US Markets

U.S. Equities Surge By Most Since July on Manufacturing Data

U.S. Session Key Developments

•    U.S. Manufacturing Unexpectedly Rises in August For First Time in Four Months
•    Crude Oil Posts Largest One-Day Gain Since August 2
•    Precious Metals Dip Slightly on Reduced “Safe-Haven” Demand

U.S. stocks posted their largest gain in nearly two months following strong economic reports out of China and a better-than-expected ISM manufacturing reading for the month of August.  The Dow Jones Industrial Average rallied 254 points on the day to 10269, while the S&P 500 added 30 points to 1080.  U.S. equities followed global stocks higher after China announced its purchasing managers’ index rose from 51.2 to 51.7, beating economist forecasts.  The news provided a strong boost to risk sentiment, sending stocks and many commodities higher.  Crude oil rallied 2.7 percent, its largest one-day gain since August 2, to $73.91.  Furthering the bulls’ case was the U.S. manufacturing release, which showed the industry unexpectedly expanded in August for the first time in four months, rising from 55.5 to 56.3.  Readings above the 50 level indicate expansion.  The report sent the Dow Jones Industrial Average over 200 points higher on the day, its largest one-day gain since July 7.  As for currencies, the risk trade was clearly present, as the Aussie and Kiwi rallied against the U.S. dollar by 2.3 percent and 1.8 percent respectively.  The Euro also rallied against its American counterpart, gaining 1 percent to close above the $1.28 level for the first time since August 19.

DJIA 30 / 10269.47 / +254.75 / +2.54%
The Dow Jones Industrial Average rallied for a second straight day as all 30 of the blue-chip stocks closed higher on the session.  Bank of America led the financials higher, rallying over 6 percent following an SEC settlement, while Caterpillar shares gained 4.6 percent on the positive manufacturing data.  Other strong performers included JPMorgan Chase, General Electric, and Chevron, which each rose at least 3.5 percent on the day.

S&P 500 / 1080.29 / +30.96 / +2.95%
The broad-based S&P 500 gained nearly 3 percent today as industrials, financials, and commodities shares rallied at least 3.5 percent each.  Exxon Mobil, the largest company in the S&P oil & gas sector by market cap, gained 2.9 percent on higher energy prices and stronger-than-expected manufacturing data, while copper and gold miner Freeport McMoRan rose nearly 6 percent on bullish data from China.  Iron ore supplier Cliffs Natural Resources also contributed to the commodity sector’s gains, rallying 5.6 percent.

NASDAQ / 2176.84 / +62.81 / +2.97%
The tech-heavy Nasdaq posted the largest gain among major U.S. indices, ending a three-day losing skid.  Technology shares were especially strong, led by Chinese search giant Baidu which rallied 4.4 percent.  Adobe, Cognizant, and Oracle also rallied at least 3.4 percent on the day.

U.S. Equities Mixed as Fed Minutes Signal No Large-Scale Asset Purchases

U.S. Session Key Developments

•    August Consumer Confidence Rises, Chicago Purchasing Index Disappoints
•    Crude Oil Posts Largest One-Day Decline Since June, Gold Rallies on Safe-Haven Appeal
•    Greenback Gains on Commodity Currencies, Slips Versus Euro

U.S. stocks declined were mixed following yesterday’s slump, as today’s Fed minutes showed no plans for large-scale asset purchases in the near-term.  The S&P 500 has dropped over 7 percent since its first day of trading this month, while the Dow Jones Industrial Average has declined over 6 percent.  During today’s session, equity trading was quite volatile, as economic data releases sent mixed signals to market participants.  Encouraging the bullish case was the backwards-looking S&P/CaseShiller Home Price Index, which showed a better-than-expected housing market in the month of June, as well as the U.S. consumer confidence report, which unexpectedly rose from a revised 51.0 reading to 53.5 in August.  Offsetting this positive data, however, was a disappointing August Chicago Purchasing Index reading of 56.7, its lowest reading since 2009, as well as a worse-than-expected NAPM-Milwaukee release.  The most important release of the day came during afternoon trading, however, as the Federal Open Market Committee released the minutes from its August meeting.  Many traders looked for further dovish commentary from Fed officials regarding asset purchasing plans, but committee rhetoric did not call for further asset purchases in the near-term.  In fact, some officials showed concern that a decision to keep securities holdings unchanged could incorrectly send signals to the markets that the central bank intends to resume large-scale asset purchases, which is currently not the case.  As for the economic outlook, policy makers saw more modest second-half growth than previously expected, with low rates of inflation and a small possibility of deflationary pressures.

