11-week High in S&P 500 Index; Earnings Power Rally

Bikram Pandey
21 Oct, 2011
New York City

U.S. stocks rallied after earnings lifted sentiment. S&P 500 index and the Nasdaq gained 2%. The S&P 500 index gained 1.5% in the week and closed at a 11-week high. Microsoft, General Electric, Verizon and McDonald

[R]4:10 PM New York – U.S. stocks rallied after earnings lifted sentiment. S&P 500 index and the Nasdaq gained 2%. Microsoft, General Electric, Verizon and McDonald’s reported better than expected earnings. Crude oil and copper gained as commodities rallied.[/R]

The U.S. stocks rose on hopes that European leaders weekend summit will provide a clear direction and higher domestic earnings. Microsoft, Verizon, Capital One Financial and General Electric were among the leading companies reporting better than expected earnings.

In merger news, Duke Realty agreed to sell suburban offices to Blackstone for $1.08 billion. IBM completed acquisition of Algorithmics for $380.2 million. Santander reached deal to raise $1.15 billion through stake sale in its U.S. subsidiary.

Investors were emboldened in the morning after the leaders of France and Germany issued a joint statement and reiterated their commitment to find a solution to the growing banking crisis.

The leaders also said at a second meeting may be needed no later than Wednesday to finalize the details of bank recapitalization plan.

Markets in Europe surged between 2% and 3.6% and investors awaited the details of the widely awaited bank recapitalization and rescue fund expansion plans.

Chipotle Mexican Grill’s third quarter net surged 25% to $60.4 million and Capital One Financial said third quarter net was flat at $813 million. General Electric third quarter earnings surged 57% to $3.2 billion and Microsoft first quarter net gained 6.1% to $5.74 billion.

European indexes with the German benchmark index leading the region with a rise of 3.6%. Greek lawmakers passed austerity measures amidst violent protests. Essilor quarterly revenue rose to €1.04 billion.

In economic views, the euro area government deficit to GDP decreased in 2010. German and French sentiment fell in October. Hungarian retail sales rose, consumer spending in the Netherlands fell, and Spain''s mortgages loans decreased 41.7% from a year ago in August.

The UK indexes climbed and public sector net borrowing and consumer confidence fell in September. Irish trade surplus rose in August. Thomas Cook soared 11% after reaching an agreement with its banks to amend the terms of the existing credit facilities.

Stocks in Japan closed unchanged and for the week gained 0.8%. More than 400 Japanese factories are submerged in Thailand after floods devastate one third provinces and Bangkok face rising waters. Property and casualty insurers declined on higher losses linked to Thai floods.

Australian stocks were flat today and for the week increased 1.5% on the optimism that the euro zone leaders will increase the size of the rescue fund. Commodities were weak as they have been all week and mining companies closed lower. Qantas Airways and unions were asked to resolve their differences by Prime Minister Gillard.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed up to 2.21% and 30-year bond increased to 3.26%.

The U.S. dollar decreased to $1.386 to one euro and closed lower against the Japanese yen to 76.13 yen.

Immediate delivery futures of Texas crude oil increased $1.41 to $87.48 a barrel and futures of natural gas increased 0.01 cents to $3.64 per mbtu and gasoline price gained 1.2 cents to 268.75 cents a gallon.

In metals trading, copper increased 17.80 cents to $3.23 per pound, gold added $25.80 to $1,638.70 per ounce and silver rose $1.07 to $31.33.