Despite a disappointing start to the week, strong earning reports pushed US stocks considerably higher for the week that ended on Thursday, 21 April 2011. It was a holiday shortened week for Wall Street due to Good Friday on Friday, 22 April. The negative bias at home was triggered during the start of the week after Standard and Poor revised its outlook for U.S. debt to negative from stable, casting a pall over the finances of the world's largest economy. But then, strong earning reports from Intel, IBM and couple of other important Dow components took market considerably higher on Wednesday, 20 April and Thursday, 21 April.
For the week, that ended on Thursday, 21 April 2011, Dow ended higher by 164.19 points (1.3%) at 12,505.99. Nasdaq ended higher 55.66 points (2%) at 2,820.16. S&P 500 ended higher by 17.7 points (1.3%) at 1,337.8.
Eight out of the ten economic sectors ended higher for the week led by technology, materials and energy sectors. Telecom and financials were the sole decliners.
During the week, the health-care giant, Johnson & Johnson topped analysts' expectations with first-quarter sales and adjusted profit. In addition, J&J's management hiked its 2011 earnings forecast. Pleasing quarterly results from Dow component United Technologies sent the stock to a new record high during the week.
In the financial sector, both Goldman Sachs and U.S. Bancorp both exceeded earnings expectations. Wells Fargo had slightly better than expected earnings, but disappointment over the bank's top line caused the stock to slump.
In the technology sector, Intel surpassed expectations in terms of earnings by a good margin and the stock soared 6% on that day. But earnings miss came from Texas Instruments. In turn, the company also made note during its conference call that earthquakes in Japan took their toll on operations. Yahoo! And IBM surpassed expectations.
Among the economic data expected during the week, the Commerce Department reported that housing starts for March hit an annualized rate of 549,000, which is an improvement from the upwardly revised rate of 512,000 for the prior month. The March rate also exceeds consensus call for an annualized rate of 520,000 units.
Building permits were also better than expected. Permits for March totaled improved to an annualized rate of 594,000, which is greater than the 540,000 building permit rate that had been forecasted. The latest tally is also up from the February rate of 534,000 permits.
On Thursday, 21 April, 2011, stocks finished this holiday-shortened week on a high note, thanks largely to another big batch of better-than-expected earnings. The Dow Jones Industrial Average ended up 52.45 points, or 0.4%, to 12,505.99. The Standard & Poor's 500 Index gained 7.02 points, or 0.5%, to 1,337.38. The Nasdaq Composite rose 17.65 points, or 0.6%, to 2,820.16. The major indexes had lost the bulk of their early gains after a midmorning round of economic reports.
Nine out of ten economic sectors ended higher led by materials, technology and financial sectors. Consumer staples were the sole laggard. The day was heavy both in terms of earnings and economic data.
Travelers shares led gains for 19 of 30 Dow components, rising 3.7% after the insurer reported a jump in profit, citing more demand from business customers, and raised its dividend.
The dollar plunged to multiyear lows against most major currencies on Thursday, as worries about the U.S. fiscal and monetary policy outlook made investors reluctant to hold the currency.
Among the earning reports expected, American Express came out with a positive earnings surprise. Morgan Stanley also had a stronger-than-expected quarter. Blue chips General Electric, Verizon and McDonalds all had better-than-expected bottom lines. GE actually augmented its report with a dividend hike.
Pfizer fell sharply after reports indicated that deaths were reported in relation to one of the company's drug tests. Amgen was also a source of weakness following its latest quarterly report, but an upside earnings surprise from UnitedHealth offered some support to the overall health care sector.
The economic data for the day showed that an index of manufacturing sentiment in the Philadelphia area slumped in April to a five-month low, showing growth at a much slower pace. The Philadelphia Fed's index of current activity tumbled to 18.5 in April after a March reading of 43.4, which was its highest level since January 1984. Separately, the leading economic index rose 0.4% in March, signaling that business conditions will strengthen in the near term with “sustained” growth through the end of the year.
The Labor Department reported on Thursday that jobless claims fell in the latest week but remained above the key 400,000 threshold for the second straight week suggesting that improvement in the labor market has stalled. The number of people filing for state unemployment benefits for the first time fell 13,000 to a seasonally adjusted 403,000 last week.
Weakness in the dollar once again helped select commodities move higher on Thursday. June gold rallied for 0.3% to close at $1504.00 per ounce, while May silver surged 3.8% to settle at $46.13 per ounce. Once again, the metals rallied to fresh all-time and 31 yr highs, respectively.
June crude oil finished up 0.8% to $112.29 per barrel. On the week, crude gained 2.4%. May natural gas rallied on the back of this morning's inventory data to close higher by 2.4% to $4.41 per MMBtu.
For every stock gaining, about one fell on the New York Stock Exchange on Thursday, where volume was 813 billion.
Indian ADRs ended mixed on Thursday. MTNL and Tata Motors gained 1.5% and 0.4% respectively. HDFC bank and ICICI Bank dropped 1.2% and 0.9% dropped.
For the year, the Dow, the Nasdaq and S&P 500 are higher by 8%, 6.3% and 6.3% respectively.
The earning season will continue in full momentum at Wall Street from this coming week. Investors will also focuss on the advance GDP report that is due on Thursday, 28 April. Other than that, the Fed will finish its two day FOMC meeting on Wednesday, 27 April.
