August 19th - market summary
JoBar : August 19th - market summary
Today's market summary comes from Rob Black's MarketWrap
U.S. Stocks rose, with the Nasdaq Composite Index hitting its highest close in 16 months as encouraging news from technology companies like Broadcom gave investors hope that an economic rebound is under way. The DJIA climbed 16 points (+0.2%) to a 14-month high of 9,428. The S&P 500 rose 2 points (+0.3%) to 1,002, with computer- related shares contributing more than 90 percent of the gain. The Nasdaq Composite gained for a fourth day, rising 21 points (+1.2%) to 1,761, the highest closing level since April 19, 2002. The advance is the longest in almost three months. About two stocks rose for every one that fell on the New York Stock Exchange. Almost 1.3 billion shares changed hands, down 7 percent from the average of the past three months. The rally was restrained by concern about terrorism after a truck bombing in Baghdad killed at least 15 people, including the United Nations envoy, and an explosion on a bus in Jerusalem caused at least seven deaths. About a dozen companies in the S&P 500 are still to report second-quarter earnings this week. Profits for companies in the index increased about 9.6 percent in the quarter, according to Thomson Financial, exceeding the 7.2 percent average estimate by analysts at the quarter's end. Earnings for S&P 500 companies may grow 14.2 percent in the third quarter and 21 percent in the fourth, Thomson Financial's analyst survey showed.
Strong Sectors: electronic manufacturing services, homebuilding, gold, aluminum
Weak Sectors: biotech, apparel & accessories, footwear
Top Stories . . . U.S. housing starts unexpectedly rose to the highest in 17 years, led by a surge in construction of single-family homes.
U.S. consumer confidence unexpectedly fell this month as mortgage rates rose and jobs remained hard to find, a University of Michigan survey showed.
The dollar surged to a three-month high against the euro after a government report showed housing starts unexpectedly rose to the highest in 17 years in July, adding to evidence an economic recovery is accelerating.
The U.S. 10-year Treasury note fell in New York trading, extending a 10 percent decline since mid- June, as gains in housing and consumer confidence add to signs of a faster growth.
Home Depot, the world's largest home-improvement chain, said second-quarter profit climbed 9.9 percent because of increased advertising and new products such as John Deere lawn tractors. Sales at older stores rose for the first time in a year.
PG&E, owner of California's largest utility, said second-quarter profit rose 4.1 percent as the loss at its wholesale-energy unit narrowed.
Quotes of Note . . . ``Investors are starting to connect the dots and see that a stronger economy is taking earnings with it. Company reports we've been getting from retailers have been generally strong.'' said Lincoln Anderson, chief investment officer at LPL Financial Services.
``Housing starts are going to remain strong. Movements in interest rates are relatively small, with rates at historical lows.'' said Stuart Miller, CEO of Lennar Corp.
``A lot of the improvements that Bob Nardelli is putting in place are just now starting to take hold,'' said Stephanie Hoff, analyst with Banc of America Capital Management, which holds 13 million Home Depot shares.
Gurus . . . Morgan Stanley U.S. strategist Steve Galbraith raised his recommended bond allocation by 5 percent, after the recent sharp move in the bond market increased expected returns. The yield on the 10-year Treasury note fell 0.051 percentage points Monday to 4.477 percent, but was still 1.403 percentage points above its 5-decade low of 3.074 percent hit on June 16. Galbraith now weights bonds at 25 percent, which is still 5 percent underweight. His stock allocation is at 65 percent and cash is at 10 percent.
Merrill Lynch's Steve Milunovich made a number of sector changes within the technology industry. The strategist lifted his view on the hardware group to an "equal weight" due to stronger revenue growth and improved price momentum while downgrading the software sector to an "underweight" stance, citing slipping sales growth. Milunovich remains overweight in the communications equipment, Internet, and storage sectors. In recent trades, the Goldman Sachs Computer Hardware Index added 0.7 percent and the Goldman Sachs Computer Software Index added 0.6 percent.
Eco Speak . . . The University of Michigan's preliminary August measure of consumer sentiment slipped to 90.2 from July's final 90.9. Economists expected the monthly survey to top 91. The release was delayed from last Friday after a power blackout closed the Ann Arbor school.
Housing starts and building permits. July housing starts topped January's 17-year high as did June's number following upward revisions to prior months' data. The booming housing market continues as rising mortgage rates are expected to put a top on the levels during the current quarter. July starts rose 1.5% to 1.872 million as June starts were revised to 1.845 million -- up 5.7% vs. the 3.7% gain first reported. Building permits came in a bit weaker than expected at 1.780 million versus 1.803 million consensus. Not getting much of a reaction from the bond market, however -- ten-year Treasury note still down about 11/32nd's to yield a touch over 4.50%.