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Broadgate: Market News 19/7

19 July 2012

The S&P 500 touched its highest level since early May on Wednesday as corporate profits from bellwethers Intel and Honeywell defied fears of a collapse in earnings.

Chipmaker Intel Corp reduced its growth forecast due to macroeconomic concerns late on Tuesday, but gross margins were healthy and the stock rose 3.3 percent to $26.21. Intel boosted technology shares and helped the market to rise for a second day.

“The theme coming out in earnings is companies are coming in short in revenue but still beat on earnings. Analysts have moved their targets (lower) and companies still are lean and mean and are able to generate profit,” said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh.

Companies remain cautious about a slowing economy, feeding the market’s hopes for further stimulus from the Federal Reserve.

Forrest said the market “really, really wants QE3,” or more monetary stimulus from the Fed. “Bernanke is painting a dire picture and the bulls in the market are holding out for more Fed action.”

Fed Chairman Ben Bernanke repeated in congressional testimony on Wednesday the Fed’s pledge to act if the economy needed it as he underscored his concerns, specifically in the job market. Later in the day, the Fed’s anecdotal Beige Book survey showed the economy is still struggling.

Honeywell Inc’s profits topped consensus views in what it called a “tough macroeconomic environment,” and its 6.7 percent advance to $58.18 made it a top gainer on the S&P industrial sector.

Intel’s gains helped the PHLX semiconductor index .SOX rebound, as it jumped 3.6 percent a day after hitting its 2012 low.

“The main driver is technology and that is driven by Intel,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. “People were overly pessimistic on Intel and semiconductors in general going into Intel’s report and guidance last night, so it’s a ‘buy the news.'”

Data storage equipment maker EMC Corp also boosted tech shares with an 9.4 percent gain to $25.08 after it replaced the head of its VMware Inc unit and reported a preliminary second-quarter profit. VMWare shares gained 12.1 percent to $89.98.

The Dow Jones industrial average gained 103.16 points, or 0.81 percent, to 12,908.70. The Standard & Poor’s 500 Index rose 9.11 points, or 0.67 percent, to 1,372.78. The Nasdaq Composite Index added 32.56 points, or 1.12 percent, to 2,942.60.

Financials underperformed the broad S&P 500, with the sector slipping 0.6 percent. Bank of America Corp lost 4.9 percent to $7.53 after it posted a decline in revenue.

Vivus Inc shares jumped 9.6 percent to $29 after regulators approved the company’s weight-loss drug.

Shares of Starbucks Corp fell as much as 2.7 percent Wednesday after Cleveland Research Co said sales momentum for the coffee maker slowed in June.

According to the report obtained by Reuters, analysts at Cleveland Research said they were trimming the company’s comparable sales estimates for the Americas region 7 percent to 8 percent for the third quarter. It had expected comparable sales to grow 8 percent to 9 percent earlier.

Economic growth in the United States cooled in June and early July and hiring grew at a tepid pace in much of the country, the Fed said on Wednesday.

The Fed’s previous Beige Book assessment of the economy, released on June 6, had painted growth in slightly more upbeat light, describing it as “moderate.”

Groundbreaking on U.S. homes rose in June to its fastest pace in over three years, lending a helping hand to an economy that has shown worrisome signs of cooling.

Shares of Rovi Corp fell to their lowest in 3-1/2 years after the digital media solutions provider slashed its profit forecast for the year and two brokerages downgraded its stock. Rovi shares last traded down 43.3 percent at $10.01.

About 6.26 billion shares changed hands on the New York Stock Exchange, the Nasdaq and Amex, compared with the 50-day moving average of 6.71 billion shares.

Advancers beat decliners by a ratio of more than 3 to 2 on the NYSE and by a similar ratio on the Nasdaq.

Commodities

Brent crude held steady above $105 on Thursday, near a seven-week high on geopolitical fears, while comments by the U.S. Fed about the world’s biggest economy avoiding a double-dip recession renewed hopes of a recovery in oil demand growth.

Brent crude gained for a seventh straight day, rising to $105.83, its highest since May 30. By 11.09 p.m. EDT on Wednesday, it was up 65 cents at $105.81 a barrel. U.S. oil gained 40 cents to $90.27 and also touched a seven-week high.

Brent will gain further to $107.78 per barrel as it has broken above a resistance at $103.22, while U.S. oil will rise to $90.88 per barrel as it has also broken past a resistance, according to Reuters technical analyst Wang Tao.

Gold edged up on Thursday after two straight sessions of losses as the dollar weakened, although investors were less than convinced of its direction given the uncertainty over Fed’s stimulus measures and persistent worries about Europe.

Spot gold gained 0.4 percent to $1,578.35 an ounce by 11.17 p.m. EDT on Wednesday.

U.S. gold futures contract for August delivery rose nearly half a percent to $1,578.30

Currencies

The euro steadied in Asian trade on Thursday but remained under pressure after reported comments by German Chancellor Angela Merkel rekindled fears about the euro zone debt crisis, to the benefit of the safe-haven yen.

The euro was last at $1.2289, up about 0.1 percent and above an overnight low of $1.2216. It remained above a two-year low of $1.2162 hit last week.

Against the yen, though, the euro bought 96.54 yen after dropping as low as 96.49 yen, closing in on its overnight low of 96.46 yen and moving back toward a six-week low of 96.17 yen touched on Monday.

It also struck a fresh all-time nadir against the Aussie of A$1.1817, and was last trading at A$1.1822.

The euro was at 78.45 pence versus sterling, not far from 78.27 pence touched overnight and on Tuesday, which was its lowest since November 2008.

The dollar bought 78.55 yen, falling as low as 78.46 yen — its lowest level since June 5 — after stop-loss orders at 78.50 yen were taken out. There was support at 78.36 yen, the 76.4 percent retracement of the move from 77.65 on June 1 to 80.63 on June 25. Resistance lay at the July 5 high of 80.09 yen.

The Aussie rose 0.2 percent against its U.S. counterpart to$1.0397, its highest level since May 1, with support seen at the former resistance at the July 5 high of $1.0330.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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