Weekly Market Recap: France and Germany Rekindle Hope, Apple Shocks Analysts
Dow 11,808 S&P500 1,238 Nasdaq 2,637 Gold 1,635 Oil 87
The Dow (NYSE:DIA), S&P (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) rallied hard as investors started repositioning bets based on an eventual EU bailout. On the commodities front, Oil (NYSE:USO) was flat after Libyan dictator Qaddafi was murdered, while Gold (AMEX:GLD) ticked down.
Hot Feature: What’s Going On With Gold?
Now, for our analysis of the 12 reasons markets moved this week:
1) Germany. Friday gave investors a huge rally on hope for more defined bailout plans for the EU, yet this morning German (NYSE:EWG) Chancellor Angela Merkel, remarked that “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled.” She added that ways to end the crisis “surely extends well into next year.” Oops. That’s not what the market wanted to hear. This issue continues to be the gravitational pole for markets.
2) Bank Earnings. Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) announced earnings this morning. Investors first cheered Citi’s data, but later sold the stock after a deeper look confirmed banks are making most of their money from accounting tricks. What else do you expect from financial engineers?
3) Apple. Apple (NASDAQ:AAPL) delivered one of the lone bright spots for investors today. The company confirmed it sold 4,000,000 iPhone 4S devices over the first 3-day period — a new record. Unfortunately, after-hours IBM (NYSE:IBM) and VMWare (NYSE:VMW) missed Wall Street expectations. The news is sure to have a negative impact on tech tomorrow.
1) France and Germany. Yesterday Germany dashed Friday’s hopes of a big EU bailout, but today there are reports France (NYSE:EWQ) and Germany (NYSE:EWG) will throw $2 trillion into a European Bailout fund. Hoorah! Risk on! The world is saved … until tomorrow when we learn it’s a hedge fund rumor.
2) Chinese Growth and Spain Downgrade. Before the story about France and Germany, slowing Chinese (NYSE:FXI) economic growth had markets concerned in morning trading. Then, after the bell Moody’s (NYSE:MCO) downgraded Spain (NYSE:EWP) two levels. Again, this was all before the report France and Germany flew in from the heavens. Oh yeah, Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) had weak reports but still caught a bid early on.
3) Apple. Apple (NASDAQ:AAPL) delivered a rare earnings miss after the bell. The company fell short on iPhone sales expectations — weird since iPhone 4 and 4S sales are all record-setting. On the other hand, Yahoo (NASDAQ:YHOO) and Intel (NASDAQ:INTC) both announced solid quarters and sent their stocks flying high.
1) Greece. While the world awaits the EU’s next step, Greeks are taking to the streets after another announcement for more austerity.
2) Sarkozy is Stuck. We told you. Yesterday was an “EU is saved!” day, so today had to be the opposite. French President Nicolas Sarkozy (NYSE:EWQ) said the EU bailout talks had stalled, and the risk off bet was back on.
1) EU Summit Delay. If you love bipolar action, the EU resolution has sure been your thing. Every day this week has been a “bailout on” or “bailout off” day. Today’s binary switch started in the off position after news the EU Summit would not reach a final resolution this weekend. However, investors switched to “on” mode once they realized next Wednesday is not eons away.
2) Bank of America. Talk about your whipping boy. Bank of America (NYSE:BAC) had it bad today on new speculation the troubled bank might be preparing to file for Chapter 11 bankruptcy. To make matters worse, the California Attorney General liked the timing to launch an investigation into the bank and its Countrywide Financial subsidiary fraudulently sold risky mortgages to investors in California. Strangely, shares recovered with the general market rally and ended the day in the green.
3) Microsoft and Yahoo. Yahoo (NASDAQ:YHOO) was the talk of the town today as Microsoft (NASDAQ:MSFT) CEO Steve Ballmer bashed the company yesterday and is reportedly wooing Yahoo today. Is it me, or isn’t that a red flag for the future relationship should they wed? Other big news had Intel (NASDAQ:INTC) down 2.6% after traders booked profits from the huge gain on earnings yesterday and floods in Thailand may affect key partner Dell (NASDAQ:DELL).
1) EU … Again. The bipolar action continues. Apparently, investors and traders now believe the EU will have some resolution in the next week or two. Thus, people are repricing the market to match expectations that the EU does not implode.
2) DJIA. The Dow Jones Industrials were on fire today. 28 of the 30 components were in the green — only General Electric (NYSE:GE) and Bank of America (NYSE:BAC) were in the red. The moves were heavily driven by solid earnings from Honeywell (NYSE:HON), McDonald’s (NYSE:MCD), and Verizon (NYSE:VZ).
3) Precious Metals. After a four-day losing streak, gold (AMEX:GLD) prices finally broke to the upside as the US dollar (NYSE:UDN) weakened. Silver also caught a nice bid as investors are salivating over what’s perceived to be a huge EU bailout sure to further deteriorate the value of paper currencies.