FOX Business: The Power to Prosper
Motivated by JPMorgan Chase’s big earnings beat, the bulls pushed Wall Street to another two-year high on Friday, giving the S&P 500 its first seven-week surge since before the Great Recession began.
The Dow Jones Industrial Average rose 55.48 points, or 0.47%, to 11787.38, the Standard & Poor's 500 gained 9.45 points, or 0.74%, to 1293.24 and the Nasdaq Composite advanced 20.01 points, or 0.73%, to 2755.30. The FOX 50 added 6.75 points, or 0.74%, to 924.77.
Wall Street once again proved to be resilient as traders focused on JPMorgan Chase's (NYSE:JPM) bullish kickoff to the financial sector's earnings season, but ignored a 1% drop for tech bellwether Intel (NASDAQ:INTC), China's latest moves to rein in inflation and an unexpected decline in U.S. consumer sentiment.
“It’s a testament to how much bullishness there is overall in the market right now. In spite of any negative economic data, the market refuses to really pull back," said Michael James, managing director of equity trading at Wedbush Securities
The latest buying binge ensured the S&P 500's seventh-straight week of gains, the longest such streak since May 2007, seven months before the start of the downturn that sent Wall street careening.
Most Dow stocks advanced, led by financial giants American Express (NYSE:AXP) and Bank of America (NYSE:BAC). The index's weakest links were Merck (NYSE:MRK) and Verizon (NYSE:VZ).
Powered by tech stocks such as Altera (NASDAQ:ALTR) and Broadcom (NASDAQ:BRCM), the Nasdaq Composite leaped nearly 1% and cruised to its best close since November 2007.
In a further sign of the upbeat mood on Wall Street, the VIX, or so-called “fear” gauge, slid 6% and fell below the 16 level for the first time since December. Of course, the index also slid to those levels in March, just before the S&P 500 slid 16% until bottoming in early July.
“Though a pullback would be completely expected today and into next week, earnings will likely moderate any momentum to the down side,” Peter Kenny, managing director at Knight Capital Group, wrote in a note. “I expect us to remain range bound with earnings supporting the market.”
Financial stocks provided the markets with a jolt, rallying 1.6% after JPMorgan impressed by beating the Street with a 47% jump in EPS to $1.12, easily exceeding estimates for $1.00. The Dow component also posted revenue growth of 5.9% to $26.1 billion, compared with calls for $24.44 billion.
The earnings beat inspired buying in shares of Citigroup (NYSE:C) and Goldman Sachs (NYSE:GS), each of which report results next week, as well as other big banks like Wells Fargo (NYSE:WFC) and US Bancorp (NYSE:USB).
On the other hand, Intel lost ground even after starting off tech earnings season with a 48% rise in fourth-quarter net income to 59 cents a share, topping the Street's view for 53 cents. While Intel struggled, other related stocks like Applied Materials (NASDAQ:AMAT) and Varian (NASDAQ:VSEA) saw a burst of buying.
Mixed Economic Signals
Wall Street managed to shrug off the Reuters/University of Michigan consumer sentiment index, which slipped in the beginning of January to 72.7, down from 74.5 in December. Economists had called for a rise to 75.4. Retail stocks like Macy's (NYSE:M) and Tiffany (NYSE:TIF) inched higher despite the report.
Also on the consumer front, the Commerce Department said retail sales increased 0.6% in December, slightly trailing estimates but still marking the sixth-straight monthly increase. For the year, retail sales soared 6.65%, the best performance since 1999.
Separately, the Labor Department said consumer prices rose 0.5% in December, slightly hotter than the 0.4% economists predicted and building on November's 0.1% rise. It was also the biggest rise since June 2009. However, when food and energy prices are stripped out, consumer prices inched up an in-line 0.1%.
The Federal Reserve said industrial production increased 0.8% -- the biggest gain in 5 months -- as U.S. industries boosted their output levels amid the stronger economy. Also, the Commerce Department said U.S. business inventories rose 0.2% in November, marking the 11th consecutive monthly rise and a further indication of strong holiday sales.
Wall Street also overcame China's decision to raise banks' reserve-requirement ratios for the seventh time as it tries to prevent a spike in inflation. The markets typically pay close attention to China's monetary policy amid fears it will overstep and derail the global economy.
On the commodities front, crude oil rose 14 cents a barrel, or 0.15%, to $91.54. Gold had its four-day win streak snapped, sinking $26.40 a troy ounce, or 1.90%, to $1,360.50.
American International Group (NYSE:AIG) closed its recapitalization plan with its federal overseers, moving a step closer to having the U.S. exit its stake. The bailed-out insurer fully repaid $47 billion owed to the New York Federal Reserve and the Treasury Department said it now owns 1.655 billion shares of its common stake, equaling a 92% stake. The Treasury plans to sell its stake over time.
BP (NYSE:BP) jumped nearly 4% after saying it is in talks with Russia’s state-controlled oil company Rosneft about taking a possible stake. According to Sky News, Rosneft plans to take approximately a 5% stake in the U.K. oil giant.
Borders (NYSE:BGP) surged 30% as The New York Times reported the bookseller is nearing a deal to secure refinancing from General Electric’s (NYSE:GE) GE Capital and other lenders. Borders plans to reduce costs, improve its liquidity and expand its marketing efforts, the paper reported.
Coinstar (NASDAQ:CSTR) lost more than one-quarter of its market cap a day after slashing its fourth-quarter sales view to $391 million. Citing lower sales at its DVD rental unit Redbox, the electronic kiosk company also lowered its EPS view to 65 cents to 69 cents, compared with the Street’s view for 84 cents.
M&T Bank (NYSE:MTB) posted a 49% jump in fourth-quarter earnings to $1.59 a share, surpassing the $1.45 a share analysts had called for. The regional bank’s revenue grew by 4.4% to $861 million, also exceeding expectations.
Bank of America (NYSE:BAC) confirmed its online banking operations have hit a snag, leaving a "subset" of its customers without access to their accounts. BofA said there is no timetable for when the site will be fixed, but said it doesn't appear to be related to hackers and has not impacted customer information.
Groupon has been talking with investment bankers about a possible initial public offering that is likely to come later in 2011, The Wall Street Journal reported. The online deals site, which rebuffed Google's (NASDAQ:GOOG) $6 billion buyout bid last year, could raise as much as $1 billion in an IPO, the paper reported.
Hasbro (NYSE:HAS) said it expects fourth-quarter sales of just $1.3 billion due to a "slowdown in U.S. consumer demand" at the end of 2010. Analysts had been calling for a rise to $1.39 billion. Hasbro also warned it now sees 2010 sales of $4 billion, compared with estimates for $4.12 billion.
The U.K.'s FTSE 100 declined 0.36% to 6002.07, Germany's DAX inched up 0.01% to 7075.70 and France's CAC 40 gained 0.21% to 3983.28.
In Asia, Japan's Nikkei 225 slumped 0.86% to 10499, Hong Kong's Hang Seng advanced 0.18% to 24283.20 and China's Shanghai Composite dropped 1.29% to 2791.34.