U.S. Stocks Advance on Caterpillar Earnings, Bernanke Remarks

U.S. stocks rose, extending the Dow Jones Industrial Average’s longest rally in two years, as Caterpillar Inc.’s earnings tripled analyst estimates and Federal Reserve Chairman Ben S. Bernanke said there are signs the economy is stabilizing.
Caterpillar, the biggest maker of bulldozers, jumped 7.7 percent to lead the Dow to a seventh straight gain. Merck & Co. added 6.1 percent as job cuts helped it post better-than- estimated earnings. Banks slid, limiting the market’s advance, after CIT Group Inc. said it may need to file for bankruptcy if a plan to repurchase debt fails and Regions Financial Corp. and Zions Bancorporation posted quarterly losses on bad loans.
The Standard & Poor’s 500 Index added 0.4 percent to 954.58 at 4:05 p.m. in New York, maintaining its highest level in more than eight months. The Dow Jones Industrial Average rallied 67.79 points, or 0.8 percent, to 8,915.94 to extend its gain since July 10 to 9.4 percent. The MSCI World Index increased 0.9 percent to the highest level since Nov. 4.
“Beating expectations shows they are in slightly better shape than most investors thought,” said Eric Thorne, who helps oversee .5 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pa. “The fact that numbers are slightly above estimates is a sign to us that we are in the beginning stages of an economic recovery.”
Earnings Top Estimates
Per-share earnings beat analysts’ projections by an average of 14 percent for the 70 companies in the S&P 500 that reported quarterly results since July 8, according to data compiled by Bloomberg. Analysts forecast profits fell an average 33 percent in the second quarter and will decrease 20 percent from July through September, according to Bloomberg data.
The S&P 500 rallied 1.1 percent yesterday as a gauge of future economic growth topped projections. The benchmark for U.S. equities advanced 7 percent last week as companies from Goldman Sachs Group Inc. to Intel Corp. reported results that topped estimates.
Treasuries climbed the most in almost two weeks today, sending the 10-year note yield down 13 basis points to 3.48 percent, as Bernanke said “limited inflation pressures” will allow policy makers to keep interest rates near zero for an “extended period.” Bernanke, in his semi-annual testimony before the House Financial Services Committee, also said the economy is showing “tentative signs of stabilization.”
Caterpillar Rallies
Caterpillar, the world’s largest maker of bulldozers and excavators, rallied 7.7 percent to .46 after government stimulus programs and improved credit markets helped stabilize demand for the world’s largest maker of bulldozers and excavators. Profit excluding some costs was 72 cents a share, surpassing the 22-cent average estimate of 20 analysts surveyed by Bloomberg. The company also raised its full-year forecast. Merck rose 6.1 percent to .65 after the drugmaker that is buying rival Schering-Plough Corp. said second-quarter earnings were 83 cents a share, surpassing the 77-cent average estimate of analysts.
Exxon Mobil Corp., the largest U.S. oil company, added 2.2 percent to .47 as oil futures erased an earlier loss and gained 1.2 percent to .72 a barrel in New York. Chevron Corp., the second-largest U.S. oil producer, added 61 cents .25.
