Stocks Gained For Third Consecutive Session

Published on Thursday, 19 January 2012 19:53 Written by Christopher Lynn

New York, January 19^th (TradersHuddle.com) – Stocks closed higher, extending the rally to a third consecutive session. A decent earnings report from Bank of America along with better than expected weekly jobless claims helped provide upside momentum, amid euro strength on the back of successful debt auctions in the euro zone.

The Dow Jones Industrial Average gained 45.03 points, or 0.36%. The S&P 500 index climbed 6.46 points, or 0.49%, while the NASDAQ jumped 18.62 points, or 0.67%.

The market started with gains, buoyed by solid earnings reports, particularly in the financial space and after bond auctions in the euro zone also showed solid demand, lifting optimism in the region and easing the debt crisis jitters. A drop on initial claims for unemployment last week to a 4-year low, while consumer prices were flat for the second straight month also boosted futures, amid a decline of 4.1% in December’s housing starts.

In Europe, equity markets closed with solid gains, buoyed by financials following the decent earnings reports from Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) and after Spanish and French bond auctions drew strong demand. Optimism over an interim solution for the EU debt crisis grew amid signs of demand for refinancing needs and on news that the IMF intends to increase its lending programs by $600 billion.

The financial sector was in focus and showed one of the strongest bids, as Morgan Stanley rallied 5.36% to $18.28, posting the biggest gain in the sector after it posted a loss of $0.15 per share, including the MBIA settlement and beating consensus of a loss of $0.62 per share. Revenues were also better than expected; with the company saying fourth quarter revenue hit $5.71 billion.

Meanwhile, Bank of America jumped 2.35% to $6.96, with the stock posting the biggest gain in the Dow Jones Industrial Average but unable to close above its calculated resistance at $7.02. Intraday the BofA hit a high of 7.29 following its solid earnings report in which the company beat revenues expectations.

Industrials were actually the best performing sector, as participants embraced the sector amid European optimism. Caterpillar (NYSE: CAT) posted one of the biggest gains in the blue chip index, as Robert W. Baird bumped its target price to $135 from $114. Also lifting the sector Southwest Airlines (NYSE: LUV) rallied 3.1% to $9.3 after the company beat by a penny on revenues that jumped 31.9% year over year to $4.11 billion, which was inline with consensus.

Union Pacific (NYSE: UNP) also helped the sector, gaining 2.15% to $112.18, after the stock posted a new all-time high of $114.82. The railway company reported solid earnings, beating by $0.18 per share on revenues that were above consensus.

In the material space also Freeport McMoRan (NYSE: FCX) posted better than expected earnings, which prompted a breakout in the stock. Freeport slid 0.22% to $44.37 after trading as high as $44.97.

In the technology space, the biggest mover was F5 Networks (NASDAQ: FFIV), with the company posting a solid earnings report. F5 surged to the top of the S&P 500, with shares rallying 10.64% to $120, after it earned $1.03 per share, $0.02 better than consensus, on revenues that jumped 19.9% year over year to $322.4 million. F5 also issued current quarter upside guidance, with both earnings and revenues expected to be above consensus

Apple (NASDAQ: AAPL) fell 0.32% to $427.75 after the company topped a market cap of above $400 billion while it posted a new all-time high of $431.37. The company unveiled its new iBook 2 platform in New York, aiming to revolutionize the text books space. Apple agreed with some top publishers that it will sell most textbooks for $14.99 or less.

Weighing on the sector were shares of First Solar (NASDAQ: FSLR), which tumbled to the bottom of the S&P 500, following an announcement from the German government that it will increase the frequency of the solar subsidy cuts to a monthly basis. First Solar tumbled close to 10% in the day.

Elsewhere in the consumer discretionary space, homebuilder Toll Brothers (NYSE: TOL) fell 2.51% to $22.90 after UBS downgraded the stock to a Neutral and housing starts declined more than 4% in December. Despite UBS downgrading other select homebuilders and weak housing starts, the SPDR S&P Homebuilders (NYSE: XHB) climbed 0.26% to $19.17 after logging a new 52-week high of $19.22.

And Sears Holdings (NASDAQ: SHLD) rallied another 9.77% to $43.35 on continued chatter over the company going private after its Chairman Eddie Lampert bought shares, increasing its personal stake.