The Dow Snaps Losing Streak
Published on Friday, 13 July 2012 18:56 Written by Christopher Lynn
New York, July 13th (TradersHuddle.com) – Stocks rallied, posting the biggest gains in the month, as the Dow surged more than 200 points, snapping a 6-session losing streak. The rally was propelled by sharp gains in the financial sector following JPMorgan’s earnings news and data showing that the Chinese economy slowdown in the second quarter to its slowest pace since 2009, but as economists had predicted.
The Dow Jones Industrial Average rallied 203.82 points, or 1.62%. The S&P 500 index jumped 22.02 points or 1.65%, while the NASDAQ gained 42.28 points, or 1.48%.
For the week, the Dow added 0.04%, while the S&P 500 fell 0.40% and the NASDAQ lost 0.91%.
The market started with modest gains after participants digested the earnings news from banking giants JPMorgan (NYSE: JPM) and Wells Fargo (NYSE: WFC), and after China’s second quarter GDP reading of 7.6%, which was its slowest pace since 2009, met expectations, easing worries over a hard landing on the world’s second largest economy. Moody’s downgraded Italy’s credit rating, while the PPI in the U.S. was hotter than expected, but investors shook off the news.
Stocks quickly added to gains as the market had struggled since June’s employment report and was in territory considered by many to be oversold. The news prompted the rebound, in which financials led the way, followed by industrials, materials, and energy.
JPMorgan surged nearly 6%, as the stock reacted to its earnings news amid a technical rebound for the stock. The lender logged the best gain in the Dow Jones Industrial Average after the results from the second quarter ex-CIO trading loss, were healthier than expected. The company gave additional details on the highly publicized 'London Whale' trade. The loss from the trade is approximately $5.8 billion year-to-date, and statements that the trade has been largely unwound soothed some fears.
Wells Fargo (NYSE: WFC) joined the earnings parade, with the bank posting higher earnings, which were slightly better than expected on revenues that were largely inline with consensus. Wells Fargo climbed 3.2% to $33.91. Rival Bank of America (NYSE: BAC) was one of the top performers in the Dow, rallying 4.55% to $7.82, closing above its 50day moving average. The Charlotte, NC based bank is scheduled to report its quarterly results next Wednesday.
Industrials and materials benefited from the GDP news out of China. Caterpillar (NYSE: CAT) jumped 3% on the day, helping the industrial sector, while rival Joy Global (NYSE: JOY) rallied 3.4%. Caterpillar gained despite Credit Suisse cutting its target price on the stock and earnings estimates on the world’s largest maker of earthmoving equipment. Meanwhile, Freeport McMoRan (NYSE: FCX) gained 2.7%, as concerns over future copper demand eased, with the world’s largest user of copper posting an inline GDP reading.
In the tech sector, hardware makers struggled after Lexmark (NYSE: LXK) plunged to the bottom of the S&P 500, as shares tumbled more than 16%. The printer maker warned that its second-quarter results would be well below consensus, due to weakness in Europe and unfavorable impact from exchange rates. The news weighed on the performance of Hewlett Packard (NYSE: HPQ), as shares lost 1.9% to $18.98, posting the only decline in the blue chip index.
The warning followed warnings from Advanced Micro Devices (NYSE: AMD) and Applied Materials (NASDAQ: AMAT) earlier in the week. Both stocks were higher for the session. For the week, AMD plunged 14.6%, while Applied Materials fell 5%.
Apple (NASDAQ: AAPL) climbed 1% to $604.97, underperforming for the session and unable to log a gain for the week. Apple lost 0.15% in the week despite UBS initiated coverage with a Buy and a target price of $740 and Piper Jaffray analyst Gene Munster made bullish comment on the iPad maker. According to him, the tech giant could sell up to 6 million mini iPads, if the new device gets unveiled during the iPhone 5 event sometime in September.
Facebook (NASDAQ: FB) slid 0.29% during the day, slumping 4.3% during the week. During the week, the company announced that it would launch a jobs posting site, while Fast Money trader Karen Finerman recommended to go long Google and short Facebook due to valuation discrepancy; and Warren Buffett said Facebook Inc. (FB) (FB) investors frustrated with the stock’s decline since its public offering are paying the price for betting on a short-term rally.
Elsewhere, Green Mountain Coffee (NASDAQ: GMCR) tumbled more than 7% on the session Stifel Nicolaus cut its earnings estimate on the coffee company, citing increasing competition.
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