Stocks Gained for Third-Straight Day

Published on Thursday, 19 July 2012 17:48 Written by Christopher Lynn

New York, July 19^th (TradersHuddle.com) – Stocks gained, boosted by positive earnings reports. The S&P 500 hit its best level since May after participants were able to focus on corporate profits and shake-off another batch of disappointing economic reports. The weak data reinforced the speculation that the Fed and other central banks would have to step up stimulus measures to reignite the sluggish global economy.

The Dow Jones Industrial Average gained 34.66 points, or 0.27%. The S&P 500 index climbed 3.73 points, or 0.27%, while the NASDAQ jumped 23.30 points, or 0.79%.

The market started with a moderate bid after a string of strong corporate results, which helped boost investors’ confidence and eased fears that the sluggish global economy might impact profits. Overseas markets were also positive for the day, boosted by earnings and by speculation that China’s central bank will once again cut reserve ratio requirements. Participants were able to shake-off negative economic data, as jobless claims data disappointed, jumping more than expected to 386,000 from 352,000.

Additional data showed June existing home sales of 4.37 million, which was well below expectations; and July Philadelphia Fed index had a worse than expected reading of -12.9, while June leading economic indicators dropped more than expected to -0.3%.

The weak economic data, renewed speculation by some participants that the Fed will need to step up soon, providing further stimulus to inject a spark into the sluggish economy. The underlying bid through out the day, helped stocks logged their third consecutive gain, with the S&P 500 hitting its best level in about two months and the tech heavy NASDAQ outperforming the other benchmark indices.

Among the S&P 500 sectors, materials, technology, and consumer discretionary posted the biggest advances, while consumer staples and financials fell. In the materials space, PPG Industries (NYSE: PPG) rallied more than 7% to $111.96, topping the sector. The stock hit a new 52-week high of $112.18 after PPG announced that it plans to merge its chemical business with Georgia Gulf Corp. (NYSE: GGC) in a $2.1 billion cash and stock deal. PPG shareholders will receive 50.5% of the shares of the new merged company. Shares of Georgia Gulf surged 13.2% on the news.

Freeport McMoRan (NYSE: FCX), the world’s largest publicly traded copper producer, rallied 4.2% to $34.42, making it one of the top performers in the sector. Freeport reported a 50% drop in quarterly profit, hurt by falling copper prices; however the company topped Wall Street’s expectations.

In the tech space, International Business Machines (NYSE: IBM) carried a big portion of the Dow’s gain, as it led the blue chips with a rally of 3.8%. The IT consulting giant reported earnings that topped expectations on revenue that missed consensus. Also, IBM issued upside earnings guidance for the full year.

Meanwhile, eBay (NASDAQ: EBAY) was the top performer in the technology sector. The stock surged 8.6% to $43.95 after positive reaction to its earnings report, which showed that the Paypal momentum continued. The company’s report topped expectations, while it provided mixed guidance for the third quarter, with earnings above consensus and revenues slightly below it.

Qualcomm (NASDAQ: QCOM) and F5 Networks (NASDAQ: FFIV) also showed strength in the session, with the stocks rallying more than 4%. Qualcomm reported earnings that were slightly below consensus and cut its guidance for the current quarter, but said that it expects a strong end to the year, while F5 reported inline quarterly results and provided downside guidance for fiscal first quarter.

Also Apple (NASDAQ: AAPL) participated in the upside move, as shares received a boost from Wedbush, reiterating its Outperform rating and target price of $800 per share ahead of its earnings report next week. Verizon (NYSE: VZ) reported that it activated 2.7 million iPhones in the second quarter, up from 2.3 million a year ago. The owner of the U.S. largest wireless carrier reported inline quarterly results, with shares slumping nearly 3%, near the bottom of the Dow Jones Industrial Average, as participants were disappointed with the company’s wire line business, which offset a better than expected quarter in the wireless side. S&P Capital IQ cut it’s rating on Verizon to Strong Sell.

On the flip side, financials were once again the worst performer. Morgan Stanley (NYSE: MS) slumped more than 5% after the company missed earnings expectations, as results were hurt by a sharp decline in its trading-related businesses.

Bank of America (NYSE: BAC) received another bout of sharp selling in the session, with the stock tumbling to 3.6% to $7.26, posting the biggest decline in the blue chip index. BofA posted better than expected results in the prior session, but still participants remain concern over the economic weakness and the lender’s earnings potential amid weak economic growth, and adverse regulatory and trading environment.

Elsewhere, Walgreen (NYSE: WAG) surged to the top of the S&P 500, as shares rallied 11.8% to $34.62 after the company announced a multi-year pharmacy network agreement with Express Scripts (NASDAQ: ESRX). The full service pharmacy benefit management and specialty managed Care Company gained 1.85% on the news.

Meanwhile, Textron (NYSE: TXT) rallied 11.5% to $26.50 after second-quarter earnings came in well above expectations, boosted by double-digit revenue growth at its Bell helicopters and Cessna units; but Johnson Controls (NYSE: JCI) plunged nearly 8% to the bottom of the broad market index, as the company missed earnings expectations by $0.02 per share due to higher costs and weak demand for replacement batteries. Also, the company cut its outlook for the current quarter.