DJIA 30 / 10014.72 / +4.99 / +0.05%
The Dow Jones Industrial Average posted the largest gain among major U.S. indices as sixteen of its 30 blue-chip stocks closed trading in the black.  JPMorgan Chase had a strong day, rising over 1.4 percent, after announcing that it will begin to shut down its proprietary trading operations to comply with new investment bank regulations.  Other stocks performing well included AT&T, which rose 1.5 percent, as well as Merck and Caterpillar, which each gained over 1 percent.

S&P 500 / 1049.33 / +0.41 / +0.04%
The broad-based S&P 500 gained for the first time this week as telecommunications and basic materials shares rallied over 1 percent on the day.  The telecom sector was led by a 4.6 percent increase in Sprint Nextel, after the firm announced it would expand its Colorado operation and add jobs to a plant there.  Basic materials were led by a 3.6 percent gain for Cliffs Natural Resources as well as bullish trading in Newport Mining and Freeport McMoRan.  Mining firms have benefited from rising metals prices, including gold and copper, which rose 0.8 percent and 2.1 percent respectively.

NASDAQ / 2114.03 / -5.94 / -0.28%
The tech-heavy Nasdaq declined for a third session in four days as the index now sits 6.8 percent lower on the year.  Technology shares were especially weak today, falling nearly 0.7 percent as shares of Research in Motion and Broadcom fell over 5 percent each.

Written by James Russell, DailyFX Research

Please send any questions or comments to JRussell@fxcm.com

U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. Session Key Developments

•    Speculation Arising that Fed May Introduce Another Round of Quantitative Easing
•    No data releases for U.S. Leaves Room for Recovery Optimism

U.S. Equities Close Near 12-Week High as Investors Await Results of FOMC Meeting

U.S. equity markets built on last week’s rally on Monday, with each index pushing further into positive territory for 2010. The NASDAQ gained the most, up three-quarters of a percent, while both the DJIA and S&P gained approximately one-half of a percent. The three indices are now at levels not seen for the past 12-weeks, as significant rallies by the Pound, Euro, and commodity currencies have exhibited renewed investor confidence in financial markets. Although some economists believe that the recovery is slowing, as evidenced by slowing factory orders, and an expected increase in U.S. Wholesale Inventories, sentiment is gathering that as long manufacturing and service indicators continue to show signs of expansion, growth will be sustained, and earnings will be boosted in the remaining months of 2010. The DJIA is now up 2.60 percent on the year, while the S&P and NASDAQ are up 1.14 percent and 1.61 percent, respectively.

Going forward, tomorrow could prove volatile as a flurry of U.S. economic data will be released during the Tuesday session. Nonfarm Productivity data for the second quarter is expected to show an increase, up 0.2 percent, though down from the 2.8 percent reading previously. IBD/TIPP Economic Optimism, a measure of small business confidence, is expected shortly after the session open. The Federal Open Market Committee Rate Decision, though expected to hold the key interest rate at 0.00-0.25 percent, will likely provide the greatest amount of event risk in the session. Although no change in rate is anticipated, investors are interested in the FOMC’s rhetoric going forward; it is expected that the Federal Reserve may expand stimulus for some time. Finally, in what is typically held lightly due to its release after the market close, the ABC Consumer Confidence reading for the period of August 8 will be announced at 17:00 EST. Currently, Confidence sits at -50.

DJIA 30                     10,698.75                      +45.19                       +0.42%

The Dow Jones Industrial Average gained 45.19 points, or 0.42 percent, during intraday trading to close at 10698.75. After opening nearly 40 points higher, the index entirely retraced its early move within the first 30 minutes of the session before advancing steadily to close just below 10700. The DJIA 30 was led by Cisco Systems, whose share price added 2.78 percent to close at 24.76. Hewlett-Packard was the worst performing company listed as part of the Dow; HP’s shares lost an astounding 8.01 percent following the announcement that Chief Executive Mark Hurd would be leaving the company in the aftermath of recent sexual harassment allegations. The company’s share price is testing its 52-week low of 41.94, ending the session trading at 42.59.

