Stocks Had Best Monthly Gain in a Year, with Blue Chips Climbing for the Week.

Published on Saturday, 31 July 2010 09:30 Written by TradersHuddle Staff

Weston, July 31^st (Tradershuddle.com) – The major benchmarked indices finished mixed for the week. Blue chips gained as investors shifted their focus away from earnings to economic data at the end of the week. Treasuries yields fell to record lows as fear of an economic slowdown returned.

For the week, the blue chip index gained 0.40%, the S&P 500 index fell 0.10% and the NASDAQ lost 0.65%. For the month, The Dow Jones Industrial Average rallied 7.08%, the S&P 500 gained 6.88%, and the NASDAQ 6.90%.

At the start of the week, stocks gained, with the Dow turning positive for the year, as a surge in new home sales and an increased outlook from FedEx (NYSE:FDX) boosted sentiment and signaled that the economic pace is likely better than previously thought.

FedEx said it has seen higher-than-expected volume in its Express and Ground businesses and now expects to earn $4.60 to $5.20 per share, 20 cents higher on each end of the forecast that what was previously estimated.

Also in the morning a better than expected report in new home sales, which showed a close to a 24% month over month surge. The positive headlines helped drive stocks higher, but resistance at the S&P 500's 200-day moving average kept a cap on gains until another round of buying helped the broad market measure settle above the key hurdle for the first time in one month.

The euro had a strong session. Specifically, the currency climbed 0.7% against the greenback to settle near $1.30, close to its two-month high. The euro strength helped the equities market to break through resistance.

Pfizer (NYSE:PFE) led the blue chip index that erased losses for the year, as the largest pharmaceutical company in the world, surged 3.02% to $15.02. Pfizer announced that the FDA approved a higher dose of Aricept for the treatment of moderate to severe Alzheimer’s disease.

Industrials, financials, telecom, and consumer discretionary were the best performing sectors. Industrials gained 1.7%, posting the best gains amid the 10 key S&P 500 sectors. The sector had the best reaction to FedEx increased outlook, as it signal that economic activity is not as bad as previously thought, pushing investors back into the cyclical sector. Leading the sector, General Electric (NYSE:GE), the diversified conglomerate maker of aircraft engines and power turbines jumped 2.74% to $16.14. GE posted the third biggest percentage gain in the Dow Jones Industrial Average.

Financial shares moved higher, as the prospects of a better housing sector and more economic activity bode well for the bottom line of the sector. Shares of financial companies gained 1.6% as a group, with Bank of America (NYSE:BAC), the largest U.S. lender, jumping 2.98% to $14.15. Bank of America was the second best Dow component.

Home Depot (NYSE:HD), the largest home improvement retailer, climbed 2.62% to $28.99, posting the fourth largest percentage gain in the blue chip index. Home Depot climbed on the surge of new home sales to an annualized rate of 330,000 units. The move helped the consumer discretionary sector to a gain of 1.5%.

On Tuesday, the market had a strong start as better than expected corporate results from European banks UBS (NYSE:UBS) and Deutsche Bank (NYSE:DB) boosted sentiment in the financial sector. Also before the open, DuPont (NYSE:DD), the U.S. third largest chemical maker and Dow component handily beat analysts’ expectations on both the bottom and top line.

But a report from the Conference Board showed its consumer confidence gauge for July falling to 50.4, which is down from the upwardly revised 54.3 that had been recorded for the prior month and below the 61.0 that had been widely expected. Stocks saw some bounce after the news, but it quickly faded as weakness in retailers and other consumer discretionary stocks, along with cyclical industrial plays pushed the major benchmark stock indices lower.

Choppy trade, with market moving sideways in tight trading range developed in the afternoon with the broad market index finishing practically flat for the session, and the Dow Jones Industrial Average eking a gain, helped by a jump in DuPont shares.

Consumer discretionary, industrials, and materials were the weakest performers. Utilities, Staples, and telecom posted the best gains among the 10 S&P 500 key sectors.

