Equities

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

Equities

European Equities Gain Now That Stress Test Uncertainty is Gone – Or is it?

Europe Session Key Developments

• Investors Continue to Digest Friday’s Stress Test Results
• Newfound Risk Appetite Drives Equities Modestly Higher

European Equities Gain now that Stress Test Uncertainty is Gone – Or is it?

The Committee of European Banking Supervisors’ bank stress tests failed to trigger the price action many had expected from the long-awaited report. Perhaps this was a result of the convenient timing of the release, which was after Friday’s close of the European equity markets, when only North American traders had just a few illiquid hours to digest all 55-pages. However, even after the weekend, investor sentiment was still largely undecided regarding the results of the bank stress tests.

Many investors have questioned the accounting practices employed by the CEBS, which has led to questions regarding the “stressfulness” of the stress tests. The methodology used in the test ignored the possibility of a sovereign debt default, as officials claimed the European Union would never allow for such an event to occur. Recall that, according to Friday’s report, only seven of the 91 banks tested failed had failed; five of the seven were Spanish Cajas, one was an already nationalized Greek bank, and the last was the government-controlled German Hypo Real Estate. To some, it seems unreasonable that in the event of an “adverse scenario” (the situation devised by the CEBS to represent the worst ‘what-if’ imaginable), only one Greek bank would fail in light of the nation’s recent sovereign debt crisis. Regardless, countless officials in Europe have praised the test and asserted that it proves the “robustness” of the European financial system.

European equities responded Monday by closing higher across the board, though the sustainability of such a move is still in question. It will be interesting to see if any form of rally will surface on the (allegedly) more stable economic playing field. Here’s how the specific indices performed:

FTSE 100                      5351.12                   +38.50               +0.72%

The FTSE 100 finished another 38.50 points higher, or 0.72 percent, to close at 5351.12 after intraday trading. The British index’s recent performance has been impressive, as it is only down 1.14 percent on a year-to-date basis. The index was led higher by its financial and oil & gas sectors, which gained 1.66 percent and 1.44 percent respectively. The financial sector, which accounts for over 20 percent of the entire FTSE 100, was led higher by Barclays PLC, which gained 4.52 percent today. The announcement that embattled BP chief executive Tony Hayward would step down sent the company’s stock markedly higher, gaining 4.60 percent. The index’s Health Care sector was the main underperformer, losing 0.94 percent, led by Glaxo’s 1.26 percent retracement.

CAC 40                     3,636.18                  +29.13                 +0.81%

The CAC 40 index closed 29.13 points higher, or 0.81 percent, after Monday’s trading session. The French index was led by its impressive financial sector, which gained a remarkable 2.92 percent today. The sector’s performance is likely attributable to Friday’s bank stress test results, in which no French banks failed. Societe Generale was the most impressive individual performer, managing to gain 5.24 percent. Shares of BNP Paribas added 2.37 percent today to close at an even 51.00, back above the midpoint of its 52-week range.

DAX 30                        6194.21                    +27.87           +0.45%

The DAX 30 added another 27.87 points today, or 0.45 percent, to close at 6194.21. The German index remains the only major European equity index to remain in positive territory year-to-date, up 3.97 percent. As was the case with the FTSE and the CAC indices, the DAX was led higher by its financial sector. The sector gained 1.19 percent intraday, led by Commerzbank, which added 3.46 percent. The financial sector’s success can also be attributed to Friday’s CEBS report; Hypo Real Estate was revealed to be the only German bank to fail the stress test. The index’s basic materials sector was the worst performing sector; it lost 0.35 percent on Monday.

IBEX 35                     10506.70                   +118.50                 +1.14%

The IBEX 35 was the top performing European equity index on Monday, adding over 118 points, or 1.14 percent, to close back above 10500. The Spanish index is particularly vulnerable to the performance of its financial sector, which comprises over 40 percent of the entire index by weight. As such, today’s dramatic increase is not surprising; financial service companies and banks outperformed across the board today. BBVA was a noteworthy performer, adding 2.54 percent to close at 10.09. Banco Santander, the nation’s biggest bank, gained 1.04 percent. The only sector to finish lower was basic materials sector, which lost 0.70 percent.

S&P/MIB                        20819.96                    +215.88                  +1.05%

The Italian index gained a remarkable 215.88 points, or 1.05 percent, following the results of the CEBS’ stress tests. All Italian banks managed to pass, which sent to the MIB higher Monday. Despite its recent surge above the psychologically significant 20000 level, the index remains down 10.45 percent year-to-date.

