales in Q1 advanced 1% on strong Fisher-Price growth. Mattel reported an operating loss of $32 million in Q1, down from a year-earlier operating income of $5.5 million.

KeyCorp, ((KEY)), multi-line financial services company, reported Q1 net earnings of 70 cents a share, up from 64 cents a share a year earlier, beating analysts forecasts for earnings of 69 cents a share Compared with last year''s Q1, taxable-equivalent net interest income advanced by $42 million, reflecting a better net interest margin, solid commercial loan growth and an increase in core deposits.

Emmis Communications Corp, ((EMMS)), radio operator, reported Q4 net profit of $3.71 a share, swinging from a loss of $4.75 a share in the prior year. The profit came from the disposal of most of the Indianapolis-based company''s television stations. On an adjusted basis, the company posted a quarterly loss from continuing operations of 2 cents a share, up from than the loss of 4 cents recorded in the year-ago period. The company’s quarterly net revenue grew to $84.5 million from $80.9 million. The company beat analysts’ forecasts of a loss of 21 cents a share.

National City Corp, ((NCC)), banking services, reported that Q1 net income declined 5.2% to 74 cents a share, beating analyst estimate for a profit of 72 cents a share. The bank added that tax-equivalent net interest income advanced 2% to $1.18 billion, while provisions for credit losses dropped to $27 million from $70 million. Fees and other income dropped 18% to $644 million.

UnitedHealth Group, ((UNH)), health-care-services provider, reported that Q1 net income went up 21% to 63 cents a share, from 55 cents in the year-ago period on 54% higher revenue, missing analyst estimate by a penny. Adjusted earnings were 68 cents vs. 55 cents.

D.R. Horton, ((DHI)), homebuilder, reported that Q2 net income advanced 20% to $1.11 a share on 25% revenue growth. Homes closed rose 19% to 12,570. The company met analyst expectations.

Pepsi Bottling Group Inc, ((PBG)), carbonated and non-carbonated Pepsi-Cola beverages distributor, reported Q1 net income of 14 cents a share, a penny down from the year-ago result. If not for expenses tied to the adoption of an accounting rule regarding share-based payments, the company would have earned 18 cents a share in Q1. Pepsi Bottling also reported quarterly revenue of $2.37 billion, up from nearly $2.15 billion in the same period a year ago on worldwide physical case volume jumping 6%. The company beat analysts’ views for earnings of 11 cents a share.


[R]8:30AM Sensex sharp rise was supported by earning and rates.[/R]
Sensex in Mumbai rose for the second day in a row to a new record. Sensex advanced 2.45% or 289 points to close at 11,821.57. The daily turnover rose to $1.1 billion from $800 million in previous session. Of the 30 stocks in Sensex 22 rose and 8 fell at close and 1400 stocks advanced and 1,050 stocks declined. Banking sector got a strong boost as the Reserve Bank of India left its short-term interest rate unchanged at 5.5% surprising the market. Market had counted a rise of 25 basis points. Banking sector index on BSE rose 1.43% on the news. ICICI ((IBN)) rose 1.2% to Rs. 587, HDFC Bank gained 1.8% to Rs. 830 and UTI Bank rose 5.4% to Rs. 353. Public sector banks rose including a gain of 0.9% in State Bank of India and 1.5% in Punjab National Bank.

After two days of rising the Indian market has gained 5% on strong earnings from software exporters and cement companies and general optimism surround the economic growth. Software leader TCS reported Q4 revenue jump of 44% to $900 million and earnings rise of 79% to $180 million. The company declared stock split of two for one and indicated that is in the process of negotiating an outsourcing contract of $500 million. TCS jumped 5.6% and closed at Rs. 2,010. Other software companies Wipro ((WIT)), Satyam ((SAY)) and Patni rose 6%, 4% and 2.5% respectively. Second tier cement company stocks rose for the second day in a row. Deccan Cement and Madras Cement closed up 7.5% and Mysore Cement, Chettinad Cement, Shree Cement and Saurashtra Cement rose 5%. Gujarat Ambuja lost 2% at close. Infrastructure company, L&T rose 4% to Rs. 2,635 on the news that the company has booked an order of $115 million from Kuwait Aviation to build a fuel complex. Morarjee Realty jumped 5% after it reported Q4 earnings jump of fifteen-fold to $10 million on revenue growth of 217%.


[R]8:15AM European averages traded mixed at mid-day.[/R]
European markets traded mixed at mid-day, resuming trading after the four-day break. Market sentiment was hurt by surging commodities prices and disappointing first-quarter earnings report from Philips Electronics which declined after reporting quarterly profit at the low end of forecasts. Sharply higher oil prices sparked investors’ worries ahead of the earnings season. However, stocks in the U.K. advanced, lifted by mining and oil companies like Total, BP, and Royal Dutch Shell which advanced more than 1%. The German DAX 30 dropped 0.6%, the French CAC 40 edged down 0.2%, while London FTSE 100 climbed 0.4%.


[R]7:45AM Asian markets closed higher, led by the Nikkei.[/R]
Asian-Pacific benchmarks advanced across the region, led by the Nikkei which climbed 1.4% to 17,232.86, boosted by strong financial and brokerage stocks, as well as mining and energy shares. Financial stocks stood out among gainers with Mizuho Financial Group rising 2.9% and Mitsubishi UFJ Group gaining 1.6%. Shares of oil and mining shares advanced, benefiting from surging commodities prices with Nippon Mining Holding moving higher by 5.8%. Hong Kong’s Hang Seng was sharply higher at 0.9%, lifted by major China-based companies and speculations that mainland investors will be given access to securities outside their home town. Among gaining stocks, China Mobile rose 3.4%, CNOOC gained 3.2%, and Synopec climbed 4.3%. Australia’s All Ordinaries was another sharp advancer, rising 1.3% on mining companies like BHP Billiton, up 2.3% and Santos, up 2.6%. South Korea’s Kospi added 0.3%, supported by Samsung Electronic.