Dow 12.231 S&P500 1,285 Nasdaq 2,737 Gold 1,746 Oil 93
The Dow (NYSE:DIA), S&P (NYSE:SPY) and Nasdaq (NASDAQ:QQQ) shot the moon this week after the EU took a step closer to an actual bailout. On the commodities front, Oil (NYSE:USO) charged higher on news the world economy wasn’t going to explode, while Gold (AMEX:GLD) add a $100 with the prospect of more huge debts encumbering currencies.
Now, for our analysis of the 15 reasons markets moved this week:
1) Financials. As investors slowly become more optimistic about Europe’s handling of the debt crisis, with Germany and France making strides toward expanding the EFSF, banks are getting a boost. JPMorgan (NYSE:JPM) and Bank of America (NYSE:BAC) both climbed upwards of 3% today, while Citigroup (NYSE:C) popped 4.29%.
2) Mergers. A slew of merger announcements gave markets a boost today, as they signaled positive outlooks for many of the companies involved. In times of economic turmoil and uncertainty, when companies have grim prospects, they are much less likely to enter into multimillion or multibillion dollar mergers or acquisitions, as one can see by examining M&A activity over the last year, so the turn around is being taken as a good sign. Among those companies announcing deals are General Electric (NYSE:GE), Juniper (NYSE:JNPR), Kinder Morgan (NYSE:KMI), Entergy (NYSE:ETR), Oracle (NASDAQ:ORCL), and Cigna (NYSE:CI).
3) Earnings. Stocks are up as earnings season gets in full swing, with Caterpillar (NYSE:CAT) reporting record revenue for the third quarter and heavyweight Netflix (NASDAQ:NFLX) announcing today after the bell. Reports from Texas Instruments (NYSE:TXN) and Amgen (NASDAQ:AMGN) are also among the most anticipated this week.
1) Europe. Fears that European policy makers won’t act to stem the sovereign debt crisis from spreading throughout the region have investors fearful for the future of the global economy. Yesterday, euro-zone leaders decided againstrestructuring Greek debt, instead hoping to entice bondholders to accept losses to help restore the country’s finances. They also ruled out using European Central Bank funds for the rescue facility, and have yet to settle upon a decisive course of action, which could include IMF involvement or private funding for the European Financial Stability Facility.
2) Consumer confidence. The Conference Board’s consumer sentiment index declined to its lower level since March 2009, when the global economy was in the throes of a full-blown recession. With limited job availability keeping unemployment high, home values continuing to deteriorate, and European nations continually threatening to default on their sovereign debt, consumer sentiment has been taking a beating. Many retailers (NYSE:XRT) are now forecasting weaker holiday shopping seasons than previously expected. At least FedEx (NYSE:FDX) and UPS (NYSE:UPS) expect record shipments.
3) Uh, Netflix. Talk about going from Prom Queen to the brothel … Netflix (NASDAQ:NFLX) is now the most hated stock on Wall Street. Today’s earnings revealed cancelations continue at a strong pace after the shocking price increase strategy. Is it the end of an era? On another tech note, Amazon (NASDAQ:AMZN) just announced after the bell and the stock is down 15%. The ecommerce giant is investing heavily in the future and it shows: Amazon’s profits fell 73%. Ouch.
1) Europe. Stocks rallied this afternoon after European leaders, holding a summit today in Brussels, hinted that they might be nearing a compromise on how to shore up the region’s finances and combat the contagion of the sovereign debt crisis from spreading. European government leaders have pledged to unveil a comprehensive plan to address the region’s debt crisis at the end of the summit.
2) Tech. Markets began the day lower after a disappointing earnings report from Amazon (NASDAQ:AMZN) dragged down the technology sector. In its report yesterday, Amazon forecast that its operating results in the next quarter would range from a loss of $200 million to a profit of $250 million. The news brought down Cisco (NASDAQ:CSCO) and Microsoft (NASDAQ:MSFT) in early trading, but they soon shook off the slump as Europe continued to drive trading.
3) Boeing. With markets starting the day lower, dragged down by heavyweights like Cisco and Microsoft, Boeing almost single-handedly held up the Dow after reporting better-than-expected earnings and announcing the completion of the first successful commercial flight of its new 787 Dreamliner. Joining Boeing in what has so far proved to be a fairly exclusive club this earnings season was Lockheed Martin (NYSE:LMT), which reported earnings that beat Wall Street’s expectations, as did Northrop Grumman (NYSE:NOC). Despite falling revenue General Dynamics Corporation (NYSE:GD) also managed to boost profit in the third quarter.
1) Europe, Europe, Europe.In case you were visiting another planet today, the EU has taken steps toward an all-out bailout. Clearly, the global financial system hinges on such a plan carrying forward. Greek bond holders will take a hit, but hey, that’s the risk of investing in the first place. Here’s How European Leaders Agreed to Combat Debt Crisis.
2) GDP. The U.S. economy grew at its fastest pace — 2.5% — in a year in the third quarter as consumers and businesses alike stepped up spending, creating momentum that could carry them through the holiday shopping season. It’ll most likely be revised lower later, so for now just celebrate the EU bailout!
3) Industrials. General Electric (NYSE:GE), 3M (NYSE:MMM), and Caterpillar (NYSE:CAT) were off to the races in the “world might not come to an end” trade. But Alcoa (NYSE:AA) led the leaders, pasting on 9.46%. Wow. Even Exxon (NYSE:XOM) managed to pipe in a gain after earnings only brought in $125.33 billion in revenues. Poor them.
1) Europe. While news out of a summit in Brussels, where European leaders hammered out a plan to combat the region’s debt crisis, had markets up yesterday, some version of that same news is responsible for their lackluster performance today. As is the trend, investors got a little ahead of themselves with the enthusiasm, only to come to the realization that the details of the plan are rather fuzzy and Europe’s problems aren’t over just yet. Furthermore, Europe pitched its euro-zone deal to China (NYSE:FXI) today with the arrival of Klaus Regling, chief executive of the European Financial Stability Facility, in Beijing. China has yet to decide whether they will participate in the fund. In a news conference, Regling said “no conclusion, certainly, today during our visit” would occur. And it’s that neither-here-nor-there news that left markets unsure of where to land.
2) Consumers. The final reading of the University of Michigan Consumer Sentiment Index for October rose to 60.9, just slightly better than expectations. This report follows news yesterday that consumer spending was up during the third quarter, giving the economy a significant boost, considering consumer spending accounts for roughly 70% of the U.S. gross domestic product. Profits for companies on the S&P 500 rose an average of 16% during the last quarter, based on results reported so far, with third-quarter earnings beating analysts’ predictions by 5.5%, compared to a rate of 3.3% since 2005.
3) Energy. Chevron Corporation (NYSE:CVX) reported net income of $7.83 billion, or $3.92 per share. Expectations were for a profit of $3.47 per share. Chevron was one of the few stocks performing well today. Investors will want to keep an eye on its competitors Exxon Mobil (NYSE:XOM), Marathon Oil (NYSE:MRO), ConocoPhillips (NYSE:COP), and Total (NYSE:TOT).