Published February 08, 2011
FOX Business: The Power to Prosper
Wall Street’s 2011 buying binge gained further momentum Tuesday as McDonald’s led the blue chips to fresh two-and-a-half-year highs and to their first seven-day surge since July.
The Dow Jones Industrial Average jumped 71.52 points, or 0.59%, to 12233.15, the Standard & Poor's 500 gained 5.52 points, or 0.42%, to 1324.57 and the Nasdaq Composite advanced 13.06 points, or 0.47%, to 2797.05. The FOX 50 added 5.09 points, or 0.54%, to 944.08.
Ever since shaking off fears about the turmoil in Egypt, Wall Street has been on a steady climb higher amid general enthusiasm about the strengthening economy, strong corporate profits and new life in the M&A market.
Wall Street proved its resilience once again on Tuesday as the markets largely shrugged off concerns China's third interest rate hike since October would hurt global growth and demand for commodities. Instead, most of the focus was on McDonald's (MCD) impressive same-store sales growth.
“Nobody seems to want to sell this market. Everyone is waiting for a pullback, but they are waiting to be a buyer, not a seller,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald.
Thanks to Tuesday's solid rally, the Dow closed at its best level since June 2008. The seven-day streak is Wall Street's longest since July 14 and the 3.4% jump over that span marks its strongest seven-day performance since September.
There are some signs the recent rally on Wall Street may be running out of steam. In a potential sign of a lack of faith in Tuesday's rally, the New York Stock Exchange's consolidated volume was the slowest of the year.
Pado points to a lack of leadership and an inflow of cash into large-cap stocks instead of the smaller companies that represent "risk and conviction."
“We’re coasting up hill," said Pado. "You don’t really have the momentum or the fuel but you are still coasting higher. Short term, it’s a little disconcerting.”
Much of the credit for Tuesday's rally can go to the consumer discretionary sector, which jumped more than 1% in the wake of McDonald's saying its same-store sales soared 5.3% last month. Analysts had called for a rise of just 3.7%. The upbeat report is the latest sign consumers continue to increase their spending and helped boost other consumer stocks like Macy's (M) and Saks (SKS).
Wall Street proved to be unfazed by the latest efforts by China to cool off its red-hot economy. China's central bank announced plans Tuesday to boost its interest rate by 0.25 percentage point. Wall Street pays close attention to the monetary policy moves by China because of its outsized role in driving global growth and its voracious appetite for commodities.
In the wake of the China move, crude oil fell 54 cents a barrel, or 0.62%, to $86.94. Gold jumped $15.80 a troy ounce, or 1.17%, to $1,363.40.
Some big tech stocks such as Hewlett-Packard (HPQ) and Intel (INTC) were under pressure from a Goldman Sachs note lowering its 2011 PC unit growth forecast to 6.4% from 8% due in part to strength from tablet devices.
ArcelorMittal (MT) jumped 4% after predicting demand will improve in 2011, returning to full-year profits and posting a 19% jump in quarterly sales to $20.7 billion.
Toyota (TM) hiked its full-year profit view to a stronger-than-expected $5.96 billion despite a 39% slide in quarterly profits.
NYSE Euronext (NYX) posted a 20% slide in fourth-quarter profits, but surpassed estimates with non-GAAP EPS of 46 cents a share. The parent of the New York Stock Exchange said revenue fell 4% to $613 million, essentially matching the Street’s view.
Kindred Healthcare (KND) inked a $900 million cash-and-stock deal to acquire rival RehabCare Group (RHB). The deal translates to $35-a-share, putting a 37% premium on RehabCare. Both companies also posted fourth-quarter earnings beats.
Sara Lee (SLE) said it earned 25 cents a share on a non-GAAP basis, trailing the Street’s view by a penny. The maker of Hillshire Farm lunch meats and BallPark hot dogs backed its full-year guidance, but said its sales declined 0.4% to $2.35 billion, significantly lower than the $2.52 billion analysts had called for.
Warner Music Group (WMG) tumbled 10% in the wake of disclosing a deeper quarterly loss of 12 cents a share. Sales at the No. 3 music company slid by a deeper-than-expected 14% to $789 million.
Avon Products (AVP) slid 3% after saying its fourth-quarter profits fell 15% and posting a non-GAAP profit of 59 cents a share. Analysts had called for EPS of 67 cents. Avon, which is the largest direct seller of cosmetics in the world, missed estimates with sales of $3.18 billion.
The U.K.'s FTSE 100 rallied 0.67% to 6091.33, Germany's DAX gained 0.54% to 7323.24 and France's CAC 40 closed up 0.43% to 4108.27.
In Asia, Japan's Nikkei 225 advanced 0.41% to 10636, Hong Kong's Hang Seng slumped 0.29% to 23484.30 and China's Shanghai Composite remained closed.