Retailer stocks, pushed the consumer discretionary lower to post a 1.2% loss, as market participants sold the sector on the premise that lower consumer confidence will translate in lower consumer spending in the future. Home Depot (NYSE:HD), the largest home improvement retailer in the world, fell 1.41% to $28.58, posting the second biggest percentage decline in the Dow Jones Industrial Average.

Also affected by the lower consumer confidence numbers, and concern that spending will falter, American Express (NYSE:AXP), the credit card issuer, was the worst Dow component, as shares slid 1.94% to $44.55.

Industrial stocks fell 0.8% as investors moved away from cyclical and recovery plays on concern the consumer confidence will derail the pace of the economic recovery, with Caterpillar (NYSE:CAT), the largest maker of earthmoving equipment in the world, posting the fourth largest percentage decline in the blue chip index. Caterpillar shares fell 1.16% to $69.18.

Energy stocks fell 0.4% for the day; with crude oil prices fell 1.8% to $77.50 per barrel, as the consumer confidence index weighed on the market on concern fuel demand might falter. BP (NYSE:BP), the embattled energy giant, reported a steep second quarter loss, as the company took a charge related to the oil spill in the Gulf. The energy producer also announced plans to sell up to 30 billion in assets during the next 18 months and confirmed that CEO Tony Hayward will step down in October and be replaced by Robert Dudley, the American citizen that was put in charge of the oil spill containment and clean up efforts.

Meanwhile, despite increased concern on the future of the economic recovery, Treasuries were also weak, as demand for safe haven never materialized. Results from a $38 billion auction of 2-year failed to spark a demand, as the bid-to-cover, and demand were down from the prior auction. The yield on the benchmark 10-year note climbed to 3.04% from 2.99%.

Mid week, stocks struggled since the early going, as the Commerce Department reported an unexpected decline in the durable goods orders, affected by a drop in the volatile aircraft orders. Despite most of the companies reported positive results, it failed to spark a bid to, as investors focused on disappointing results from Boeing (NYSE:BA).

Boeing (NYSE:BA), the 2^nd largest commercial aircraft maker in the world, posted a profit of $1.06 per share, $0.05 better than consensus; revenues fell 9.2% year over year to $15.57 billion versus the $16.13 billion that was widely expected. The company also failed to raise its guidance, pushing its shares lower.

The major benchmark indices succumbed to a broad selling effort in afternoon trading, as the market extended its losses after the release of the Fed’s beige book business survey, showed that economic activity has slowed in some areas.

Healthcare stocks fell 1.4% for the session, making it the worst performing sector, as weakness in managed care providers, despite a better than expected report from Aetna (NYSE:AET), weighed on the sector.

Pfizer (NYSE:PFE), the largest pharmaceutical company in the world, fell 1.77% to $15.00, posting the second biggest percentage decline in the blue chip index.

Financials shares were also among the weakest sectors, as Moody's lowered its outlook on Bank of America (NYSE:BAC) to Negative from Stable, citing lower government support for financial institutions with new regulations. The largest U.S. lender was the fifth worst Dow component, as shares fell 1.41% to $13.99.

Treasuries were flat for most of the session, but a bid surfaced in the afternoon to take the yield on the benchmark 10-year Note back below 3.0%. The move came as stocks encountered increased selling and market participants digested results from an auction of 5-year Notes.

Crude oil prices fell 0.7% loss to $76.99 per barrel after they had been as low as $75.90 per barrel amid news that oil inventories increased by 7.31 million barrels, versus a draw of 1.73 million barrels that had been widely expected.

Home Depot (NYSE:HD), the largest home improvement retailer, fell 1.75% to $28.08, posting the third biggest percentage decline in the blue chip index, continuing yesterday’s slide after consumer confidence unexpectedly fell to a 5-month low.

On Thursday, the market started to the upside early on, as earnings and the euro moving to a two-month high provided an early momentum. European markets moved to the upside, as the euro zone economic confidence was stronger than expected, however the euro retreated some and the major European markets moved to negative territory to close their session.

Initial jobless claims for the week ended July 24th came in at 457,000, which is below the expected total of 464,000. Continuing claims hit 4.57 million, which is up from the 4.48 million continuing claims that had been registered for the previous week.