S&P 500                       1,127.78                        +6.14                         +0.55%

The broad-based S&P 500 finished up 6.14 points, or 0.55 percent, to close at 1127.78 after Monday’s trading session. The S&P now sits at its highest level since May amid speculation the FOMC might introduce new quantitative easing measures to stimulate growth at its meeting tomorrow. All ten of the index’s sectors posted gains today, with the telecommunications and consumer services sectors outperforming the rest. Sprint Nextel led the way, gaining 2.92 percent intraday to close at 4.58. Shares of Sprint have gained over 25 percent year-to-date, making it one of the top performing companies listed on the S&P 500.

NASDAQ                     2,305.69                       +17.22                       +0.75%

The NASDAQ outperformed its American counterparts on Monday, adding 17.22 points, or 0.75 percent, to close at 2305.69. The tech-based index has been unable to hold on to its gains beyond the significant 2300 level in recent weeks, but a breakout may be on the horizon (see below). Shares of Research in Motion (RIMM) surged following an announcement the company would cave to Saudi Demands regarding its privacy policy. The company saw its share price gain 3.50 percent intraday to close at 55.32.

Written by Jay B. Steinberg and Christopher Vecchio, CFD Trading Analysts
For Questions/Comments, please contact him at JSteinberg@fxcm.com

U.S. Equities Decline on Jobless Claims, Chain Store Sales

U.S. Session Key Developments

•    Initial Jobless Claims Rise Last Week By Most in Three Months
•    July ICSC Chain Store Sales Decline From Month Prior
•    Commodities Continue Ascent, Led By Surging Wheat Prices

U.S. stocks declined for a second day this week as an unexpected rise in American initial jobless claims and continuing claims stoked concerns that the U.S. recovery is stalling.  The weakness in equities caused the Dow Jones Industrial Average to dip to 10674, while the S&P 500 fell to 1125.  The jobs data, released by the Labor Department one hour before U.S. trading began, showed that initial jobless claims rose by 19,000 to 479,000 in the week ended July 31, the most since April and worse than the most bearish economic forecasts.  Continued claims were also higher than expected, rising to 4.53 million in the week ended July 24.  The employment data seemed especially concerning to investors today, due to concerns that it could be a bearish precursor to tomorrow’s nonfarm payrolls release at 12:30 PM GMT.  The consensus estimate is for a drop of 65,000 in July nonfarm payrolls, compared to a decline of 125,000 in the month prior.  Furthering the bearish case today was the ICSC Chain Store Sales release, which showed that sales at 30 chain stores climbed 2.8 percent in July, falling short of last month’s 3.0 percent gain.  The data fell short of forecasts and further eroded sentiment, sending risky assets lower and pushing the two-year Treasury note yield toward an all-time low, at 0.53 percent.

On the commodities front, agriculture continued its strong showing, led by wheat contracts, which rose over 7.9 percent to $815.25 on the CBOT.  The move came after an announcement from Prime Minister Vladamir Putin that Russian farmers would no longer be allowed to export the commodity due to the country’s worst drought in 50 years.  Other commodity classes posting strong gains today included metals, led by 1 percent gains for aluminum and copper, while silver and gold futures rallied 0.4 percent and 0.1 percent on the COMEX, respectively.  The active gold contract closed the day above the $1197 level, a seventh consecutive gain for the yellow metal and its highest closing price since July 15.

DJIA 30                      10,674.98                    -5.45                -0.05%
The Dow Jones Industrial Average dipped slightly lower today, as sixteen of its 30 bluechip stocks closed lower on the day.  American Express posted the largest decline, dropping over 2 percent after hinting at possible changes to its financial targets.  Other firms pulling down the index included Pfizer, which fell 1.5 percent, and Microsoft which declined 1.4 percent.  Caterpillar, on the other hand, posted the largest gain on the Dow, rallying 1.1 percent after announcing an expansion and new hiring at a North Carolina factory.

S&P 500                               1,125.81                               -1.43                      -0.13%
The broad-based S&P 500 fell for a second time this week, led by a 0.4 percent decline in financial shares.  Bank stocks were especially weak, dropping over 0.5 percent after Goldman Sachs announced it may spin off part of its proprietary trading operations into an independent entity.  The investment bank’s share price fell by 0.5 percent as a result, while shares of U.S. Bancorp and Bank of America dropped over 1 percent.  Furthering index weakness today were retailers, led by a 7.7 percent decline for J.C. Penney, after the third-biggest U.S. department-store announced a 0.6 percent decrease in July sales.

