Stocks Gained after Bernanke’s Gloom

Published on Tuesday, 17 July 2012 18:52 Written by Christopher Lynn

New York, July 17^th (TradersHuddle.com) – Stocks gained following a choppy session, in which Ben Bernanke’s gloomy economic outlook provided support, as participants expect the Fed will need to take action to reactivate the sluggish economy.

The Dow Jones Industrial Average gained 78.33 points or 0.62%. The S&P 500 index jumped 10.03 points, or 0.74%, while the NASDAQ climbed 13.10 points, or 0.45%.

The market started with gains after overseas markets climbed overnight ahead of Ben Bernanke’s testimony before the Senate Banking Committee, as speculation over hints of further stimulus was supportive for stocks. The consumer price index was flat in June, while German business sentiment was worse than expected. In China, the government suggested economic growth could improve in the second half, while it boosted railway investments.

Commitment to either side was limited, as participants waited for the Fed Chairman’s testimony. Stocks initially tumbled after Bernanke’s speech, which failed to give clear signals that the Fed was planning further easing measures. The semiannual report on the state of the U.S. economy however highlighted that uncertainty is increasing due to the debt crisis in Europe and the looming fiscal cliff in the U.S., with tax rates scheduled to move higher and mandatory government spending cuts starting in January.

Ultimately, the gloom picture presented by Bernanke helped turn the market around, as participants saw the diminished economic outlook as an implied fact that the Fed will need to act to reactivate the sluggish recovery.

Earnings season geared up earlier today, with Coca-Cola (NYSE: KO), Goldman Sachs (NYSE: GS), Mattel (NYSE: MAT), and Johnson & Johnson (NYSE: JNJ) reporting quarterly results before the opening bell. Goldman climbed 0.31% to $97.98 after trading as high as $100.49 following results that beat on both the top and bottom line and on reports that the Investment Bank was planning the launch a private bank catering to wealthy clients.

Coca-Cola jumped 1.58% to $77.69, helping the consumer staples sector and the Dow to log gains after its results were slightly better than consensus, meanwhile, J&J climbed 0.80% to $69 after the company beat earnings expectations by a penny, but missed revenue consensus and issued downside earnings guidance for the full year.

Mattel (NYSE: MAT), the maker of Barbie Dolls and Hot Wheels toys, surged to the top of the S&P 500, as shares rallied more than 9% after its quarterly results topped expectations. The company said that for the second quarter it earned $0.28 per share, $0.07 better than consensus, on revenues that fell 0.3% from a year ago to $1.16 billion

All of the S&P 500 sectors ended in positive ground. Energy, healthcare, materials, and consumer discretionary posted the biggest gains. In the energy sector, Nabors (NYSE: NBR) rallied more than 6% after announcing the adoption of shareholder rights plan, and as the company provided lower guidance for the second quarter.

In tech land, Apple (NASDAQ: AAPL) ended flat for the session amid increased speculation over the launch date of the new iPhone 5, with increasing signals that the device is already in production in China.

Sprint Nextel (NYSE: S) rallied to the top of the sector, with shares jumping 5.5% after Credit Suisse raised its target price to $6 from $4, while Yahoo! (NASDAQ: YHOO) lost 0.29% ahead of its quarterly results on news that it hired long-time Google executive Marissa Mayer as its CEO.

Broadcom (NASDAQ: BRCM) tumbled 3.9% on news that Samsung bought out the development operations of CSR plc in handset connectivity and location. In 2011, Samsung represented 10% of Broadcom’s revenue.

Other movers in the session were Walt Disney (NYSE: DIS), which topped the gainers in the Dow Jones Industrial Average, rallying 3%, after it was upgraded to a Buy from Neutral at Bank of America Merrill, and Home Depot (NYSE: HD), which fell to the bottom of the blue chip index. Home Depot was downgraded along rival Lowe’s to a Neutral at Janney Capital Markets.

State Street (NYSE: STT) plunged to the bottom of the S&P 500 after beating earnings expectations by $0.03 per share on revenues that were inline with consensus. The provider of investment management and securities administration also announced that it would acquire Goldman Sachs Administration Services for $550 million in cash.

Mosaic (NYSE: MOS), the concentrated phosphates and potash producer, rallied more than 5% to $58.21 after the company beat earnings expectation by $0.09 per share on revenues that were above consensus.