While you were sleeping: Fuelled by earnings

Thursday 15th April 2010

Enthusiasm over the results of Intel Corp and JPMorgan Chase & Co paced equities higher in both Europe and the U.S. as investors bet that the world’s biggest economy was firmly in recovery mode and corporate profits were poised to rise.

In late trading, the Dow Jones Industrial Average was up 0.77%, the Standard & Poor’s 500 Index added 0.88% and the Nasdaq Composite rose 1.29%.

Today marked the S&P500’s return above the 1200 point level. That level was a technical resistance for the S&P and follows the Dow's finish above 11,000 on Monday.

If the S&P500 holds above 1200 it could next find strong resistance at around 1228, a 61.8 percent Fibonacci retracement of the October 2007 to March 2009 decline, according to Reuters data. The Fibonacci number is a widely used technical tool that can help identify the point at which asset prices will reverse.

While the US first-quarter earnings season began on a negative note from Alcoa Inc, it has powered ahead on Intel and JPMorgan.

“It’s just a couple of earnings reports so far, but these are pretty important companies and the numbers look phenomenal,” Brian Barish, president of Cambiar Investors LCC in Denver, told Bloomberg News. “Not only is the bear case not unfolding, it seems to be just categorically false.”

Among the active stocks were Intel, gaining 3%, CSX Corp, Texas Instruments, Bank of America Corp and General Electric Co.

Yum! Brands Inc. is scheduled to report earnings after the market closes today. Google Inc. and Advanced Micro Devices Inc. come out with results after hours tomorrow.

Credit Suisse Group AG raised its year-end estimate for the S&P 500 by 13% to 1270 today, according to Bloomberg, saying “equities still offer value relative to other asset classes”.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ fell 2.3% to 15.83.

The Dow Jones STOXX 600 slid for a third day, by 0.7% to 270.44.

The UK’s FTSE 100 rose 0.6%, Germany’s DAX gained 0.76%, while France’s CAC ended 0.64% higher.

Among the most actives were Infineon Technologies AG, STMicroelectronics NV, Allied Irish Banks Plc, Ericsson AB and Rio Tinto Group.

The Dollar Index, which measures the greenback against a basket of six major currencies, fell 0.33% to 80.16.

US Treasury debt prices were little changed as strong retail sales data overshadowed positive inflation numbers. Yields on benchmark 10-year Treasury notes rose 0.01 percentage point to 3.83%.

The euro pared gains against the U.S. dollar after rating agency Moody's told Reuters there was still a greater than 50% chance of a rating cut for debt-stricken Greece in the next 12 to 18 months.

The greenback eased back against the yen after Federal Reserve Chairman Ben Bernanke in Congressional testimony gave no new guidance on US interest rates.

When pressed on the outlook for interest rates and for what the Fed meant by keeping rates low for “an extended period”, he said low resource utilisation, subdued inflation and stable inflation expectations were the keys.

“If those conditions cease to hold, and we anticipate changes in the outlook, then of course we will respond to that,” he said.

At midday in New York, the euro rose 0.43% to US$1.3664, and the dollar declined 0.15% to 93.07 yen.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.94% to 279.96.

Copper futures for May delivery rose 1 cent, or 0.3%, to US$3.6105 a pound on the Comex in New York. On April 12, the most-active contract reached US$3.68, the highest price since July 2008.

Businesswire.co.nz

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