U.S. Market Snapshot: Stocks Rise and Post Weekly Gains on Corporate News and EU Banks Test Results
The U.S. stocks rose today supported by better-than-expected earnings from Verizon and GE raising its dividend and after Sanofi-Aventis made a takeover approach to Genzyne Corp., the largest maker of medicines for genetic diseases . Investors were also relieved by the results of the EU bank stress tests, which turned out to be better-than-expected, with only 7 out of 91 banks failing the test.
Despite earlier jitters, markets responded positively to the better-than-expected results of the EU bank stress tests as a vote of confidence in Europe’s banking system. Policymakers in Europe hope the results will reassure markets worried about hidden bank losses from the crisis. Investors and analysts have time till Monday to digest the results and make conclusions about the rigorous nature of the tests.
All three major indices posted 3.5-4% gains for the week as investors’ focus shifted from worries about the pace of the economic recovery to more positive Q2 earnings results as 36% of companies in the S&P 500 reported this week with the overwhelming majority beating the estimates. However, investors will also look to more economic data on housing and a first estimate for Q2 GDP to be released next week. Another batch of 24% companies in the S&P 500 will also report next week.
Ford Motor Company reported Q2 earnings of $2.6 billion compared with $2.3 billion a year earlier. Excluding items, the company earned 68 cents a share, topping the 41-cent estimate based on a survey of analysts by Bloomberg. Ford’s CEO said that the company remains “on track to deliver solid profits and positive cash flow for 2010, and even better financial results in 2011.”
For Q2, earnings per share for companies included in the S&P 500 index are expected to be about $20.67, or 4.85% up from Q1 EPS, which was $19.7, according to Bloomberg. See RGE: Another Strong Quarter for U.S. Equities Earnings in Q2 2010?
The Dow gained 0.99% with all but consumer services in positive territory. Financials advanced the most by 2.07%, followed by telecom, which was up 2% and industrials, which were up by 1.95% leading a broader advance. Verizon shares rose 3.78% to $28.02 after reporting better-than-estimated Q2 earnings. In consumer services, MacDonald’s shares fell 2.1% to $69.90 after reporting higher profits and better than expected earnings.
The S&P 500 rose 0.82% with all ten sectors in the black. Industrials rose 2% followed by basic materials, which were up 1.7% and consumer services, which were up 1.4%, leading the broader increase. GE shares rose 3.3% to close at $15.71 as the company boosted its quarterly dividend by 20%.
In Canada, the S&P/TSX composite index rose 0.40% with nine out of ten sectors in positive territory. Technology, industrials and consumer goods led the advance, while consumer services were down 0.26%. The index is also 1.24% up for the week.
Into close, the S&P 500 index rose 8.99 points or 0.82% to close at 1,102.66, and 3.5% up for the week.
The Dow gained 102.32 points or 0.99% to close at 10,424.62, and 3.2% up for the week.
The tech-heavy Nasdaq composite index was up 23.58 points, or 1.05% to close at 2,269.47, and 4.1% higher for the week.
Treasury prices fell with the yield on the benchmark 10-year Treasury note up yielding 2.99%, from 2.93% from late Thursday.
In commodity markets, light crude for September delivery settled down 32 cents, or 0.4%, at $78.98 a barrel on the New York Mercantile Exchange.
In currency markets today the euro advanced after most of European banks passed the stress tests.
In currency, EUR/USD traded at 1.2909, up from 1.2892 late on Thursday in New York, Cable was quoted at 1.5425, up from 1.5255. USD/JPY traded at 87.46, down from 86.92. USD/CHF was at 1.0543, up from 1.0423, while USD/CAD was quoted at 1.0358, down from 1.0375.
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