Dow jumps 340 on European, economic news
The blue chips are briefly up more than 400 points. Announcement of a deal to fix Europe's debt crisis sets off a global rally. US growth improves but is still anemic. Higher oil prices boost Exxon profits.
By Charley Blaine on Thu, Oct 27, 2011 12:40 PM
Updated: 5:05 p.m. ETU.S. stocks -- and stocks worldwide -- jumped today on hopes that a new deal to fix Europe's debt crisis will lead to more global financial stability.
In the biggest rally since since Aug. 11, the Dow Jones industrials ($INDU +2.86%) were briefly up as many as 415 points and closed above 12,000 for the first time since Aug. 1. The Standard & Poor's 500 Index ($INX +3.43%) and the Nasdaq Composite Index ($COMPX +3.32%) moved into positive territory for the year for the first time since Aug. 3.
European stocks soared on the news, which broke after 3:30 a.m. local time in Brussels, Belgium, where leaders of the eurozone nations were holding their second summit in three days.
An irony of the glee that pervaded markets today was that the euro rose sharply against the dollar. As a result, commodity prices rallied strongly. Gold (-GC) nearly reached $1,750 an ounce. Light sweet crude oil (-CL) in New York jumped above $93 a barrel and is up 17% for the month.
The Dow closed up 340 points, or 2.9%, to 12,209. The S&P 500 climbed 43 points, or 3.4%, to 1,285, and the Nasdaq surged 88 points, or 3.3%, to 2,739.
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After the close, Hewlett-Packard shares were up 0.9% to $27.22, on top of a 4.9% gain to $26.99 in regular trading. The company said it was abandoning a plan to spin off its computer business.
Breaking the PC business off would have required one-time expenses of about $1.5 billion, Cathie Lesjak, the company's chief financial officer, told The Wall Street Journal.
In addition, factors such as reduced purchasing power and the elimination of joint branding opportunities would have cost H-P about $1 billion a year, Lesjak said.
The Dow is looking at a record
The Dow is up about 11.9% for October -- its best October ever and potentially its best monthly performance since January 1987. The S&P 500, up 13.5%, is looking at its best October and best monthly performance since October 1974. The Nasdaq, up 13.4% for the month, is enjoying its best October since 1974 and best month since October 2002.
Gold settled up $24.20 to 1.4%, to $1,747.70 an ounce, its highest settlement since Sept. 21, when the metal finished at $1,808.10. It peaked at $1,749 an ounce. Silver (-SI) jumped $1.807, or 5.4%, to $35.12 an ounce. Copper (-HG) had surged 20.2 cents, or 5.8%, to $3.692 a pound.
Crude oil was was up $3.31, or 3.7%, to $93.51 a barrel. Brent crude jumped $3.31 or 3% to $112.22.
Financial stocks were the market's strongest sector, thanks to gains in big banks. Shares of Citigroup (C +9.70%) were up 9.7% to $34.17. Bank of America (BAC +9.56%) had aded 9.4% to $7.21 -- its highest price in a month. JPMorgan Chase (JPM +8.31%) had gained 8.3% to $37.02.
All of the 44 domestic indexes that Market Dispatches tracks are higher, led by indexes tracking securities brokers, steel makers and insurance companies. Morgan Stanley (MS +17.00%) shot up 17% to 19.41. U.S. Steel (X +11.92%) soared 11.9% to $24.97.
Something to worry about
If you're looking for something to worry about, it's volume.
New York Stock Exchange volume barely reached 1 billion shares. That essentially means that the bulk of today's buying came from short sellers -- traders who had bet the market would go lower. They were buying in a panic because of the quickness of the market turn overnight.
Some of the biggest gains -- in metals and bank stocks, for example -- came because short sellers were forced to buy shares to cover their positions.
