Stocks Rallied On ECB Hopes; Dow Topped 13,000
Published on Friday, 27 July 2012 17:49 Written by Christopher Lynn
New York, July 27th (TradersHuddle.com) – Stocks rallied to close a volatile week with sharp gains, with the Dow closing above 13,000 for the first time since May. Market sentiment turned bullish amid speculation that both the Fed and the ECB will provide additional stimulus measures next week, particularly as the U.S. economy growth slowdown to a sluggish 1.5% pace in the second quarter. Reports that the ECB President Mario Draghi was having discussions with the Bundesbank President caused a spike in the market, as it added to the optimism following yesterday’s pledge from Mario Draghi to do whatever it takes to save the euro.
The Dow Jones Industrial Average jumped 187.73 points, or 1.46%. The S&P 500 index rallied 25.95 points or 1.91%, while the NASDAQ surged 64.84 points, or 2.24%.
For the week, the Dow rallied 1.97%, while the S&P 500 jumped 1.71% and the NASDAQ gained 1.12%.
The market started to the upside amid mixed earnings reports and ongoing speculation over a possible ECB intervention. GDP data showed the U.S. economy expanded at its slowest pace since the third quarter last year, increasing concerns that the world’s largest economy was stalling, but adding to the optimism of additional Fed action.
The market continued to the upside after consumer sentiment hit its lowest level of the year, but still came in slightly better than expected in July, according to the Thomson Reuters/University of Michigan's final reading. Midday, volume picked up, as stocks spiked, with the Dow practically doubling the gains following the reports of possible discussions between the ECB and the Bundesbank, ahead of the ECB policy decision scheduled for next week.
Yesterday’s pledge from Mario Draghi to save the euro, received additional support from German and French Leaders, whom pledged they would help save the euro zone single currency. The rally was broad based with all of the S&P 500 sectors ending in positive territory.
Healthcare, industrials, and technology jumped more than 2%, while consumer discretionary followed closed behind. In the Healthcare sector, Coventry Health Care (NYSE: CVH) rallied nearly 11% in the session, posting the biggest gain in the sector after the company beat earnings expectations by a penny on revenues that were inline with consensus. Coventry reaffirmed its full year EPS guidance, while raising its revenue guidance slightly to inline with consensus.
Merck (NYSE: MRK) also boosted the sector, with shares rallying 4% and posting a new 52-week high at $45.17 after the company’s quarterly results topped expectations. The pharmaceutical company said it earned $1.05 per share excluding non-recurring items, $0.03 better than consensus, on revenues that climbed 1.3% from a year ago to $12.31 billion versus consensus of $12.16 billion. Additionally, the company reaffirmed its guidance for the full year 2012.
Energy saw also strong upside on the back of a move in crude oil, as risk-on was back in vogue and the euro moved higher on the ECB pledge. But it was coal stocks that took the top spots on the sector after a better than expected earnings report from Arch Coal (NYSE: ACI). The space’s early momentum accelerated amid a short-squeeze. Arch Coal surged nearly 30% after it posted a narrower-than-expected loss for the second quarter, and forecast improving U.S. demand for thermal coal.
The news spurred a surge in Alpha Natural Resources (NYSE: ANR), with shares soaring more than 20%, posting the biggest gain in the S&P 500 index. Other coal stocks, like Peabody Energy (NYSE: BTU) and CONSOL Energy (NYSE: CNX) also gained. CONSOL jumped 3.3%, despite the stock was downgraded to a Hold from Buy at BB&T.
Also in the sector, Chevron (NYSE: CVX), the U.S. second largest energy producer, gained 0.9% to $109.26 after it topped earnings expectations but revenue was shy of consensus.
Technology helped the tech heavy NASDAQ to outperform the other benchmark indices in the session. Amid the best performers were VeriSign (NASDAQ: VRSN) and Sprint Nextel (NYSE: S). VeriSign rallied 6.5% to $45.42 after it posted an inline earnings report, while Sprint jumped 6.4% to $4.31, adding to yesterday’s surge of 20% after it was upgraded to a Buy at UBS. Shares of Sprint surged in the prior session after the company missed earnings expectations by $0.05 per share, but beat on the top line.
Meanwhile, Apple (NASDAQ: AAPL) moved along with the broad market and gained 1.79% to $585.16, closing above its 50day moving average at the $581-$582 area. The stock received a boost from news that the tech giant had acquired finger print sensor maker AuthenTec Inc for $8.00 per share. The deal valued at about $356 million spurred renewed speculation over Apple entering the mobile payments arena. For the week, the stock lost 1.65% after reporting sizeable earnings miss and issuing poor guidance for the current quarter on Tuesday.
In the consumer space it was a mixed bag, as in one hand you had the online travel companies rallying and on the other you had a plunge in Starbucks’ shares following disappointing results and outlook.
Expedia (NASDAQ: EXPE) surged 20% to $54.90, posting the second biggest percentage gain in the broad market index and logging new all-time highs after the online reservation site posted strong quarterly results due to solid worldwide hotel revenue. The company handily topped expectations, as it earned $0.76 per share, $0.05 better than consensus, on revenues that climbed 13.8% from a year ago period to $1.04 billion. Rival priceline.com (NASDAQ: PCLN) saw a strong bid, with shares rallying 8.7% to $683.99.
Amazon.com (NASDAQ: AMZN) rallied 7.9% despite reporting quarterly results meet expectations on the earnings side, but slightly missed on the top line. The results showed strong revenue growth for its services business, which includes its cloud computing business Amazon Web Services surged 57% to $2.04 billion.
But, Starbucks (NASDAQ: SBUX) skidded big time, as momentum traders exited the name. Shares tumbled more than9% to $47.47 after disappointing fiscal third quarter quarterly results and fourth quarter and 2013 guidance, due to global economic conditions.
Elsewhere, Facebook (NASDAQ: FB), the social media Company, tumbled 11.7% to $23.70 after posting an all-time low of $22.28. The stock was hit hard amid concerns over future growth, a future expiration of the IPO lockup period, and the lack of guidance, coupled with the little insight offered into its progress in making money through mobile devices. The social media company reported its first quarterly results as a public company, saying that it earned $0.12 per share, excluding non-recurring compensation charges, $0.01 better than consensus, on revenues that jumped 32.3% from a year ago to $1.18 billion versus consensus of $1.15 billion.
- AT&T And America Movil To Provide Deeper National Reach For Advanced Enterprise Services Across Latin America
- AT&T 4G LTE Available In Willimantic
- AT&T 4G LTE Available In Torrington
- AT&T And The University Of Kansas Team Up To Enhance Wireless Coverage On Lawrence Campus
- AT&T 4G LTE Available In Fargo
- AT&T 4G LTE Available In Amarillo
- Benefitfocus Announces Pricing of Initial Public Offering
- Trends of China Gear Industry 2013 Analysis & Reviewed in New Research Report at RnRMarketResearch.com
- Product Launch Formula 4.0 Bonuses Total $5000 at BrianHanson.com
- Datex Presents Motorola Solutions Webinar “Is It ‘Smart’ to Use Smartphones for the Enterprise?”
Related Partner Headlines
Recent Trading Ideas
Latest Partner Headlines