International Paper Co. gained 6.4 percent to .55, the highest price since Oct. 29, after the largest U.S. maker of cardboard shipping boxes was raised to “buy” from “hold” at Deutsche Bank AG, which said containerboard pricing was stable in June.
New York Times Co. advanced 5.6 percent to .42 after the Boston Globe’s largest union approved a contract for million in annual cuts in a decision that may reduce losses at the newspaper and help its owner negotiate a sale.
Credit Suisse Says to Buy
Credit Suisse Group AG today advised investors to buy equities and trim their holdings of government bonds, reversing a recommendation from June. The bank raised its estimate for the S&P 500 by 14 percent to 1,050 by the end of the year, citing improving economic indicators and earnings. Goldman Sachs yesterday boosted its year-end estimate for the measure to 1,060, implying a 15 percent surge between June 30 and Dec. 31. That would be the steepest second-half rally since 1982.
The S&P 500 has rallied 41 percent from a 12-year low on March 9 amid speculation the economy and companies are recovering from the worst recession in more than half a century and the longest slump in quarterly earnings on record.
More Gains Predicted
U.S. stocks will likely continue to advance, according to John Murphy, chief technical analyst at StockCharts.com. The S&P 500 rose to a new high for the year today on an intraday basis, touching 956.53. Since the index exceeded 956, it’s likely to advance to about 1,000, for a gain of 50 percent from the 12- year intraday low of 666.79 on March 6, Murphy said.
Indications that the S&P 500’s run is likely to continue include the performance of the cumulative advance-decline line for securities listed on the New York Stock Exchange, Murphy said. The index, which tallies the number of daily gains for individual securities minus the number of declines since its August 1996 inception, rose 4.2 percent to a 10-month high of 39,961 yesterday.
“Most people missed the lows and continue to treat this as a rally in a bear market,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, which manages 2 billion. “Hey folks, every bull market that I’ve seen began being called a short-term rally in a bear market.”
CIT Slumps
CIT, the 101-year-old commercial lender, fell 22 percent to 98 cents after saying its “existing liquidity” isn’t enough to repay billion of floating-rate notes maturing on Aug. 17. The lender, which announced a billion rescue financing from its bondholders yesterday, has asked holders of the August notes to swap their claims for 82.5 cents on the dollar.
A gauge of financial shares was the largest drag on the S&P 500 among 10 industry groups as Regions dropped 15 percent to .42, Zions declined 13 percent to .68 and Comerica Inc. lost 10 percent .51.
Lexmark International Inc. had the second-biggest drop in the S&P 500 after CIT, losing 20 percent to .08, after the second-largest U.S. printer maker said third-quarter profit may be as low as 40 cents a share, below the 52-cent average of analyst estimates compiled by news.
Lockheed Martin Corp., the world’s largest defense company, lost 8.5 percent to .13 after the company posted its largest profit drop in more than five years and the U.S. Senate voted to end funds for its F-22 jet.