That buying may have run its course by the end of the day. The proof: the late selling that knocked the Dow as many as 137 points between 3:26 p.m. ET and 3:56 p.m. The index did gain 43 points in the last few minutes of the session.
| Energy prices -- New York close | ||||||||||||
| Thur. | Wed. | Month chg. | YTD chg. | |||||||||
| Crude oil (-CL) | $93.96 | $90.20 | 18.64% | 2.82% | ||||||||
| (per barrel) | ||||||||||||
| Heating oil (-HO) | $3.1037 | $3.0210 | 11.67% | 22.02% | ||||||||
| (per gallon) | ||||||||||||
| Natural gas (-NG) | $3.7640 | $3.7750 | 2.67% | -14.55% | ||||||||
| (per mil. BTU) | ||||||||||||
| Unleaded gasoline (-RB) | $2.7072 | $2.6253 | 6.66% | 10.35% | ||||||||
| (per gallon) | ||||||||||||
| Brent crude | $112.29 | $108.91 | 9.27% | 18.51% | ||||||||
| (per barrel) | ||||||||||||
| Retail gasoline | $3.4440 | $3.4410 | -0.03% | 12.11% | ||||||||
| (per gallon; AAA) | ||||||||||||
The plan has big risks
The European debt solution has three components:
- Banks that own Greek debt have agreed to write down 50% of the value of the bonds in hopes of getting Greek debt down to 120% of gross domestic product by 2020. It's around 160% of GDP now.
- Many big banks will be required to raise new capital. A sticking point: Where will the new capital come from?
- The European Financial Safety Facility, the rescue fund for governments, is to be expanded to 1 trilliion euros or $1.4 trillion.
There are plenty of questions and skepticism about the plan. Just getting Greece in shape is going to be a major task. Its finances are a mess, and it is in the throes of a recession so severe that many analysts don't think Greece will be able to continue using the euro as its currency. There are worries the recapitalization of Europe's troubled banks will be too little, too late.
Worse, as Capital Economics said today, the plan does not attack "the peripheral economies’ deep-seated economic problems and fundamental lack of competitiveness within the single currency."
Growth is better, but other issue remain
First, the good news: The economy grew 2.5%, as expected, in the third quarter, according to an initial reading on gross domestic product. That's up from 1.3% in the second quarter.
The report, said Capital Economics, "would seem to make a mockery of fears that emerged early in the quarter that the economy was entering a recession."
Consumer spending was stronger, particularly at the end of the quarter. Business investment jumped by an annualized 16.3%, and exports grew.
The bad news is that the growth rate is unlikely to be so robust going forward. Cuts in federal, state and local government spending will be a big drag on the economy.
Now, the bad news: The Labor Department's weekly jobless claims report showed initial claims falling by 2,000 to 402,000 in the week ended Oct. 22. To produce real job growth requires claims to fall to 350,000 or less.
The National Association of Realtors said pending-home sales fell 4.6% in September from the prior month, disappointing expectations for a flat reading.
Exxon's big quarter
Dow component Exxon Mobil (XOM +1.00%) topped Wall Street’s profit expectations by a penny with third-quarter earnings of $2.13 a share. Shares rose 1% to $81.88.
Exxon sold oil in the United States for an average of $95.58 a barrel, up 35.2% from a year earlier. Internationally, it charged $107.32 a barrel, up 45.4%. It also charged more for natural gas.
Revenue for the quarter jumped 31.5% to $125.3 billion. For the first nine months of 2011, Exxon's revenue came to $364.8 billion -- larger than Greece's GDP of about $325 billion.
Rival Chevron (CVX +2.06%) reports Friday; shares were up 2.1% to $108.97.
Shares of Royal Dutch Shell (RDS.A +1.30%) rose 1.3% to $73.31 after the oil company said third-quarter profit doubled on higher oil prices.
Meanwhile, Dow component Procter & Gamble (PG +0.48%) met analysts’ estimates with fiscal-first-quarter earnings of $1.03 a share. The company said sales rose 9% to $21.92 billion, topping the Street estimate of $21.53 billion. The stock, however, was up only 0.5% to $65.26.
Aetna (AET +4.96%) shares were up 5% to $40.83 after the health insurer's third-quarter earnings of $1.40 a share beat the consensus estimate of $1.15 a share. The profit gain came on lower-than-expected usage.
