Stocks Rallied on Earnings

Published on Tuesday, 16 October 2012 18:00 Written by Christopher Lynn

New York, October 16^th (TradersHuddle.com) – Stocks jumped and closed near session highs, with the Dow gaining more than 100 points, as participants cheered a batch of better than expected earnings. The market also gained after reports our of Europe signaled that Spain was getting closer to request a credit line from the ECB, which would free the central bank to start its bond-buying program.  

The Dow Jones Industrial Average gained 127.55 points, or 0.95%. The S&P 500 index jumped 14.79 points, or 1.03%, while the NASDAQ rallied 36.99 points, or 1.21%.

The market started with gains, showing follow thru strength from yesterday’s rebound. Better than expected earnings reports along with macro headlines coming from Europe spurred risk appetite.

 On economic news, headline CPI was 0.6% in September, above consensus of 0.5%, while core CPI was inline with expectations at 0.1%. Industrial output jumped 0.4% in September, rebounding from the drop in the prior month, while homebuilder sentiment gained for the sixth straight month, even as momentum showed some easing.

All of the S&P 500 sectors closed in positive territory, with material stocks leading the charge higher, as the Dollar slumped versus the euro and risk assets were sought after. Energy, technology, healthcare, and industrials all closed with 1% gains. In the material sector, Cliffs Natural Resources (NYSE: CLF) jumped to the top of the sector, as shares rallied more than 7% to $44.07, while Newmont Mining (NYSE: NEM) gained more than 2% amid increased bids for the bullion and after Barclays initiated coverage with an Outperform rating.

Energy stocks were also on rally mode. The biggest mover in the space was Murphy Oil (NYSE: MUR), as shares surged more than 8.6%, logging the second biggest percentage gain in the broad market index. The company announced a plan to separate its U.S. downstream business into an independent company, while also announcing authorization of a $2.50 per share special dividend and a $1 billion share buyback program. Other notable movers were Denbury Resources (NYSE: DNR) and Halliburton (NYSE: HAL). Denbury jumped 3.4% after it was upgraded to a Positive from Neutral at Susquehanna and Halliburton gained more than 2% after Credit Suisse initiated coverage on the stock with an Outperform rating.

Financials were on focus after Citigroup’s CEO Vikram Pandit stepped down, surprising Wall Street and spurring speculation over the unexpected board decision, particulary after yesterday’s solid earnings report. Citigroup (NYSE: C) gained 1.6% to $37.25, with the lender announcing Michael Corbat, who currently serves as the head of Citi's Europe, Middle East and Africa operation, will succeed Pandit.

Other financial names were weaker, with Goldman Sachs (NYSE: GS) slumping 1% on the session despite reporting quarterly results that topped expectations and boosting its quarterly dividend.  Some regional banks fell after PNC Financial (NYSE: PNC) tumbled to the bottom of the S&P 500 index, as shares lost 4% after beating earnings expectations by $0.04 per share on revenues that topped consensus. The lender said that it expects net interest income to remain stable in the fourth quarter.

In tech land, Apple (NASDAQ: AAPL) jumped more than 2% to $649.79 on news the company send press invitations to an event scheduled for October 23^rd, with participants expecting the tech giant will unveil the iPad mini just in time for the holidays and to be able to consolidate its dominance in the tablet market. Intel (NASDAQ: INTC) jumped 2.9%, posting the largest gain in the Dow Jones Industrial Average and IBM (NYSE: IBM) gained 1% ahead of big tech kicking off earnings season after the closing bell. In after hours, Intel was slumping more than 3% after results topped expectations, but provided lackluster guidance, while IBM was tumbling 3.6% after missing revenue consensus and reaffirming its 2012 EPS guidance.

Elsewhere, Johnson & Johnson (NYSE: JNJ) gained 1.4% to $69.55 after its quarterly results topped consensus. Coca-Cola (NYSE: KO) fell 0.6% to $37.90 after earnings match expectations on revenue that was slightly shy of consensus. Meanwhile, United Health (NYSE: UNH) reported its first quarterly results as a Dow component. The company reported earnings that were higher than prior guidance, while the health insurer also boosted its full-year profit outlook. Shares still fell 1%.