Published February 01, 2011
FOX Business: The Power to Prosper
Wall Street flipped the calendar to February with bullish enthusiasm on Tuesday as the Dow surged beyond 12000 and the S&P 500 conquered 1300 for the first time in two-and-a-half years amid enthusiasm for impressive manufacturing and earnings reports from around the world.
The Dow Jones Industrial Average jumped 148.23 points, or 1.25%, to 12040.16, the Standard & Poor's 500 gained 21.47 points, or 1.67%, to 1307.59 and the Nasdaq Composite rose 51.11 points, or 1.89%, to 2751.19. The FOX 50 added 16.16 points, or 1.76%, to 932.50.
The burst of buying represented Wall Street strongest performance since December 1 and comes on the heels of the markets' hottest January since 1997.
Tuesday's rally began as manufacturing reports in Europe and in the U.S. showed strong growth, and continued as UPS (UPS), Pfizer (PFE) and other major companies reported fourth-quarter results that left shareholders thoroughly impressed.
“The global economy looks like it continues to motor forward pretty strongly,” said Nick Kalivas, vice president of financial research at MF Global.
Fears about the turmoil in Egypt spilling out of control also continued to recede, helped by a lack of new violence there and a pullback in the previously red-hot price of crude oil.
“My sense is the risk trade is back on. Though Egypt will remain a concern, it appears to be peaceful, constructive and heading in a direction the markets really want,” said Peter Kenny, managing director at Knight Capital Group.
After days of brushing up against 12000 and then retreating, the Dow finally broke through that psychologically-important level, closing above it for the first time since June 2008. Almost all 30 Dow stocks rallied, led by Pfizer, Alcoa (AA) and Bank of America (BAC). The index's weakest links were McDonald's (MCD) and Procter & Gamble (PG).
The S&P 500 landed above the closely-watched 1300 level for the first time since August 2008.
“We’re in the process of extending this huge 25% run from the September low. We’ve had a heck of a five-month run,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Traders shouldn't have been caught off guard by the rally as Wall Street has often benefited from an asset allocation shift out of bonds and into stocks during the month's first trading day. The blue chips leaped 93 points in their January debut and 250 points on December 1. At the same time, a gain in January on the Dow results in the benchmark index finishing the year higher 82% of the time.
Manufacturing Indicators, Earnings Fuel Rally
Wall Street received a flood of global manufacturing reports that signal growth gained steam in January, but so did signs of inflation.
In the U.S., the Institute for Supply Management said its manufacturing index soared to 60.8 in January -- the highest level since May 2004. Economists had called for a reading of just 58. However, the prices paid index leaped to 81.5, up from 72.5 in December, compared with estimates for just 73.5.
The euro zone's manufacturing index climbed in January to its highest level since 1997, but consumer prices jumped 2.4%. British inflation soared 3.7%, doubling the Bank of England's targets.
U.S. markets continue to scale back their fears about the situation in Egypt, which has been paralyzed by eight days of protests demanding longtime President Hosni Mubarak resign. Just as U.S. markets closed, Mubarak addressed the world, saying he will not run for president again and will spend his remaining months focusing on a smooth transition of power.
The situation remains volatile, but has calmed considerably from last week. So far the unrest hasn't spilled over into critical oil-producing nations, namely Saudi Arabia. Concerns the Suez Canal would shut down, causing oil to spike above $100 a barrel, have not been realized either. In the clearest sign of the receding fear, crude oil gave back a chunk of the gains from its two-day surge, sinking $1.42 a barrel, or 1.54%, to $90.77.
Meanwhile, Wall Street cheered stronger-than-expected results from a number of key companies, headlined by economic bellwether UPS. The shipping giant revealed a 48% jump in fourth-quarter profits, topped estimates with non-GAAP EPS of $1.11 a share and predicted 2011 EPS will grow by 16% to 22% to a record.
Pfizer was the best performer on the Dow, leaping 5.5% after beating the Street by a penny and posting revenue of $17.6 billion that solidly surpassed consensus calls. Pfizer also announced plans to buy back another $5 billion of its stock, but cut its 2012 sales view.
Basic materials stocks, one of the most economically-sensitive sectors, were the biggest winners, jumping more than 2.6%. Individual stocks such as U.S. Steel (X) and Freeport McMoRan (FCX) saw even heavier buying.
Wall Street also benefited from a weaker dollar, which helped drive up the price of commodities like copper and multinationals. Helped by the increased risk appetite, the euro soared 1.06% to $1.3832 -- its highest level since November 11. Gold rose $5.80 a troy ounce, or 0.43%, to $1,339.60.
Airline stocks like Delta Air Lines (DAL) and JetBlue (JBLU) were mixed as the travel industry braces for the aftermath of the massive snowstorm hitting the Midwest and other parts of the U.S. According to reports, more than 4,400 flights across the U.S. have been grounded due to the storm.
Elsewhere in the transportation world, major auto makers released mostly upbeat monthly sales figures. General Motors (GM) said U.S. sales of its four brands jumped 23% in January, while Ford (F) posted a 9.2% increase in sales from the year before.
The Commerce Department said U.S. construction spending fell 2.5% in December to $787.9 billion -- the lowest level since July 2000. Economists had called for a slight increase.
Archer Daniels Midland (AMD) was among the biggest earnings winners, rallying 5% after revealing a non-GAAP profit of $1.06 that blew away Wall Street's expectations for 78 cents.
BP (BP) posted a 30% jump in fourth-quarter profits and unveiled plans to resume dividend payouts and sell off a pair of its U.S. refineries. However, BP's adjusted profit of $4.36 billion trailed estimates.
Orexigen Therapeutics (OREX) plunged more than 70% after the Food and Drug Administration rejected its weight-loss drug due to heart risks. The drug, Contrave, could have been the first new diet pill in a decade.
Lexmark (LXK) surged 13% as its fourth-quarter adjusted-profit of $1.29 widely topped estimates for $1.12. The printer company posted a 3% rise in sales to $1.1 billion. Lexmark also projected first-quarter profits that would beat consensus calls.
Novellus (NVLS) soared 5% to 52-week highs a day after the chip-gear maker beat the Street with a non-GAAP profit of $1.03 and forecasted stronger-than-expected first-quarter sales of up to $425 million. Analysts had been calling for sales of just $381.9 million.
Biogen (BIIB) posted a fourth-quarter profit of 99 cents a share and an adjusted-profit of $1.42 a share. The biotech company said it sees 2011 non-GAAP EPS above $5.70.
Tupperware Brands (TUP) said it earned $1.38 a share on a non-GAAP basis last quarter, exceeding forecasts for $1.28 and sparking a 15% surge in its stock. The company’s sales rose 5% to $655 million, topping the Street’s view of $642.8 million. Tupperware also said it sees stronger-than-expected EPS for the current quarter.
McGraw-Hill (MHP) slid 5% after it disclosed an 8% slide in fourth-quarter profits. The company posted non-GAAP EPS of 55 cents that topped estimates by 2 pennies. Revenue rose 4% to $1.52 billion, meeting estimates.
The U.K.'s FTSE 100 jumped 1.62% to 5957.82, Germany's DAX climbed 1.51% to 7184.27 and France's CAC 40 advanced 1.68% to 4072.62.
In Asia, Japan's Nikkei 225 gained 0.36% to 10274.50, Hong Kong's Hang Seng inched up 0.15% to 23482.90 and China's Shanghai Composite gained 0.30% to 2798.96.