Dow +217.29 at 13101.28, Nasdaq +58.13 at 2967.9, S&P +25.99 at 1390.99
Friday's action saw a broad market rally which started with optimism across European markets. A strong nonfarm payroll report combined with a positive ISM Services print supported the day's gains. After advancing 1% at open, equities added to their strength. As a result, the Nasdaq gained 2% and the S&P 500 rose by 1.9%.Nonfarm payrolls came in at 163K versus the expected 100K Briefing.com consensus while nonfarm private payrolls added 172K against expectations of a 105K increase. The unemployment rate of 8.3% ticked up from its previous reading of 8.2%.
The July ISM Services index was reported at 52.6, slightly above the 52.3 Briefing.com consensus, and up from June's 52.1 reading.
European indices closed firmly higher after yesterday's volatile session. Italy's MIB and Spain's IBEX soared by 6.3% and 6.0% respectively. France's CAC jumped 4.4% and Germany's DAX gained 3.9%.
U.S. listings of European financials rose sharply with Deutsche Bank (DB 31.21, +2.86) and Barclays (BCS 10.66, +0.61) gaining 10.0% and 6.1% respectively.
The strength in European banks followed a significant drop in Italian and Spanish yields. Italy's 2-yr yield declined 54 basis points to 3.11% while Spain's 2-yr yield eased 88 basis points at 3.91%.
The financial sector was the best performer today. With considerable gains throughout, Morgan Stanley (MS 13.78, +0.75) gained 5.8% while Citigroup (C 27.41, +1.23) advanced 4.7%.
Knight Capital Group (KCG 4.05, +1.47) has rebounded off all-time lows after securing a line of credit which has allowed the firm to continue operating for the day. Despite today's rally, shares of Knight remain down 60.9% on the week. It is expected that some sort of longer-term resolution for KCG will come next week, with reports today suggesting several potential bidders/investors are reviewing the company.
LinkedIn (LNKD 108.51, +15.00) gained 16% after reporting in-line EPS and better than expected revenues and full-year guidance. Today's considerable bid has taken the shares above the 20- and 50-day moving averages.
Procter & Gamble (PG 65.50, +1.99) gained 3.1% after beating earnings estimates but coming up short on revenues.
The dollar index was considerably lower amid today's risk rally. At 82.45, the index ended down 1.1%. The euro was the top performer among the major currencies against the dollar with today's 200 pip advance running it up to 1.2375. Other currencies which saw strong gains include the Australian dollar (up 0.9% at 1.0555) while the British pound has added 0.8% to 1.5640.
Crude oil got a major boost today, gaining nearly 5% after the better than expected employment data, positive performance in Europe while also benefitting from the dollar's decline. The energy component lifted from its session low of $88.31 per barrel and steadily climbed higher, settling just below its session high of $91.79. Despite selling pressure seen in previous sessions following little-changed FOMC and ECB statements, crude finished the week with a 1.4% gain at $91.40.
Corporate earnings and central bank comments headline the week.
Looking back on the week, Monday's equity markets were quiet for the duration of the session with the S&P 500 finishing nearly flat on the day. One notable deal was announced before the open. Shaw Group (SHAW 39.47, +0.43) gained 55% after the firm was acquired by Chicago Bridge & Iron (CBI 36.44, +1.00) CB&I will pay a total of $3 billion or $46 per share of Shaw.
Tuesday's action was similar to that observed on the day before as the major indices hovered around their respective unchanged levels for most of the session. Low volume and in-line economic data contributed to an uneventful session as investors awaited comments from the Federal Reserve and the European Central Bank later in the week. As far as earnings, US Steel (X 21.72, +0.66) was one of the day's best performers, finishing up 9% after it beat earnings expectations. The S&P 500 edged lower by 0.4%.
On Wednesday before the open, The ADP National Employment Report indicated employment in the nonfarm private business sector rose 163K in July. This was above the 125K expected by the consensus. About 15 minutes following the opening bell, approximately 150 stocks began to behave erratically. It was later determined that a technology issue at Knight Capital Group (KCG 4.05, +1.47) was behind the abnormal activity. Later in the day, the Federal Open Market Committee repeated that it would ‘monitor incoming information on economic and financial developments and will provide additional accommodation as needed.' The FOMC kept its pledge to keep rates low to at least late 2014. The S&P 500 fell 0.3 that day.
Thursday's trade was focused on the comments from European Central Bank President Mario Draghi. During his press conference, Mr. Draghi failed to announce new measures to help stem the European debt crisis. Knight Capital Group (KCG 4.05, +1.47) finished near session lows as Wednesday's execution glitch is said to have cost the firm $440 million in direct losses. Several firms have indicated that they have used other systems to route their orders. The S&P 500 finished down 0.7%. In Corporate news, Abercrombie & Fitch (ANF 29.37, +0.31) dropped 14.6% after issuing disappointing guidance. Finally, retailers reported July same store sales, which overall came in above expectations with sixteen retailers beating estimates—the most since April of last year (three companies missed).
Earnings Season enters home stretch.
Just over 80% of the S&P 500 has reported quarterly results so far during this earnings season. Roughly two thirds of them have beat earnings estimates. On the other hand, roughly 56% of companies have missed sales expectations. Guidance has been decidedly cautious.
Next week is the final very heavy week of earnings season. Over 500 companies are expected to report, including more than 40 companies in the S&P 500. Cognizant (CTSH 57.86, +1.58) and Tyson Foods (TSN 15.40, +0.25) will report on Monday morning.
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