Out of Neutral, S&P 500 Eyes New 4-Month Highs

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Published August 16, 2012

| FOXBusiness

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Cheering positive comments out of the beleaguered eurozone and Cisco's (CSCO) upbeat outlook, Wall Street generated solid gains Thursday afternoon that put the S&P 500 on track for its highest close since early April. 

Today’s Markets

As of 2:49 p.m. ET, the Dow Jones Industrial Average rose 101.41 points, or 0.77%, to 13266.42, the S&P 500 gained 11.57 points, or 0.82%, to 1417.11 and the Nasdaq Composite jumped 34.96 points, or 1.15%, to 3065.88. The FOX 50 picked up 6.93 points, or 0.66%, to 1062.56.

The markets appeared to be on track for another lackluster session, continuing a quiet stretch that threatens to break their five-week win streak.

However, initial focus on mixed economic reports gave way to more bullish sentiment in late morning action, with technology stocks following Cisco Systems (CSCO) higher and the broader markets benefiting from a rally in the euro after positive comments from Germany's Angela Merkel.

“The market is in a good place. We’ve bottomed here economically. Things have really stabilized,” said Jason Weisberg, senior vice president at Seaport Securities.

Yet Weisberg acknowledged the lack of participation, saying “we’re moving up on vapor volume.”

Most of the Dow's 30 stocks gained ground, tech giants Microsoft (MSFT) and Cisco, which soared 8%. The index's weakest performers were Pfizer (PFE) and Wal-Mart (WMT), which disclosed weaker-than-expected revenue. 

Tech stocks outperformed their peers on Thursday after Cisco revealed a 56% leap in quarterly earnings and an unexpected dividend boost. Importantly, the tech giant's outlook met expectations and CEO John Chambers sounded an optimistic tone about the economy, especially in the U.S. 

The news helped lift other tech stocks like SanDisk (SNDK) and Oracle (ORCL).

In Europe, Merkel said Germany is committed to do what's necessary to maintain the euro, mirroring comments made by European Central Bank President Mario Draghi last month. 

The remarks helped send the euro to session highs, recently trading up 0.55% to $1.2353. Likewise, European stocks rallied, with the Euro Stoxx 50 climbing 1.1% to fresh four-month highs and Spain's IBEX surging 4%.

“The Europeans have been talking since 2008. I think the investment community is getting a little bit tired of the words and they want to see actions,” said Weisberg.

Meanwhile, basic materials stocks such as BHP Billiton (BHP) received a bid after Chinese Premier Wen Jiabao opened the door to new stimulus. Warning the "downward pressure" on China's economy is "still big" and "may last for a while," Wen said he sees "growing room for monetary policy operation." China's gross domestic product is projected to slow to just 8% in 2012, its weakest performance since 1999.

In commodities, crude oil jumped $1.27 a barrel, or 1.35%, to $95.60. Gold picked up $12.40 a troy ounce, or 0.77%, to $1,616.10.

U.S. stocks hit session lows earlier in the day after the Philadelphia Federal Reserve's manufacturing index came in at -7.1 in August, up from -12.9 in July but missing forecasts from economists for -5 and marking the fourth consecutive contraction. Inside the report, the six-month index was at its lowest level in a year and the employment component tumbled to its weakest level since September 2009.

The weaker-than-expected Philly Fed report comes a day after a New York manufacturing gauge unexpected turned negative in August. 

Meanwhile, the Labor Department said initial jobless claims rose by 2,000 last week to 366,000, just slightly trailing forecasts from economists for a rise to 365,000. As usual, the government upped its estimate for the previous week to 364,000 from 361,000. Still, the four-week average of claims slipped by 5,500 to 363,750 -- the lowest level since the end of March. 

On the housing front, the government said housing starts declined in July by 1.1% to a pace of 746,000, missing forecasts for a lighter decline to 756,000. However, building permits jumped 6.8% last month to a rate of 812,000 -- the highest level in four years. 

Home builders like Pulte (PHM) and Hovnanian (HOV) advanced on the news.

Corporate Movers

Wal-Mart (WMT) narrowly topped expectations with a 5.7% rise in second-quarter earnings. While a 4.5% rise in sales missed forecasts, the world’s largest retailer upped its full-year profit targets.

Facebook (FB) tumbled another 5% and broke through $20 a share to hit new all-time lows as the lock-up period expired, allowing some insiders to start selling. The social network's stock has crumbled 48% from its $38 debut price in May.

Electronic Arts (EA) rallied 5% after the New York Post reported the video-game publisher is exploring a sale. The maker of Madden NFL and Sim City has been approached by private-equity firms KKR (KKR) and Providence Equity Partners, the paper said.

Best Buy (BBY) climbed 3% after founder Richard Schulze asked the electronic retailer’s board to OK a request to form a group to conduct due diligence. Earlier this month Schulze offered to take Best Buy private for $24 to $26 a share.

Dollar Tree (DLTR) retreated 3% after posting an in-line 26% jump in second-quarter earnings that was overshadowed by a weaker-than-expected outlook for the third quarter.

GameStop (GME) narrowly topped estimates with EPS of 16 cents, but suffered a deeper-than-expected 11.1% dive in sales to $1.55 billion. The world’s largest video game retailer projected third-quarter EPS of 28 cents to 36 cents, below the Street’s view of 41 cents.

Global Markets

The U.K.’s FTSE 100 gained 0.03% to 5834.51, the German DAX advanced 0.71% to 6996.29 and France’s CAC 40 jumped 0.91% to 3480.49 -- its highest close since March 26. 

In Asia, Japan’s Nikkei 225 soared 1.88% to 9092.76 and the Hong Kong Hang Seng declined 0.45% to 19962.95.

URL

http://www.foxbusiness.com/markets/2012/08/16/ahead-data-futures-tick-higher/