Daily Market Reports | Apr 21 2011
By Greg Peel
The Dow rose 186 points or 1.5% while the S&P gained 1.4% to 1330 and the Nasdaq added a whopping 2.1%.
Standard & who? Portuguese what? Earthquake impact where? Who cares? Did you see Intel?
Leading US chip maker Intel (Dow) set the scene in Tuesday's after-market by posting a result which blew the Street away. In last night's session, Intel jumped 8% and dragged the entire tech sector with it, as evidenced by the surge in the Nasdaq. But there was more to come.
Earlier, Spain successfully put away a 13-year bond auction at a lower than expected yield and the euro took off for its biggest gain since January to a 15-month high at US$1.45. Between the euro's gain and a re-ignition of the risk trade post the S&P credit rating scare on Monday, the US dollar index dropped 1.0% to 74.36.
Commodities surged. Brent crude rose US$2.52 to US$123.55/bbl and West Texas jumped US$3.17 to US$111.45/bbl. Any concept of an oil price drag on the economy was missing in action. Gold rose US$5.30 to US$1501.60/oz and silver added another lazy 2.8% to US$45.23/oz. Copper jumped 2%.
Between commodity price correlation and carry trades, the Aussie leapt another two cents to US$1.0714.
The commodity price surge was clearly a catalyst for further moves up in the energy and materials sectors on Wall Street – those sectors you can't kill with a gun at present. But the real measure of stock market value is actual corporate earnings. And there were plenty of reports out last night.
Copper and gold producer Freeport McMoRan beat the Street with a 59% jump in profit, and its shares were up 3%. Elevator and aircraft engine manufacturer United Technologies (Dow) can have its ups and downs, but a solid result saw its shares up 4%. Despite having lost exclusivity on iPhone networking, AT&T (Dow) posted a good result. But not quite good enough for the Street and its shares were down 0.5%.
Indeed, it was not all beer and skittles. Railroad, and thus economic bellwether, Union Pacific posted a strong profit but missed estimates due to high oil prices. Its shares were down 1.3%. The financial sector has been well and truly left behind in the recent push past pre-GFC highs, and last night Wells Fargo shares dropped 4%. The bank managed to beat the Street, but commentary suggested weak credit demand growth – a theme which has been common amongst the banks reporting to date.
The fact of the matter is that last night the Dow, spurred on by Intel, opened up around the plus 180 point mark and just stayed there all day. It was not a momentum rally and volume was on the light side. But while we might question as to whether Wall Street is ignoring the oil price (see Union Pacific) or ignoring lack of credit demand (see Wells Fargo, and note that lack of private sector credit demand suggests QE2 is doing little more than pushing down the dollar to provide greater export receipts and inflate commodity prices), the focus is on absolute earnings and not much else. And the party continued after the bell.
America's second biggest company, Apple, had been hit by a shortage of parts stemming from the quake but it blew away Street estimates and is up 3.5% in the after-market. The biggest maker of chips for mobile phones, Qualcomm, was also a winner and has posted a 4% gain. Yum Brands has been successfully pedalling obesity to China via its KFC and Pizza Hut franchises, and its beat has sparked a 6% gain. American Express (Dow) also posted a solid beat, but financial stocks are not in vogue and Amex has lost 1.6%.
So once again, all things being equal, Wall Street is setting itself up for another good session tonight. The first week of earnings was largely disappointing but this week has come back with a vengeance, notwithstanding the blip caused by Standard & Poor's. Tonight is another huge night of earnings, with all of DuPont (Dow), General Electric (Dow), Honeywell, McDonald's (Dow), Morgan Stanley, Newmont, Travelers (Dow) and Verizon (Dow) set to report.
This week has also seen a raft of housing data, which may have provided some angst to counter corporate earnings. But Tuesday's pending sales number was positive and last night existing home sales saw a 3.7% gain for March, slightly better than expected. Tonight it's house prices.
The VIX volatility index is back at 15.
It must be noted that when Australia is on standard time, the SPI Overnight closes at 7.00am Sydney, a full hour after the close in New York. Hence those after-market US results will impact on SPI trading. This morning we have closed up 49 points or 1.0%.
Have a happy Easter everyone and drive safely. A reminder that Australia now has five days off but the US only has the three. Thus there will be a holiday “Monday Report” on the Tuesday next week to take in tonight's and Monday's nights trading in the US.
Rudi will not be appearing as usual on Sky Business today as he has the blues. At Byron that is.
Please note that due to the impending holiday there will be no FNArena daily email today, only a Broker Call email for subscribers. Normal service will resume on Wednesday.
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