Corporate earnings and deal talk lift broader markets
US stocks ended higher on Wednesday, 16 July 2014 as the Dow Jones Industrial Average closed at a record level as better-than-expected corporate earnings and deal talk lifted broader markets. The Federal Reserve's Beige Book, which said that economic conditions and labor markets showed improvement across the country into early July, gave stocks a late lift.
The Dow Jones Industrial Average added 77.52 points, or 0.5%, to 17,138.20. The Nasdaq Composite gained 9.58 points, or 0.2%, to 4,425.97. The S&P 500 closed 8.29 points, or 0.4%, higher at 1,981.57.
The tech sector opened in the lead with its top-weighted component Apple providing support after announcing plans to develop business applications with IBM. Shares of IBM rose 2.1%, settling near their early high, while Apple lost 0.6% after being up as much as 1.9% at the start.
The somewhat surprising lack of concern in the market place regarding geopolitics has prompted better risk appetite in the market place this week. Tensions are rising on the Gaza strip as Israel prepares to bomb Hamas targets in that region and possibly send in ground troops. European Union sovereign debt concerns, which last week resurfaced after a bank in Portugal was reported in serious trouble, are this week being ignored by traders and investors.
There was upbeat economic news coming from China on Wednesday. The world's second-largest economy had a slightly better-than-expected second-quarter GDP growth rate of 7.5%, year-on-year. A 7.4% growth reading was expected. Asian stock markets were supported on the China GDP data on Wednesday. This news is a bullish underlying development for the raw commodity markets.
U.S. corporate earnings reports are also be featured this week. So far, major companies' earnings have been mostly upbeat.
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Intel soared 9.3% after beating estimates, boosting its guidance, and adding $20 billion to its buyback program. Staying on the earnings theme, Yahoo! tumbled 5.1% after missing the consensus estimate by one cent on revenue that was also below estimates.
But most of investors' attention was on earnings and M&A news. Time Warner shares jumped 17% as the media company confirmed it had rejected an $80 billion offer from 21st Century Fox
Economic data for the day included the MBA Mortgage Index, PPI, net long-term TIC flows, Industrial Production, and the NAHB Housing Market Index. The weekly MBA Mortgage Index fell 3.6% to follow last week's uptick of 1.9% Producer prices increased 0.4% in June after declining 0.2% in May, while the consensus expected an increase of 0.2%. A 2.1% surge in energy prices was the main catalyst for the strong increase in producer prices. Excluding food and energy, core prices were up 0.2% after declining 0.1% in May, while the consensus expected these prices to increase 0.2%.
The May net long-term TIC flows report showed a $19.40 billion inflow of foreign capital into U.S.-denominated assets to follow an outflow of $41.20 billion in the prior month. Industrial production increased 0.2% in June after increasing a downwardly revised 0.5% (from 0.6%) in May, while the consensus expected an increase of 0.4%.
It was mixed finish for bullions on Wednesday, 16 July 2014. Gold prices inched fractionally higher on Wednesday, getting back on track after a three-day skid yet staying below the key level of $1,300 an ounce. The economic highlight of the trading week was testimony on U.S. monetary policy from Federal Reserve Chair Janet Yellen before the U.S. Congress on Tuesday and Wednesday. Yellen's remarks to the U.S. House on Wednesday elicited little market reaction. Gold for August delivery rose $2.70, or 0.2%, to settle at $1,299.80 an ounce. September silver gave up 12 cents to finish at $20.77 an ounce.
Crude-oil futures bounced back from two-month lows on Wednesday, 16 July 2014, adding to gains after a government supply report showed a larger-than-expected drop in inventories.
Light, sweet crude futures for August delivery rose $1.24, or 1.2%, to end at $101.20 a barrel on the New York Mercantile Exchange.
As per EIA, U.S. crude-oil inventories fell by 7.5 million barrels in the week ended 11 July 2014. Market had expected a decline of 3 million barrels. The EIA also said that gasoline stockpiles rose by 200,000 barrels, and distillate inventories, which include heating oil, increased by 2.5 million barrels. Market had expected gasoline inventories to increase 1.2 million barrels, and distillates stocks to increase 2 million barrels.
Participation was on the light side with 660 million shares changing hands at the NYSE.
Tomorrow, weekly initial claims, June Housing Starts, and Building Permits will be released at 8:30 ET, while the Philadelphia Fed survey for July will be reported at 10:00 ET.
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