Leaders and laggards
Akamai Technologies (AKAM +15.43%) gained 15.4% to $27.45. The operator of server networks that let businesses speed data delivery forecast fourth-quarter sales of $303 million to $315 million. That topped some analysts' estimates. Pushing the business: Growing demand for new services, such as security protection.
Ancestry.com (ACOM -9.00%) lost 9% to $21.84. The online provider of family histories forecast fourth-quarter revenue may be as little as $103 million, compared with the average analyst estimate of $104.5 million.
Logitech International (LOGI +14.76%) advanced 14.8% to $10.34. The world's biggest maker of computer mice confirmed its forecast after three profit warnings in the past seven months.
Norfolk Southern (NSC +7.73%) rose 7.7% to $75.16. The second-biggest eastern U.S. railroad posted a quarterly profit that beat analysts' estimates on higher revenue per unit and volume.
United Continental Holdings (UAL -1.13%) fell 1.1% to $20.11 after falling to as low as $19.47. The parent of United Airlines and Continental Airlines posted a third-quarter profit that lagged behind analysts’ estimates as higher fuel expenses overcame rising fares during the summer travel season.
McDermott International (MDR -25.02%) sank 25% to $10.97. The offshore oil and gas contractor forecast third-quarter revenue of no more than $880 million, falling short of the average analyst estimate of $889.5 million.
| Short hits from the markets -- New York close | ||||||||||||
| Thur. | Wed. | Month chg. | YTD chg. | |||||||||
| Treasury yields | ||||||||||||
| 13-week Treasury bill | 0.0100% | 0.010% | -50.00% | -91.67% | ||||||||
| 5-year Treasury note | 1.202% | 1.062% | 24.56% | -40.38% | ||||||||
| 10-year Treasury note | 2.395% | 2.203% | 24.48% | -27.53% | ||||||||
| 30-year Treasury bond | 3.446% | 3.224% | 17.97% | -21.00% | ||||||||
| Currencies | ||||||||||||
| U.S. Dollar Index | 75.011 | 76.473 | -5.14% | -5.39% | ||||||||
| British pound | 1.6108 | 1.5967 | 3.40% | 3.22% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in pounds | £0.621 | £0.626 | -3.29% | -3.12% | ||||||||
| Euro in dollars | $1.42 | $1.39 | 6.37% | 6.09% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. $ in euros | € 0.704 | € 0.719 | -5.99% | -5.74% | ||||||||
| U.S. $ in yen | 76.05 | 76.25 | -1.41% | -6.54% | ||||||||
| U.S. $ in Chinese | 6.38 | 6.35 | 0.06% | -3.52% | ||||||||
| yuan | ||||||||||||
| Canada dollar | $1.009 | $0.996 | 5.66% | 0.55% | ||||||||
| (in U.S. $) | ||||||||||||
| U.S. dollar | $0.992 | $1.004 | -5.28% | -0.55% | ||||||||
| (in Canadian $) | ||||||||||||
| Commodities | ||||||||||||
| Gold (-GC) | $1,747.70 | $1,723.50 | 7.73% | 22.96% | ||||||||
| (per troy ounce) | ||||||||||||
| Copper (-HG) | $3.692 | $3.490 | 17.13% | -16.98% | ||||||||
| (per pound) | ||||||||||||
| Silver (-SI) | $35.1170 | $33.3100 | 16.73% | 13.51% | ||||||||
| (per troy ounce) | ||||||||||||
| Wheat (-ZW) | $6.4400 | $6.1950 | 5.70% | -18.92% | ||||||||
| (per bushel) | ||||||||||||
| Corn (-ZC) | $6.5150 | $6.37 | 9.96% | 4.66% | ||||||||
| (per bushel) | ||||||||||||
| Cotton | $1.0432 | 1.0032 | 4.12% | -27.96% | ||||||||
| (per pound) | ||||||||||||
| Coffee | $2.3775 | 2.369 | 3.87% | -1.14% | ||||||||
| (per pound) | ||||||||||||
| Crude oil (-CL) | $93.96 | $90.20 | 18.64% | 2.82% | ||||||||
| (per barrel) | ||||||||||||
137Comments
27 seconds ago
While it's nice to hear some good economic news these days but... Exxon/Mobil posting a 40+ jump in profits while selling less volume is dispicable at best! Actually in my mind their behavior SHOULD be criminal! At the very least they should let us all fill up for FREE for the remainder of the year!