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

Equities

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

Equities

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

Equities

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

Equities

U.S. Equities Pare Early Losses, Commodities Fall

U.S. Session Key Developments

•    Initial Jobless Claims Data Worse Than Expected, Highest in Five Weeks
•    March Chain Store Sales Rise 9 Percent From One Year Ago
•    Crude Oil Falls For a Second Day, Precious Metals Pullback

U.S. stocks rebounded from early losses and a weak jobs report to close higher for the third time this week.  The S&P 500 closed at 1,186, just 3 points below Tuesday’s 18-month high.  Initially, the index declined to 1,175 following weakness in foreign equity markets and a worse-than-expected U.S. jobless claims release.  The employment data showed that 460,000 Americans filed claims for jobless benefits last week, the highest level in five weeks.  Economists had forecast that claims would fall to 435,000, after dropping to 439,000 in the week prior.  Although the bearish news initially dampened trading, stocks posted a strong rebound through the latter half of the day, aided by a 9 percent rise in March chain store sales from a year earlier.  This was the largest sales gain since 1999 and gave investors hope that American consumers may be making a comeback.

The equities rally failed to boost commodities, which fell on weak equities performance abroad and concern that Greece’s debt problems may cause a slowdown in the global economy.  Crude oil fell nearly half of 1 percent to $85.39, while gold futures dipped to $1152 per ounce.  The U.S. Dollar, on the other hand, rallied for a third consecutive day as risk averse investors sought safer investments.  The U.S. Dollar Index rose to 81.49, its highest close since March 26.

DJIA 30                     10,927.07                      +29.55                       +0.27%
The Dow Jones Industrial Average gained for the first time since Monday, closing about 50 points shy of its yearly high.  Twenty of the 30 Dow stocks rose on the session, led by a 3 percent gain for American Express.  The credit-card company benefited from the strong sales data and news that MBNA is launching a new credit card in conjunction with American Airlines and American Express.  The strong sales data also helped to boost McDonald’s, AT&T, and Home Depot, as each company’s shares rallied over 1 percent.

S&P 500                       1,186.44                           +3.99                       +0.34%
The broad-based S&P 500 posted the biggest gain among major U.S. indices as telecommunications and financial shares rallied 0.8 percent each.  Helping boost the telecom sector was a 3 percent gain for Sprint Nextel, after the firm launched the world’s first 3G/4G enabled Android headset in the U.S.  MetroPCS shares also added 3 percent, following the company’s launch of a fully automated voice mail-to-text service.

NASDAQ                     2,436.81                         +5.65                       +0.23%
Shares on the tech-heavy Nasdaq gained back yesterday’s losses as technology stocks rose 0.1 percent.  Yahoo! shares were especially strong, gaining 2.7 percent on the day, while Microsoft added 1.9 percent.

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

Equities

U.S. Equities Tumble on Fed Rhetoric, Consumer Credit Data

U.S. Session Key Developments

•    Consumer Credit Declined More Than Expected in February
•    Fed Policy Makers Release Mixed Rhetoric Regarding Interest Rates
•    Crude Oil Pulls Back Slightly, Gold Surges Over $1150 Per Ounce

U.S. stocks declined today following mixed commentary from policy makers at the Federal Reserve and a worse-than-expected consumer credit reading for February.  The Fed commentary made evident the central bank’s uncertainty of market conditions going forward, and pushed the S&P 500 over 0.5 percent lower to 1,182.  Fed President Ben Bernanke said that the labor market contains the “toughest problems” and “we are far from being out of the woods.”  Bernanke specifically cited “very weak” hiring and a “troubled” commercial real estate market as tough hurdles for the economy to overcome going forward.  As for interest rates, Bernanke did not take a position, but New York Fed President William Dudley reiterated the view that the federal funds rate needs to be “exceptionally low for an extended period.”  Kansas City Fed President Thomas Hoenig, however, said that the Fed should raise the benchmark rate “soon” to about 1 percent to avoid asset bubbles.  Hoenig has consistently objected to the Fed’s “extended period” language this year regarding low rates.  The rhetoric increased market uncertainty, leading to a sell-off of riskier assets such as equities and crude oil.  Furthering the decline was the 3:00 PM release of consumer credit for February, which showed that borrowing fell $11.5 billion, the most in three months.  The drop was the twelfth in the past thirteen months and furthered the notion that consumer spending may be slow to rebound.

As for specific commodities, crude oil dropped over 1 percent to $85.64 a barrel as the U.S. dollar rallied against its major cross currencies.  The U.S. Dollar Index gained for a second consecutive day, closing above 81.60.  Despite the greenback strength, gold gained 1.5 percent to $1153, the metal’s highest close in 12 weeks.  Silver rallied over 1.2 percent to $18.15.

