U.S. Stocks Rest; Earnings Momentum, Housing Weakness Collide

Bikram Pandey
20 Jul, 2011
New York City

The U.S. indexes traded sideways after 90% of the 65 companies in the S&P 500 index so far reported better than expected earnings. The surge in Apple Inc

[R]4:30 PM New York – The U.S. indexes traded sideways after 90% of the 65 companies in the S&P 500 index so far reported better than expected earnings. The surge in Apple Inc’s earnings confirmed the trend in place for more than 24 quarters. The parent of American Airlines placed the largest industry order for planes. The Greek bailout worries drag the euro lower.[/R]

The U.S. indexes were caught in cross currents of rising earnings and weak housing market data. Investors were also heartened after President Barack Obama endorsed the U.S. Senate plan to cut $3.7 trillion in spending with conditions.

Apple Inc gained more than 3% after the popular electronic gadgets and phones reported a surge in unit sales and earnings. The rising sales also lifted makers of flash memory and other components in Japan and Taiwan.

Seasonally adjusted annual rate for existing U.S. home sales in June decreased 0.8% to 4.77 million from 4.81 million units in May, and 8.8% below from a year ago of 5.23 million units rate in the month.

AMR Corp, the parent of American Airlines agreed to divide the 460 planes order between Boeing and Airbus SAS. The largest order in the industry’s history was valued at more than $35 billion based on average price of planes and with deliveries extending in the next decade.

In the merger news, Energy Transfer agreed to acquire Southern Union in $9.4 billion deal and Ecolab agreed to buy Nalco for $5.4 billion. CNOOC agreed to acquire OPTI for $2.1 billion.

Carl Ichan lifted his offer for Clorox Co. to $80 a cash from $76.50 a share that valued the company at $10.7 billion.

European indexes extended gains ahead of the Greek bailout summit. German producer prices increased 5.6%. Accor first-half revenue rose 4.4% to €3 billion. Alstom reported fiscal first quarter sales declined 12%.

German producer prices eased to a 6-month low in June. Iceland jobless rate fell in the second quarter. Italian industrial orders improved in May. Dutch and Danish consumer sentiment declined in July.

The UK indexes climbed after gross mortgage lending fell in June. The Bank of England policymakers remained divided on rates and quantitative easing. Melrose completed the disposal of Dynacast division for £377 million. Yell Group plunged 12% after first quarter revenues declined.

Stocks in Japan gained following a rally in tech stocks and banking stocks. Apple Inc earnings lifted Toshiba Corp, Softbank and Foster Electric. Banks gained after the U.S. debt talks jitters eased. Yasakawa Electric earnings lift robot makers.

Australian stocks soared tracking a surge in international markets and BHP reported strong production. However the index of leading indicators and consumer spending declined to the slowest growth in 20 months. Woolworths reported food and liquor sales dropped 10% in the quarter.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased 2.93% and 30-year U.S. bond traded up to 4.25%.

The U.S. dollar increased at $1.423 to one euro and fell against the Japanese yen to 78.75 yen.

Immediate delivery futures of Texas crude oil increased $0.64 to $98.14 a barrel and futures of natural gas decreased 0.03 cents to $4.50 per mbtu and gasoline price increased 2.62 cents to 314.11 cents a gallon.

In metals trading, copper decreased 3.35 cents to $4.44 per pound, gold fell $2.50 to $1,598.60 per ounce and silver decreased $0.32 to $39.91.