NASDAQ                              2,293.06                               -10.51                    -0.46%
The tech-heavy Nasdaq posted the biggest loss among major U.S. indices, dropping nearly half of one percent on weakness in technology shares.  Research in Motion contributed heavily to the move, falling over 2 percent to $52.23, its lowest closing level since July 8.  Shares of the Blackberry maker have dropped over 30 percent since April.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

U.S. Stocks Gain on Increased Earnings Forecasts

U.S. Session Key Developments

•    Home Sales, Leading Indicators Beat Expectations
•    Profit Forecasts Raised For Multiple Firms
•    Crude Oil Rallies To Eleven-Week High

U.S. stocks followed their European and Chinese counterparts higher, as better-than-expected home sales and improved earnings forecasts helped boost investor sentiment regarding the economic recovery.  The positive news sent stocks on the Dow Jones Industrial over 1 percent higher to 10322, while shares on the S&P 500 gained over 2 percent to 1093.  On the earnings side, companies ranging from United Parcel Service Inc. to AT&T Inc. improved their earnings outlooks as executives see growing demand from overseas.  Qualcomm shares, for example, rose 8.2 percent as the chipmaker said today that it expects higher profits and selling prices for its products this year.  As for the economic docket, home sales fell 5.1 percent in June to a 5.37 million annual rate, but this decline was better than the 9.9 percent decrease expected.  It was the second consecutive monthly decline for purchases, which may continue to struggle as the federal incentives to buy homes cease.  Also released today was the leading indicators, which declined 0.2 percent, less than the 0.3 percent drop expected.  Leading indicators, which point to the direction of the economy over the next 3-6 months, have declined in 2 of the past 3 months.

DJIA 30                         10,322.30                              +201.77                         +1.99%
The broad-based Dow Industrial Average rallied nearly 2 percent today, led by Boeing Co. which rallied over 5 percent to $66.  The Chicago-based planemaker announced that it won over 200 jetline orders worth nearly $30 billion at this week’s Farborough Air Show.  This was more than three times the number of orders announced in Paris a year ago and showed a huge rebound in demand.  Other firms posting large gains on the day included American Express, which rose 4.9 percent, and Du Pont, which added over 3 percent.

S&P 500                         1,093.67                               +24.08                           +2.25%
The S&P 500 posted its largest gain since July 7, as all ten of its index sectors closed in the black.  AT&T gained over 2 percent after announcing that its 2Q profits beat analyst estimates, while the KBW Bank Index rose nearly 4 percent on a positive quarterly profit release from Fifth Third.  Shares of Xerox and 3M Co. climbed 7 percent and 3 percent, respectively, after each company boosted its full-year revenue forecast.

NASDAQ                        2,245.89                             +58.56                           +2.68%
Shares on the tech-heavy Nasdaq posted the largest gain among major U.S. indices, as Microsoft announced fourth-quarter earnings that topped analyst estimates.  Furthering bullish momentum for the technology sector was Qualcomm, which added over 8 percent after raising its 2010 profit forecast and reporting better-than-expected third quarter sales.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

U.S. Stocks Rebound As Traders Look Towards Bernanke Speech

U.S. Session Key Developments

•    Market Participants Await Fed Bernanke’s Semiannual Senate Address Tomorrow
•    Housing Starts Fall in June to Lowest Level Since October
•    Crude Oil Rallies For Second Day, Gold Rebounds Nearly 1 Percent

U.S. stocks rallied today, erasing an initial slide following worse-than expected housing starts and building permits data.  Investors looked past the data and towards Federal Reserve Chairman Ben Bernanke’s Senate address tomorrow, speculating that the Fed Chairman would announce new plans to help revive the economy.  The positive sentiment helped boost equities, driving the S&P 500 over 1 percent higher to 1083, while the Dow Jones Industrial Average gained 0.7 percent to 10229.  One rumor circulating regarding Bernanke’s speech tomorrow, is that the central bank plans to cease paying interest to private bank reserves currently being held at the Fed.  This maneuver would, in theory, encourage banks to lend out that money into the real economy because there would be no payout for holding it as reserves within the Fed.  Such a move could provide a major boost to asset prices and help ward off deflationary forces that many economists see as problematic in the current economic environment.

