Bulls Sprint Forward on Upbeat Economic News
FOX Business: The Power to Prosper
A batch of encouraging economic reports helped ease traders' concerns over the slowing pace of the economic recovery, sparking the best rally for the broad S&P 500 in nearly two months.
Today's Markets
The Dow Jones Industrial Average jumped 123 points, or 1%, to 12,076, the S&P 500 rallied 16 points, or 1.3%, to 1,288 and the Nasdaq Composite soared 39 points, or 1.5%, to 2,679. The FOX 50 gained 8.1 points to 903.
Every major sector closed in the green on Tuesday. Energy and materials stocks fared the best on the day after getting knocked down on Monday, while financial issues lagged behind.
Retail sales were down 0.2% in May, a narrower decrease than the 0.4% Wall Street anticipated. Excluding automobiles, sales were up 0.3%, which was inline with analysts expectations.
Prices on the wholesale level were up 0.2% in May, slightly higher than estimates of a 0.1% increase. Prices were up by the same amount excluding the food and energy component, which was in line with expectations. Producer prices were, however, up 7.3% from last May, higher than the 6.8% economists forecast.
A major question has been whether significant gains in energy will seep into the broader price level -- a situation that many economists say is more challenging to control. Indeed, Peter Newland, an economist with Barclays Capital notes "there is increasing evidence of building pipeline price pressures."
The more closely-watched Consumer Price Index is slated for release on Wednesday.
Wall Street also got fresh data suggesting the Chinese economy, the second-largest in the world, might not be slowing down as quickly as expected.
Despite the sharp rally, many market participants remained wary about the sustainability of the sudden uptick in confidence on Wall Street.
"Nothing has changed" to suggest the economic picture has brightened, said Peter Kenny, managing director at Knight Capital Group. "All of the fundamentals point to a slowdown."
After a sharp selloff in recent weeks, market observers noted traders might have been taking advantage of low prices to hunt for bargains as well.
Today's rally "could be an indication the market is looking for any favorable news on which to begin buying while prices are still relatively low, wrote David Krein, senior director of product development and analytics at Dow Jones Indexes, in a research note.
Technical trading, which is when traders look for key prices levels and movements, also played in to the sudden rally, according to Kenny.
On the corporate front, Apple (NASDAQ:AAPL) and Nokia (NYSE:NOK) agreed to settle all pending patent lawsuits and International Trade Commission complaints. Nokia said the deal will increase its quarterly earnings, pushing shares significantly higher in early trading. The two companies had been sparring over smartphone patents for months.
The high pace of mergers and acquisitions activity continued into Tuesday. Ericsson (NYSE:ERIC) unveiled plans to buy privately-held Telcordia for $1.15 billion in cash. Graham Packaging (NYSE:GRM) backed a $1.6 billion buyout offer from Reynolds Group and said it would terminate a prior takeover agreement with Silgan Holdings (NYSE:SLGN).
Energy markets tracked equities far into the green.
Light, sweet crude soared $2.07, or 2.1%, to $99.37 a barrel. Wholesale RBOB gasoline was up 7 cents, or 2.3%, to $3.06 a gallon.
Consumer gasoline prices continue moderating at a fairly slow pace. A gallon of regular gas costs $3.70 on average nationwide, down from $3.96 last month, but still a dollar above the $2.70 drivers paid last year, according to the AAA Fuel Gauge Report.
In metals, gold climbed $8.80, or 0.58%, to $1,524 a troy ounce. Silver was up 67 cents, or 1.9%, to $35.41 a troy ounce.
The euro gained 0.33% against the U.S. dollar and the greenback fell 0.24% against a basket of world currencies.
Corporate News
Best Buy (NYSE:BBY) revealed fiscal first-quarter earnings of 35 cents a share, besting estimates of 33 cents. The technology retailer saw revenue of $10.94 billion, also topping Wall Streets forecast of $10.71 billion.
Ford (NYSE:F) announced plans to boost its European production, including a $1.2 billion investment in Spain.
Dryships (NADSAQ:DRYS) was upgraded to "outperform" from "market perform" by analysts at Wells Fargo, pushing shares sharply higher.
Foreign Markets
Global shares rallied on the positive economic data from China.
The English FTSE 100 was up 0.51% to 5,803, the French CAC 40 climbed 1.5% to 3,865 and the German DAX jumped 1.7% to 7,205.
In Asia, the Japanese Nikkei 225 soared 1.1% to 9,548 and the Chinese Hang Seng ticked lower by 0.05% to 22,496.