U.S. Markets Advance on Earnings, Greece at Next Hurdle

Bikram Pandey
09 Feb, 2012
New York City

U.S. stocks traded higher on positive domestic earnings and renewed market optimism. Greek negotiations reached next hurdle as lawmakers prepare to approve agreement with international lenders this weekend. Inflation in China surged to a seven month high.

[R]4:00 PM New York – U.S. stocks traded higher on positive domestic earnings and renewed market optimism. Greek negotiations reached next hurdle as lawmakers prepare to approve agreement with international lenders this weekend. Inflation in China surged to a seven month high.[/R]

U.S. stocks inched higher in cautious trading as investors digested stronger quarterly results from Visa Inc, Akamai Technologies Inc, Cisco Systems and others.

However, investors in Europe were on the defensive as Greek negotiations reach to the next hurdle. The agreement among Greek party leaders will need to be ratified by the Parliament that is opposed by the two largest unions. However the math keeps getting difficult as Greece slides deeper into recession.

Greece’s industrial production declined in December more than 11%, Value Added Tax revenues declined 18% in January and Greek interest payment shot up to 17% of total government revenues in 2011.

And, Greece’s economy is now 25% smaller than it was five years ago. In addition, government employees’ wages are down 20% from a year ago and are likely to shrink further this year and pension payments are expected to be cut in the year.

Across the Atlantic, five largest U.S. banks agreed to pay $26 billion to 49 U.S. states for foreclosure abuses. The historic settlement though large, many analysts feel did not go far enough.

In earnings news, PepsiCo plans to trim $1.5 billion in cost and Cisco Systems quarterly sales exceeded expectations.

Bunge fourth quarter net dropped to $245 million. Cisco second quarter net surged 44% to $2.2 billion. PepsiCo fourth quarter net increased 4% to $1.42 billion. Thomson Reuters fourth quarter net loss swung to $2.6 billion. Visa first quarter net increased to $1 billion.

European markets closed higher ahead of the euro zone finance ministers meeting. Greek political parties agreed on the broad points of labor reforms and government spending cuts after all night marathon negotiations as Greek economy descends deeper into recession.

European Central Bank left its key lending rate at 1% and President Mario Draghi did not clarify what is the position of the central bank if it will participate in Greek debt swap.

Separately, Bank of England left its key lending rate at 0.5% and expanded its bond purchase program, which is essentially printing more money, by 50 billion pounds to 325 billion pounds.

Japanese stock indexes were nearly unchanged and foreign investors added to stocks for the sixth week in a row. Nissan Motor Co said quarterly operating profit increased 3.6%. Daikin Industries Ltd lowered its annual income outlook.

Australian stocks eased after China reported a surge in inflation in January. After the close, Rio Tinto said its annual earnings dropped 59% to $5.8 billion after it wrote down its Alcan Aluminum business by $8.9 billion. Tabcorp reported better than expected earnings and News Corp said cost of hacking scandal continue to bite in its earnings.

The company is facing multiple suits for hacking scandals in the U.K. and tapping into phones of victims of terror in Mumbai, India and a potential FBI inquiry in the U.S.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond increased to 2.04% and 30-year bond inched up to 3.19%.

The U.S. dollar traded down 0.2% to $1.328 to one euro and edged up against the Japanese yen at 77.767.

Immediate delivery futures of Texas crude oil rose 50 cents to $98.91 a barrel and futures of natural gas rose 2 cents to $2.46 per mbtu and gasoline price increased 3.75 cents to 301.3 cents a gallon.

In metals trading, copper increased 6.60 cents to $3.97 per pound, gold increased 80 cents to $1,732.10 per ounce and silver added 16 cents to $33.87.