The Fed rumors had an immediate impact on commodities, as energy and precious metal prices moved higher on the session.  Crude oil rallied 1.1 percent to $77.44, while gold rose 0.8 percent to $1192.  As for Treasuries, the 2-year and 10-year yields declined 1 basis point each to 0.576 percent and 2.948 percent, respectively.  The 30-year yield was unchanged at 3.978 percent.

DJIA 30                         10,229.96                              +75.53                         +0.74%
The broad-based Dow Industrial Average rallied for a second day as twenty-three of its thirty bluechip stocks closed higher.  Home Depot led the index with a 3.1 percent gain, while retailer Walmart and aluminum giant Alcoa rose over 2.5 percent each.  IBM was the biggest laggard, declining 2.5 percent on weak 2Q earnings, while Pfizer and Johnson&Johnson dropped over 1 percent each.

S&P 500                         1,083.48                               +12.23                           +1.14%
The S&P 500 posted the largest gain among the major U.S. indices today, as nine of its ten sectors closed higher on the day.  Health care stocks were the lone exception, but their losses were trumped by a 3 percent rise in basic materials shares and at least 1.5 percent gains for industrials, consumer goods, and energy stocks.  Gold and copper miner Freeport McMoRan rallied over 5 percent to boost basic materials, as investors speculate on further quantitative easing from the Federal Reserve.

NASDAQ                        2,222.49                             +24.26                           +1.10%
Shares on the tech-heavy Nasdaq rallied as technology shares gained 1.2 percent.  Shares of search engine giant Google gained over 3.3 percent on the day, while Apple rebounded from a sour two weeks, closing 2.6 percent higher.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Global Equities Slump as U.S. Confidence Hits Eleven-Month Low

U.S. Session Key Developments

•    University of Michigan Consumer Confidence Falls to Lowest Level Since August 2009
•    Consumer Prices Decline in June for Third Consecutive Month
•    Japanese Yen Rises to a 2010 High Versus Greenback

U.S. stocks posted their worst day since June 29, following weakness in foreign markets and an unexpectedly poor consumer confidence reading from the University of Michigan.  The S&P 500 shed 2.8 percent to 1064, continuing the bearish momentum that began with a 2.8 percent plunge for Japan’s Nikkei 225 overnight.  The main catalyst for risk aversion during the U.S. session was the University of Michigan’s confidence indicator, which showed that consumer confidence unexpectedly fell from 76.0 to 66.5 in July, its lowest reading in eleven months.  The reading showed that a record-low share of Americans expect their incomes will rise in the next 12 months, making a strong rebound in consumer spending seem unlikely.

As for commodities, the risk sell-off led to a third consecutive decline in crude oil prices as well as declines in precious metals despite their “safe haven” qualities.  NYMEX Crude fell 0.9 percent to $75.87, while COMEX gold shed 1.3 percent and COMEX silver dropped 2.7 percent to close at $1192 and $17.85, respectively.  The U.S. Dollar Index, on the other hand, ended a three-day skid, while the Japanese Yen gained against all of its major cross-currencies.  U.S. Treasuries also rallied, as 10-year bond yields fell to 2.923 percent.

DJIA 30                         10,097.90                              -261.41                         -2.52%
The broad-based Dow Industrial Average fell for a second day as all thirty shares on the index closed in the red.  Bank of America plunged 9.1 percent to lead the descent, on news that the bank’s second quarter revenues fell short of analyst expectations.  Other stocks falling sharply on the Dow were American Express, General Electric, and Home Depot, which fell over 4 percent each.

S&P 500                         1,064.88                               -31.60                           -2.88%
The S&P 500 gave back all of its gains this week, as financials plunged 4 percent and industrial, basic materials, and consumer services dropped over 3 percent each.  Seventy-one of the largest seventy-two S&P companies by market cap closed lower, with Goldman Sachs being the lone exception after settling its pending SEC lawsuit after hours yesterday.  Overall, the S&P index is down 4.5 percent year-to-date.