But stocks fell from an opening gain to a loss of more than 1% before they staged a comeback. However, resistance at the neutral line kept the move from extending into positive territory, so stocks settled with modest losses.

There wasn’t any particular catalyst that triggered the slide, but it gained momentum as sellers started to turn against technology stocks. Tech stocks settled with a 0.9% loss as participants reacted negatively to the latest earnings and forecasts from companies like Nvidia (NASDAQ:NVDA).

Intel (NASDAQ:INTC), the largest chipmaker in the world, was among the Dow worst components, as shares fell 1.41% to $21.03. Market participants sold Intel after the world leader in visual computing technologies disappointed and raised concern about growth rates in the sector.

Hewlett Packard (NYSE:HPQ), the largest PC maker, also fell with the sector. Shares of Hewlett-Packard dropped 1.53% to $40.41, posting the third biggest percentage decline in the Dow Jones Industrial Average.

Shares of consumer staples were among the worst performers, as they posted a 1.1% loss as a group in response to disappointing reports in the sector. Colgate-Palmolive (NYSE:CL) and Kellogg (NYSE:K) disappointed investors with their corporate results. Kraft (NYSE:KFT), the maker of Velveeta cheese and Oreo cookies, posted the biggest percentage decline in the blue chip index, as shares slid 2.05% to $29.11.

Procter & Gamble (NYSE:PG), the global consumer products company, also fell as investors hit the sector on concern earnings multiples might be too high, as proved by the disappointing reports in the sector. P&G was the second worst Dow component, as shares dropped 1.64% to $61.67.

At the end of the trading week, stocks finished flat for the session, after a report that showed better than expected consumer confidence helped the market stage a bounce from losses stem from a weaker than expected GDP report by the Commerce Department. Economic uncertainty helped pushed Treasury yields to record lows.

Market participants mostly shrugged off upside earnings surprises by Dow components, Chevron (NYSE:CVX), the U.S. second largest producer, and Merck (NYSE:MRK), the pharmaceutical company maker of Zocor, as they focused on economic data.

The economic data raised concern about economic growth and the prospects of further weakness, as unemployment will likely cut into future growth rates. Stocks lost close to a 1% in the early going, but a better-than-expected Chicago PMI figure, which came in at 62.3, and the final July Consumer Sentiment Survey, which was stronger-than-expected at 67.8 helped the market staged a come back.

However stocks met resistance at the neutral line and finished practically flat for the session, with the benchmark indices finishing mixed for the week and the broad market index posting its best monthly gain since last year.

Consumer discretionary, materials, and healthcare were the best performing sectors. Stocks in consumer discretionary gained 0.7% as a group, after personal consumption in the second quarter increased. Home Depot (NYSE:HD), the largest home improvement retailer, helping lead the sector and posting the biggest percentage gain in the Dow Jones Industrial Average, as shares jumped 1.64% to $28.51.

In currency news, the euro the euro pulled back from the two-month high, as it finished the session 0.3% lower, but still booked a 6.5% gain for July, making it the first monthly advance in eight months. Meanwhile, the Japanese yen climbed 0.4% to hit a fresh eight-month high.

Material stocks climbed in the session, as they posted 0.5% gain for the session. Alcoa (NYSE:AA), the aluminum producer, was the third best Dow component as shares gained 1.6% to $11.17.

Despite Natural gas jumping 2% in the session, and crude oil prices climbing 0.9%, above the $79 per barrel level, energy stocks lost 0.3%.

Shares of Verizon (NYSE:VZ), the owner and operator of the largest U.S. wireless network, gained 0.62% to $29.06, posting the fourth biggest percentage gain in the blue chip index, reports that a new tablet computer from Research In Motion (NASDAQ:RIMM) will hit the market in November, signaled investors that data plans revenues will likely continue to climb.

Meanwhile, Treasuries climbed, pushing two-year note yields to the lowest ever, as GDP slowed spurring demand for the world’s safest securities. The yield on the benchmark 10-year note fell to 2.91%.