Stocks Gained after Greek Austerity Deal

Published on Thursday, 09 February 2012 19:23 Written by Christopher Lynn

New York, February 9^th (TradersHuddle.com) – Stocks gained for the third straight session following the better than expected weekly jobless claims data and news that Greece had reached a deal on new austerity measures that will allow the country access to a fresh round of bailout funds. The advanced was measured as enthusiasm over the Greek deal waned and as participants remained worried over Chinese inflation and the persistent risks in the euro zone.

The Dow Jones Industrial Average gained 6.51 points, or 0.05%. The S&P 500 index added 1.99 points, or 0.15%, while the NASDAQ gained 11.37 points, or 0.39%.

The market started in positive territory after futures received a bid, following news headlines that Greek politicians have reached a deal on new austerity measures and after the Bank of England boosted quantitative easing and the ECB left rates unchanged. Participants were also spur to bid, as risk appetite increased after better than expected weekly jobless claims data. Futures had been little changed earlier, as Chinese inflation was hotter than expected

In Europe, equity markets closed higher but off their highs of the session as optimism and enthusiasm over the Greek austerity measures deal waned. Participants worried over the comments from ECB President Mario Draghi suggesting that the risks remain elevated. The ECB left rates unchanged and announced more measures that will relax the collateral rules for banks to access loans from the long-term refinancing operation.

Stocks were able to hold to gains, despite some concern over Chinese inflation and as new measures to relax bank eligibility to access 3-year funding in the ECB failed to inspire a much higher move. In the S&P 500, technology, consumer staples, and industrials posted the biggest gains, while healthcare, financials, and utilities fell.

The Technology SPDR ETF (NYSE: XLK) gained 0.97% to $28.24 after posting a new 52-week high of $28.27. The sector received a boost from better than expected earnings from Akamai (NASDAQ: AKAM) and Teradata (NYSE: TDC) and as Apple continued to function in all cylinders hitting new record highs on speculation over new products, with analysts bumping estimates and price targets.

Apple (NASDAQ: AAPL) jumped 3.46% to $493.17 after posting a new all-time high of $496.75 on speculation the company will launch its iPad 3 in early March. Mizuho Initiated coverage on the stock with a Buy and a target price of $635, while Needham raised its target price to $620 from $520, citing the push the company is doing in the business market with its iPad and the halo effect it could have on Mac sales. Additionally, Canaccord Genuity bumped its target price to $665 from $650 on strong iPhone sales momentum.

Both Akamai and Terdata posted solid earnings reports, with Akamai saying that net income climbed 14% year over year and getting upgraded by Credit Agricole. And Teradata in addition to its earnings beat issued upside revenue guidance for fiscal 2012, while announcing a new $300 million share repurchase program.

Teradata also received a boost from M&A in the space, after Oracle (NASDAQ: ORCL) made a $1.9 billion offer for Taleo Corp (NASDAQ: TLEO).

Consumer staples were also higher, with Lorillard (NYSE: LO) jumping more than 9% to a new 52-week high of $127.68 after the company beat earnings expectations on revenues that were above consensus. Lorillard also raised its dividend by 19%. Philip Morris (NYSE: PM) also lifted the space, with shares climbing 2.8% following solid quarterly results and upside earnings guidance for fiscal 2012.

Walgreen (NYSE: WAG) gained more than 3% after it was upgraded to Outperform from Neutral at Macquarie. The upside moves from these components, help the Consumer Staples Sector SPDR ETF (NYSE: XLP) to trade near its multiyear high of $32.77.

But not all was positive in the sector, as PepsiCo (NYSE: PEP) tumbled 3.7% in the session after forecasting a drop in 2012 earnings. The company said that the year would be a transitional one in which it will increase advertising and marketing costs while it undergoes a restructuring effort that will result in a cut of 8,700 jobs.

Financials also garnered attention following news of the largest government settlement with an industry since a deal with the tobacco industry in 1998.  The agreement covers five banks, which include major players such as Bank of America, J.P. Morgan Chase and Wells Fargo. Together, the five banks handled mortgage payments on 55% of outstanding home loans.

The settlement involves billions, payable to borrowers, states and the federal government. The deal allots payments to borrowers who went through foreclosure between September 2008 and December 2011. The settlement also calls for the banks to create loans and aid for borrowers who previously did not have access to funding.

Bank of America (NYSE: BAC) gained despite the news of the $26 billion settlement, in which the Charlotte, NC based bank will bear about $11.8 billion. The stock continued to defy gravity and kept this year rally going. BofA gained 0.62% ot $8.18, receiving additional momentum after the stock closed in the prior session above its 200day moving average for the first time since April last year.

Rival JPMorgan (NYSE: JPM) fell 1.15% to $37.86, while Wells Fargo (NYSE: WFC) dropped 0.16% to $30.58. And Citigroup (NYSE: C) fell more than 1.5% on news that it will have to pay $2.2 billion, with the bank having to take $209 million in retroactive charges for the prior quarter.