Source | Forex News | http://forexnews-4all.blogspot.com/2009/07/us-stocks-advance-on-caterpillar.html

Dollar Drops to Seven-Week Low as Earnings Pare Safety Demand

The dollar declined to a seven-week low versus the euro and the yen dropped as U.S. company results beat analysts’ estimates, reducing demand for safety.
The euro advanced for a second week after reports showed yesterday that the contraction in European manufacturing and services slowed more than forecast and German business confidence rose. The Canadian dollar reached the highest level since June 2 as oil prices gained and the central bank said the nation’s recession is ending.
“There’s slightly more economic optimism,” said Warren Naphtal, who overseas 0 million in assets as chief investment officer at P/E Investments in Waltham, Massachusetts. “What we are seeing is commodity-sensitive currencies, such as the Canadian dollar, are attracting capital. The main backdrop is improvement in outlook in general and the increase of the negative dollar view.”
The dollar declined 0.7 percent to .4202 per euro yesterday from .4102 on July 17. It touched .4291 on July 23, the weakest level since June 3. The yen slid 1.3 percent to 134.63 against the euro from 132.85. Japan’s currency depreciated 0.6 percent to 94.79 versus the dollar from 94.19.
Brazil’s real added 1.6 percent this week to 1.8957 per dollar and touched 1.8824 on July 23, the strongest level since Sept. 29. Brazil’s policy makers signaled a day earlier that they may stop lowering the target lending rate after cutting it by a half-percentage point to a record low of 8.75 percent.
The yen declined against all of its 16 most-traded counterparts tracked by Bloomberg, dropping 5.2 percent to 12.716 versus Sweden’s krona and declining 4.5 percent to 12.251 against the South African rand.
Rising Stocks
The Dow Jones Industrial Average rose above 9,000 for the first time since January on better-than-expected results from companies including Apple Inc. and Intel Corp., encouraging investors to borrow in Japan and buy higher-yielding assets elsewhere. Japan’s 0.1 percent target lending rate is among the lowest in the developed world.
Among Standard & Poor’s 500 Index companies that have posted second-quarter results, 75 percent beat the average analyst forecast, according to data compiled by Bloomberg. That would be the highest rate for a full quarter, Bloomberg data going back to 1993 show. About 300 S&P 500 companies have yet to report for the period.
The Norwegian krone and Canadian dollar were two of the best performers against the dollar among major currencies as crude oil prices rallied 5.4 percent this week to more than a barrel. Oil is the biggest export for both countries.
Krone Versus Dollar
The krone advanced 2.5 percent to 6.2361 per dollar and reached 6.2190 yesterday, the strongest since June 3.
Canada’s currency, known as the loonie, appreciated 2.8 percent this week to C.0826 and touched C.0795 yesterday, the strongest level since early June.
The Bank of Canada said in a report this week that output will expand at a 1.3 percent annualized pace July through September, replacing a forecast of a 1 percent contraction.
The loonie’s 12 percent rally this year is an “important brake” on growth, and the central bank is watching it “very closely,” Bank of Canada Governor Mark Carney told reporters in Ottawa after releasing the economic outlook.
The euro advanced versus the dollar as Markit Economics said yesterday a composite index of the region’s manufacturing and services industries increased in July more than economists forecast to 46.8, representing the slowest pace of contraction in almost a year. A reading below 50 indicates a decline. The Ifo Institute in Munich said its German business climate index rose to 87.3 this month, a nine-month high.
U.S. Economy
The U.S. economy probably contracted at a 1.5 percent annual rate in the second quarter, after shrinking 5.5 percent in the previous three months, according to the median forecast of 66 economists surveyed by Bloomberg News. The report from the Commerce Department is due on July 31.
Citigroup Inc. recommended its clients “take profit” on a bet that the Canadian dollar will gain further against the yen yesterday. The Canadian currency gained 10 percent to 87.85 yen in the past two weeks.
“It’s difficult to sustain the risk rally in light of the lack of pickup in economic data,” said Todd Elmer, a currency strategist at Citigroup in New York, in an interview.
Investors should look to re-enter the Canadian dollar-yen trade at “better levels” on renewed capital outflow from Japanese investors, strategists including Elmer wrote in a note to clients yesterday.
Polish Zloty
Eastern European currencies such as the Polish zloty will advance in the next two weeks as “hot money” flows into the region on signs of global economic recovery, according to David Woo, global head of foreign-exchange strategy at Barclays Capital in London. The zloty gained 3.1 percent this week to 4.1966 per euro in one of the best performances among emerging- market currencies.
“A lot of investors still sit on a lot of cash on the sideline,” said Woo in an interview on Bloomberg Television this week. “What you are seeing is basically people being forced to essentially put money to work.”
Federal Reserve Chairman Ben S. Bernanke told the House Financial Services Committee this week that while the U.S. economy is showing “tentative signs of stabilization,” the central bank intends to maintain a “highly accommodative” monetary policy for an extended period.

Source | Forex News | http://forexnews-4all.blogspot.com/2009/07/dollar-drops-to-seven-week-low-as.html