28 seconds ago
1 minute ago
Exxon and Shell report BILLIONS in profits for JUST the quarter and nobody thinks they are gouging us on the price of gasoline? Where is our Federal government to investigate these greedy, manipulative companies that are helping to bring down our economy? And, no, I do not drive a gas hog. I just don't like being taken advantage of by these manipulators.
That's capitalism at it's best. It's simple Supply/Demand economics, but at the end of the day, you have to remember as my good pal Mitt Romney so eloquently put it: "Corporations are people too" ya know!3 minutes ago
Euphoria is a great feeling of well being and happiness. There is an agreement that the Europeans have come to some sort of solution for the fiscal mess in Greece. IT HAS NOT HAPPENED AS YET. What are they planning to do about Italy, Spain and Portugal???????? Where is all this money coming from? Are they going to have to start to print money to cover their A_ _ _ _? If so, how will that affect the dollar?
TOO MANY UNANSWERED QUESTIONS in Europe to have this feeling of euphoria. Today's market was only a knee jerk reaction. This up and down elevator ride we've been experiencing in the markets isn't gong to end soon. Be careful out there it's a rough road to travel.
Question:
Why is the person that invests your hard earned dollars called a "BROKER"?
TOO MANY UNANSWERED QUESTIONS in Europe to have this feeling of euphoria. Today's market was only a knee jerk reaction. This up and down elevator ride we've been experiencing in the markets isn't gong to end soon. Be careful out there it's a rough road to travel.
Question:
Why is the person that invests your hard earned dollars called a "BROKER"?
6 minutes ago
On August 9th this year, the DOW soared 430 points on good news from the FED. On September 9th, the DOW dropped 304 points on the news that Greece was in trouble again and the EU was having problems on the vote. Today, the DOW soars again on good news coming out of Europe. I'll bet a dollar to a dime that the market takes a nose dive again after Black Friday on the bad news from retailers in this country that people aren't shopping as much this year. Why? BECAUSE THEY DON'T HAVE A JOB!!!!!!!!!!!!!!
7 minutes ago
13 minutes ago
14 minutes ago
Here we go again with Exxon-Mobil's record profits. It is a vicious circle of feeding the politicians in Washington and gaining more money to bring to the trough the next quarter. The America people are being raped! The economy will never get any better until this rotten cycle is dismantled.
14 minutes ago
It is all a bunch bull sh-- as far as i am concerned!!! I have lived a long time it is time for election ,remember and those who want him back in. I AM NO PARTY SO MY SAY DOES NOT COUNT IN OUR CONTROLLED LITTLE WORLD, I DO NOT TRUST ANY OF THEM!!!!!!!!!REALLY ANYMORE YOU ARE F--- BY BOTH PARTIES. THE RICH AND GOVERNMENT ARE PLAYING THIS OUT JUST LIKE THE PRESIDENTS BEFORE HIM!!!!! SO QUIT JUST BLAMING HIM. I DO NOT EVEN LIKE BUT FARE IS FARE!!!!!!!!!!!!!!!!
17 minutes ago
17 minutes ago
Exxon and Shell report BILLIONS in profits for JUST the quarter and nobody thinks they are gouging us on the price of gasoline? Where is our Federal government to investigate these greedy, manipulative companies that are helping to bring down our economy? And, no, I do not drive a gas hog. I just don't like being taken advantage of by these manipulators.
18 minutes ago
18 minutes ago
Prices of oil keep going up and spending will stop. The reason the economy has been better may have something to do with fuel prices finally dropping a little. If you want to see a major jump in the economy drop the fuel prices back to a reasonable amount and see what happens. It amazes me how oil companies continue to show such a major profit, and the gov't is not doing anything to help control them ripping us off!
19 minutes ago
21 minutes ago
21 minutes ago
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Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Gradient Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Telekurs.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
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