DJIA 30                     10,897.52                      -72.47                       -0.66%
The Dow Jones Industrial Average posted the worst performance among major U.S. indices as 24 of the 30 Dow stocks closed in the red.  Verizon shares dropped over  3 percent on the day and shares of rival AT&T fell 2.5 percent as investors and traders attempt to play rumors of a Verizon iPhone to be released at some point this year.  The rumored release of the product is June, 2010, but many believe this estimate to be too optimistic.  Other losing stocks today included Alcoa and Caterpillar, whose shares fell over 1 percent each on reduced investor optimism regarding the economic recovery.

S&P 500                       1,182.45                           -6.99                       -0.59%
The broad-based S&P 500 fell over 0.5 percent as all ten index components closed lower today.  Telecommunications was the worst performing sector, dropping over 2 percent, while utilities and energy shares fell 0.9 percent each.  Oil giants Exxon Mobil, Chevron, and ConocoPhillips (the largest oil & gas companies in the S&P) declined under 1 percent as oil prices fell back to the $85 a barrel level.  Alternate energy firm First Solar Energy gained 5 percent today, as investors begin to look for alternatives to crude oil, whose price has spike from the $70-$80 range to $86 yesterday.

NASDAQ                     2,431.16                         -5.65                       -0.23%
Shares on the tech-heavy Nasdaq posted a slight decline despite a small gain for technology stocks.  Micron Technology posted a 3.2 percent gain on the day to help push the sector higher.

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

Equities

U.S. Equities Gain For Third Consecutive Session

U.S. Session Key Developments

•    Sovereign Debt Concerns Ease as Greece Prepares For More Deficit Cuts
•    February Vehicle Sales Announced After Market Close, Fall Short of Expectations
•    Commodities Trade Higher as Greenback Generally Weaker

U.S. stocks gained for a third consecutive day, following a strong session in Europe, as investor concerns regarding a Greece debt default continued to ease.  The broad-based S&P 500 rose 2 points to 1118, the highest close for the index since January 20.  The gains in U.S. stocks were a continuation of the European session today, in which the FTSE, CAC, and DAX each gained over 1 percent.  Sovereign debt concerns in the region eased for a second day, as yields on 10-year Greek bonds fell 10 basis points to 6.14 percent.  Leaders of the Greek government plan to announce additional cuts of $6.5 billion tomorrow to help reign in the country’s massive debt-to-GDP ratio that currently sits at three times the acceptable European Union level.  The news fueled speculation that other EU nations would provide aid to Greece and boosted risk appetite across the globe.  The positive momentum wore off by the end of the U.S. session, however, as the Dow Jones Industrial Average dipped into the red during the last hour of trading before closing slightly above even.  There was no economic data today to drive market sentiment as the only data release took place an hour after U.S. markets closed.  The data showed that domestic vehicle sales were slightly lower than expected in February and that ABC consumer confidence ticked slightly higher last week.

On the commodities front, crude oil had a strong showing and rallied over 1 percent to $79.68 a barrel.  Precious metals had an even better day as gold futures posted their largest gain in two weeks to $1137 and silver futures rose 3 percent to $17.06.  Rising metal prices coincided with a relatively weak dollar, as the U.S. Dollar Index fell for the fourth time in five days.  The greenback still managed to gain against the British Pound, however, driving cable lower for a sixth consecutive session.  Looking ahead, the ISM Non-Manufacturing Composite report and ADP employment report will be released tomorrow morning, while the Fed will release its Beige Book in the latter half of the trading day.

DJIA 30                     10,405.98                      +2.19                       +0.02%
The Dow Jones Industrial Average closed slightly higher today, led by a near half-percent gain for industrials and oil & gas stocks.  Chevron led commodity stocks with a 0.7 percent gain due to rising oil prices, while Boeing and 3M gained 0.6 percent each to lead industrials.  Disney was the best overall performer on the Dow today, adding over 1 percent as fans await the opening of Alice in Wonderland in theaters on March 5.  The main laggards of the index today were Microsoft and Bank of America, which dropped 1.9 percent and 1.5 percent respectively.  The U.S. Treasury announced yesterday its intentions to auction off $272 million warrants to buy stock in BofA.

S&P 500                       1,118.31                        +2.60                         +0.23%
The broad-based S&P 500 rose to its highest level since January as rising commodity prices helped boost basic materials and energy shares.  Massey Energy led basic materials shares with a 4 percent gain, followed by Consol Energy and Newmont Mining which added nearly 3 percent each.  The coal sector posted strong gains today amid speculation that Massey will acquire Patriot Coal Corp., the fourth-largest U.S. coal producer.  Tesoro Corp. posted a 5 percent gain to lead a strong showing for energy stocks.  Financial shares added to the bullish momentum after bank analyst Dick Bove said that bank earnings over the next few years “will soar.”