U.S. Stocks Advance for Third Week as Earnings Beat Estimates

U.S. stocks rose for a third week, completing the Dow Jones Industrial Average’s best month since 2002, as companies from Motorola Inc. to MasterCard Inc. topped analysts’ profit estimates.
Amgen Inc., the world’s largest biotechnology company, and Dow Chemical Co., the largest U.S. chemical maker, gained after earnings beat projections. General Electric Co. surged 11 percent on speculation new banking rules will allow it to keep its finance unit. Yahoo! Inc. slumped after terms of an Internet-search accord with Microsoft Corp. were less favorable than analysts predicted.
“What’s been driving the market is the idea that maybe this recession isn’t going to be as severe or prolonged as we thought,” said Samuel Stewart, president of Wasatch Funds, which manages billion in Salt Lake City. “The market is now behaving as though the credit crisis was a blip on the radar.”
The S&P 500 rose 0.8 percent to 987.48, the highest since Nov. 4, capping its fifth straight monthly advance. The main benchmark for American equity has rebounded 46 percent from a 12-year low on March 9. The Dow Jones Industrial Average rose 78.37 points, or 0.9 percent, to 9,171.61, extending its monthly advance to 8.6 percent, the biggest since October 2002. The Russell 2000 Index of small companies added 1.5 percent to 556.71.
Earnings Top Estimates
About three-quarters of the 148 companies in the S&P 500 that released second-quarter results this week topped estimates, according to data compiled by Bloomberg. Companies slated to report next week include Kraft Foods Inc., Procter & Gamble Co. and Cisco Systems Inc.
Companies in the S&P 500 are still headed for a record eighth consecutive decline in quarterly profits. Per-share earnings have tumbled 32 percent for the 352 companies in the S&P 500 that have reported results since June 17. Analyst estimates compiled by call for a 31 percent drop in the second quarter and a 22 percent third-quarter decline. While earnings are falling, results have topped projections by an average 10 percent.
“There is a broader sense that the decline is over,” said Stephen Lieber, chief investment officer of Alpine Mutual Funds in Purchase, New York, which manages billion. “Corporate earnings in the last week have been singular in importance.”
Motorola climbed 8.8 percent to .16. The biggest U.S. mobile-phone maker posted a narrower second-quarter loss than analysts projected, helped by job cuts and a recovery in handset shipments.
MasterCard Climbs
MasterCard rose 4.6 percent to 4.03. The world’s second- biggest payment-card network reported earnings excluding some items of .68 a share, 11 percent higher than the average analyst estimate. MasterCard raised fees, slashed expenses and processed more transactions during the quarter.
Amgen added 2.3 percent to .31. The world’s largest biotechnology company raised its full-year earnings forecast after second-quarter profit excluding some items beat the average analyst estimate by 11 percent. Amgen cut research costs and increased sales of its arthritis drug Enbrel.
Dow Chemical advanced 4.9 percent to .17. The largest U.S. chemical maker posted an unexpected second-quarter profit as demand for its products stabilized. The average analyst estimate was for a loss.
GE Gains
General Electric, the world’s biggest non-bank financial company, advanced 11 percent to .40. U.S. Representative Barney Frank said manufacturers that already own finance businesses should be allowed under revised banking rules to retain them without being subject to Federal Reserve oversight of their manufacturing operations. Frank heads the U.S. House Financial Services Committee.
Financial stocks in the S&P 500 climbed 4.4 percent, the steepest among 10 industries. Old National Bancorp, an Indiana- based financial-service company, reported second-quarter profit excluding some items that was more than four times the average analyst estimate, sparking a rally in regional banks.
Marshall & Ilsley Corp., Wisconsin’s largest lender, led gains, surging 26 percent to .04. Old National climbed 15 percent to .30 and Zions Bancorp., the Utah lender that operates in 10 Western states, rose 21 percent to .58.
Yahoo fell 18 percent to .32. The owner of the second- most popular U.S. Internet search engine will use Microsoft’s search engine on its Web sites and sell ads that appear next to search results. The agreement with Microsoft, the world’s largest software maker, didn’t include an upfront payment for Yahoo, which some analysts had estimated could be as much as billion.
Recession Saps Demand
Exxon Mobil Corp. led energy companies to the second- biggest decline among the S&P 500’s 10 main industry groups. The world’s largest energy company fell 2.6 percent to .39 after reporting its lowest profit in more than five years as the recession sapped fuel demand.
Masco Corp. rose 26 percent to .93 for the biggest gain in the S&P 500. The insulation installer forecast a loss this year of as little as 5 cents a share, compared with the average analyst loss estimate of 26 cents.
Akamai Technologies Inc. fell 22 percent to .44 for the biggest drop in the S&P 500. The provider of software that makes Web sites load faster reported profit excluding some items of 40 cents a share in the second quarter, missing the average analyst estimate by 1.5 percent.
Reports next week will probably show employers cut jobs at a slower pace in July and the factory slump eased, according to economists’ forecasts, suggesting the recession is ending.

Source | Forex News | http://forexnews-4all.blogspot.com/2009/08/us-stocks-advance-for-third-week-as.html