NASDAQ                        2,179.05                             -70.03                           -3.11%
Shares on the tech-heavy Nasdaq posted the largest loss among major U.S. indices as technology shares declined over 3 percent.  Google plunged 6.9 percent after the internet search giant’s second quarter earnings missed analyst estimates, while Research in Motion, Cisco, and Dell dropped over 4 percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

U.S. Equities Reverse Morning Losses, Goldman Sachs Settles SEC Suit After Hours

U.S. Session Key Developments

•    Goldman Sachs Pays Record $550 Million to Settle SEC Suit
•    Financial Reform Regulation Passes Following 60-39 Senate Vote
•    Initial Jobless Claims Fall to Lowest Level Since August 2008

U.S. stocks managed to overcome weakness in Asia and Europe today, as the S&P 500 rallied to its highest closing level since June 21.  Initially, the index fell to 1080 as a better-than-expected jobless claims report failed to overcome weakness in foreign equities overnight.  The S&P then traded flat for most of the day until the bulls found their footing in the last 30 minutes, pushing the S&P to a 1096 close.  Overall, investors appeared more confident about the fate of the U.S. financial sector, as JPMorgan Chase beat its 2Q earnings estimates and financial regulation finally found the 60 votes needed to pass the Senate floor.  Although some analysts believe the financial reform bill could reduce bank profits, many realize that Wall Street avoided a “tougher” bill and the current bill’s passage provides clarity to investors.  Furthering bullish sentiment in financial shares, was a rumor that Goldman Sachs would be settling its SEC lawsuit with the U.S. government after trading closed.  Forty minutes after close, the SEC announced that Goldman agreed to pay a record $550 million and change its business practices to settle claims that it misled investors in collaterized debt obligations linked to subprime mortgages.  Goldman Sachs acknowledged it made a “mistake” and that marketing materials for certain financial instruments had “incomplete information.”

As for the economic docket, initial jobless claims fell to 429,000 in the week ended July 10, the lowest level since August 2008 and better than the expected reading of 438,000.  Continuing claims, on the other hand, rose to nearly 4.68 million in the week ended July 3, worse than the 4.44 million expected reading.  Also disappointing investors was a drop in Empire Manufacturing from 19.57 to 5.08 in July and a decline in the Philadelphia Fed Index from 8.0 to 5.1 in the same month.  Also released this morning were wholesale prices, which fell 0.5 percent in June, signaling a lack of inflationary pressures in the current economic environment.

DJIA 30                         10,359.31                              -7.41                         -0.07%
The broad-based Dow Industrial Average closed lower for the first time since July 2, as a 2.1 percent decline in Travelers and a 1.7 percent drop in Bank of America shares weighed on the index.  Overall, ten of the thirty index stocks closed in the red.

S&P 500                         1,096.48                               +1.31                           +0.12%
The S&P 500 was the lone major U.S. index to close higher today, thanks to strong gains for utilities and consumer services.  Nextera Energy and American Electric rose over 1 percent each to lead utilities, while Target shares rose 2.3 percent to boost consumer services.

NASDAQ                        2,249.08                             -0.76                           -0.03%
Shares on the tech-heavy Nasdaq dipped slightly lower on today’s session, although technology stocks closed up 0.03 percent.  Blackberry-maker Research in Motion gained over 1.4 percent to lead the major tech stocks, while shares of NetApp also added over 1 percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

U.S. Equities Extend Winning Streak on Earnings Optimism

U.S. Session Key Developments

•    Alcoa Beats Expectations to Open Earnings Season for DJIA Companies
•    Small Business Confidence Declines to Three-Month Low
•    Dollar Index Falls to Lowest Level Since May 4

U.S. stocks followed their European counterparts higher today on investor optimism following a better-than-expected Alcoa earnings report.  The S&P 500 gained for a sixth consecutive session, rising 16 points to 1095.  The Alcoa release came out just after market close on Monday and showed per share profits of 13 cents, better than the consensus 11 cents per share that analysts expected.  This release helped boost U.S. equity futures overnight, but positive investor sentiment was tested throughout the session by poor economic releases.  Just prior to market open, the NFIB announced its Small Business Optimism reading fell from 92.2 to 89.0 in June, a three-month low and significantly below the 91.2 expected reading.  In the afternoon, the U.S. government announced its 21st consecutive monthly budget shortfall of $68.4 billion, although the reading was better than economists predicted.  Other news released during the trading session was that the U.S. trade deficit unexpectedly widened to $42.3 billion in May from $40.3 billion in April and that the IBD/TIPP economic optimism reading declined from 46.2 to 44.7 in July.