NASDAQ                     2,280.79                       +7.22                       +0.32%
The tech-heavy Nasdaq was the best performer among major U.S. indices although technology stocks posted a minimal gain.  Qualcomm led the heaviest-weighted fifteen tech stocks on the index, gaining 6.6 percent after the chip maker boosted its dividend by 12 percent and announced a $3 billion stock buyback program.  Internet search giant Google rose over 1.5 percent on news that the company agreed to purchase online photography site Picnik.

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

Equities

U.S. Equities Rally For Third Day, Fed Tightens After Hours

U.S. Session Key Developments

•    Fed Unexpectedly Raises Discount Rate By 0.25 Percent After Hours
•    Commodities Advance During Market Hours, Fall After Hours on Fed Hiked
•    Philadelphia Fed Index Higher For Sixth Month, Leading Indicators Rise Slightly

U.S. stocks rallied for a third day, capping the biggest three-day rally since November for the Dow Jones Industrial Average and S&P 500.  The news of today’s trading was quickly overshadowed thirty minutes after close, however, when the Federal Reserve unexpectedly raised the discount rate by a quarter point to 0.75 percent.  During trading hours, the market moved steadily higher as investors were encouraged by further strength in commodity producing firms and generally positive economic data.  The economic docket provided an upbeat outlook for market participants as the  Philadelphia Fed beat expectations and rose for a sixth consecutive month to 17.6, while leading indicators gained for a tenth straight month.  Stocks and commodities rallied in tandem, as crude oil traded above $79 a barrel and gold held above $1120 during the session.  Commodities moved sharply lower after hours, however, as the Fed unexpectedly announced a quarter point rise in the discount rate- the rate charged to banks for direct loans from the central bank.  The rate had previously been held at 0.50 percent since 2008 as Fed policy makers maintained a dovish stance amidst the worst financial crisis since the Great Depression.  In their statement today, the central bank said that “these changes are intended as a further normalization of the Federal Reserve’s lending facilities.”  The policy statement went on further to state that the modification does not signal a change in the outlook for the economy or monetary policy, although some market participants appear to disagree.  The dollar rose nearly a full percent to $1.3510 per euro following the announcement, and gold futures sold off from their $1118-$1125 intraday range back to the $1100 level.

DJIA 30                     10,392.90                      +83.66                       +0.81%
The Dow Jones Industrial Average posted the largest gain among major U.S. equity indices, led by a 1 percent gain in financial and industrial shares.  Insurance company Travelers was the best performer on the index, adding 1.9 percent, followed by Boeing, whose shares rose 1.7 percent.  Furthering gains among financial shares were Bank of America and JPMorgan Chase, whose shares gained 1 percent each.  Procter and Gamble also traded higher, adding nearly 1 percent, after company executives reiterated its strong earnings expectations for 2010.  Walmart was the biggest laggard of the 30 Dow stocks, dropping over 1 percent after sales by U.S. stores fell 1.6 percent, worse than the company’s projection of 2 percent.  The company’s fourth quarter profit actually beat estimates, although revenues fell short of analyst expectations.

S&P 500                     1,106.75                         +7.24                         +0.66%
The broad-based S&P posted its third consecutive gain led by basic materials and industrials.  Precious metals continued their climb during the regular trading hours, pushing Newmont Mining and Freeport McMoRan higher by at least 2 percent each.  Priceline.com rose the most on the index, gaining nearly 10 percent after announcing that forecast first-quarter profit is significantly higher than analyst estimates.  Hewlett-Packard, the world’s largest personal-computer maker, rallied over 1 percent after the company posted a 25% profit jump from one year ago.

NASDAQ                     2,241.71                         +15.42                         +0.69%
The tech-heavy Nasdaq rallied for a fifth consecutive session as technology stocks gained over 0.8 percent on the day.  The fifteen largest technology companies on the Nasdaq closed higher today, with the exception of Teva Pharmaceutical.  The top performing large tech company was DirecTV, whose shares gained over 4 percent on the session.  DirecTV added customers in the fourth quarter last year despite a rise in monthly bills for customers.