Despite the poor set of economic figures, investors extended their recent appetite for risk, driving equities and commodities higher.  Crude oil posted its largest gain since June, rising nearly 3 percent above the $77 per barrel level, while gold and silver futures gained over 1 percent each to $1213 and $18.25, respectively.  The bullish move in crude was likely attributable to the Alcoa earnings, as executives at the aluminum giant forecast growing global demand and an improved economic outlook going forward.  As for currencies, the Euro posted its biggest gain against the U.S. Dollar since June 10, pushing the EURUSD exchange rate to $1.2724, its highest closing level since May.  The U.S. Dollar Index fell nearly a full percent to 83.518, its lowest reading since May 4.  Looking ahead, tomorrow’s session could find direction from the advanced retail sales release at 8:30 AM ET, while all eyes will be on earnings releases from JPMorgan Chase, Bank of America, and Citigroup on Thursday and Friday.

DJIA 30                         10,363.02                            +146.75                         +1.44%
The broad-based Dow Industrial Average traded higher across the board, led by banks and basic materials shares, which increased nearly 2 percent each.  Alcoa’s positive positive earnings report helped boost the basic materials sector, while investors appeared confident that earnings releases from JPMorgan Chase, Citigroup, and Bank of America could boost bank shares later this week.  JPMorgan Chase gained 3.2 percent, while Bank of America added 3 percent.

S&P 500                         1,095.34                               +16.59                           +1.54%
The S&P 500 rallied over 16 points as financials, consumer services, and basic materials gained over 2 percent each.  Overall, 95 percent of S&P stocks traded higher and all ten index sectors finished the day in the black.  The index closed above 1095 for the first time since June 22.

NASDAQ                        2,242.03                             +43.67                           +1.99%
Shares on the tech-heavy Nasdaq posted the largest gain among major U.S. indices, despite a modest 1.5 percent move in technology stocks.  The sector was boosted by a 5 percent gain from Baidu and 3 percent gains for Research In Motion and Yahoo!  Shares of Apple, on the other hand, fell over 2 percent.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

U.S. Equities Advance on Late Rally

U.S. Session Key Developments

•    Asian, European Shares Rally Sharply on Improved Sentiment
•    Precious Metals Decline as Gold Falls Below $1200
•    Dollar Index Falls to Lowest Level Since May 5

U.S. stocks rallied in afternoon trading to close higher, following Asian and European shares into the black.  Risk sentiment was strong despite a worse-than-expected ISM Non-Manufacturing reading, pushing the S&P 500 to 1028 at close.  The Institute of Supply Management’s index fell from 55.4 to a four-month low of 53.8 as orders slowed for a third month and employment dropped.  Investors shook off the news, however, as bullish sentiment in Europe and anticipation of second quarter earnings boosted equities.  Although there are no bluechip earnings releases this week, Alcoa, Google, Citigroup, and General Electric will all release 2Q numbers next week.

On the commodities front, crude oil traded slightly lower on the day, closing just below $72 a barrel level.  Gold, on the other hand, experienced a massive move to the downside, closing at $1195 on the COMEX.  Improved risk sentiment made the “safe haven” qualities of gold less appealing to investors, who also sold off the U.S. Dollar against its major cross currencies.  The Dollar Index fell for a fourth time in five days, declining to 84.083 at the time of this writing.

DJIA 30                         9,743.62                            +57.14                         +0.59%
The broad-based Dow Industrial Average posted the largest gain among major U.S. indices as 22 of its 30 bluechip stocks closed higher on the session.  Microsoft was the index leader, ralling over 2.3 percent, while aluminum giant Alcoa gained 2.1 percent.  On the downside, Home Depot fell 1.5 percent, while shares of Bank of America and Verizon declined over 0.7 percent each.

S&P 500                         1,028.06                               +5.48                           +0.54%
The S&P 500 rallied over 5 points as the utilities and energy sectors gained over 1 percent each.  American Electric led the rally in utilities, gaining 2.6 percent, while Entergy Corporation rose over 2 percent.  As for energy shares, Baker Hughes and FMC Technologies surged 3.8 percent each, while Halliburton closed 2.8 percent higher.

NASDAQ                        2,093.88                             +2.09                           +0.10%
Shares on the tech-heavy Nasdaq ticked slightly higher as technology stocks rallied 0.7 percent.  Oracle and Microsoft gained over 2 percent each, while shares of Intel rallied 1.5 percent.  Adobe Systems and Applied Materials fell over 1.4 percent each.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

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