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

Equities

European Equities Post Biggest Gain in Six Weeks

Europe Session Key Developments

•    Greek Bond Yields Dip Slightly After Greek Official Says Bailout Unnecessary
•    Crude Oil Posts Sixth Gain in Seven Days, Precious Metals Decline
•    Euro Resumes Bearish Trend Versus Greenback

Stocks in Europe posted their biggest gain in six weeks on renewed optimism over the Greece debt situation and better-than-expected economic data out of the U.S.  The DJ Stoxx 600 Index, a broad measure of European equities, posted its seventh gain in the past eight days.  Investors seemed cautiously optimistic that the debt problems in Greece would not threaten euro area stability after Greek Finance Minister George Papaconstantinou said yesterday that his country had “no actual need for” a bailout and was ahead of its deficit-reduction targets.  The 10-year yield on Greek bonds fell 2 basis points to 6.37 percent, reducing the excess risk premium required over equivalent German bonds by 1 basis point.  Overall, the yield on Greek bonds has increased 184 basis points this year on concern that the country would struggle to reduce the largest fiscal deficit in the euro zone.  As for the economic docket, the only major event out of Europe was U.K. unemployment, which investors managed to shrug off.  Instead, markets keyed on positive economic releases from the U.S. which showed that industrial production rose 09 percent in January and building permits beat expectations during the month.  Overall, European stocks remain 4.8 percent below this year’s high on January 19, but sentiment has clearly improved over the last week.

FTSE 100                         5276.64                     +32.58                     +0.62%
British stocks posted the smallest gain among major European indices after U.K. unemployment claims unexpectedly rose in December to the highest level since 1997.  The ILO unemployment rate for the last three months of 2009 held at 7.8 percent, as expected.  Despite the disappointing news, shares on the FTSE rallied for a third consecutive day and nine stocks gained for each that fell on the index.  Barclays gained 2.9 percent to lead banking shares higher, a day after announcing earnings that soundly beat analyst expectations.  RBS raised its recommendation on the company’s shares from “hold” to “buy” and Bank of America Merrill Lynch raised its price target.  RBS and Lloyds Banking Group gained 3.2 percent and 1.9 percent respectively, on anticipation of their earnings reports due out next week.  Further driving the FTSE today was Man Group, the largest publicly traded hedge fund, which added 5 percent on the day.  Some investors have speculated that the firm may receive a takeover bid from asset manager BlackRock.

CAC 40                             3725.21                     +56.17                     +1.53%
The French index added at least 50 points for a second consecutive session today, led by strength in financials, industrials, and technology shares.  Aerospace and defense leaders EADS was the biggest individual gainer on the index, adding 4.9 percent on news that the company’s seven government clients will pay additional costs for the A400M military plane.  Accor posted the second-largest gain, adding 4.2 percent on news that the hotel operator would increase its operable capacity by over 45 percent.  BNP Paribas, France’s largest bank, led financial shares higher after recording its fourth consecutive quarterly profit.  The bank’s shares rallied 3.9 percent after the company reported 1.37 billion euros of fourth quarter net income, above the 1.06 billion estimate of bank analysts.

DAX                                   5648.34                        +56.22                     +1.01%
The German index rallied for a third consecutive session as financials and industrials gained at least 1.4 percent each.  Deutsche Boerse, Europe’s largest exchange by market value, gained 3.7 percent to lead financials higher after the company announced a significantly smaller fourth quarter loss than analysts expected.  Deutsche Bank followed suit, adding 2.1 percent to its highest close in two weeks, after the German bank announced a sale of wealth manager BHF-Bank.  Industrial shares were led higher by mailing company Deutsche Post, which gained 2.3 percent, and Siemens, which rose 1.6 percent.  Siemens, a leader in electronics and electrical engineering, rallied on speculation that the company may acquire some components suppliers this year.

IBEX 35                          10498.60                     +104.70                 +1.01%
Shares in Spain added a full percent today, led by a 6 percent gain for Obrascon Huarte and a 4 percent increase in Grifols.  Shares of Obrascon Huarte, the Spanish building and infrastructure firm, had dropped in the four prior sesssions on weakness in the construction sector.  Grifols, a plasma firm, gained after its Australian peer CSL confirmed its full-year profit forecast.  Financial shares in Spain followed their global counterparts higher today, led by a 2.8 percent gain in Mapfre, and a 1.4 percent gain for Banco Santander.

FTSE MIB                     21650.81                     +361.61                   +1.70%
Italy’s FTSE MIB posted the biggest gain among major European indicies, rising nearly 2 percent on the day.  Trading in Milan led to a 4.6 percent gain for Fiat, after Italian Industry Minister Caludio Scajola said there are 14 offers for a company plant in Italy.  Intesa Sanpaolo gained over 4 percent on a potential unwinding of an investor agreement between Generali and Credit Agricole.  Fondiaria-Sai fell for a second straight day, dropping nearly 1 percent, after Banca Akros downgraded the insurance firm.

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

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