Reply #129: Who was pimping what today? Oil? [View All]

[ozymandius]

Oh...wait. It was shorts betting on a puff of wind from financials sending the NYSE volume to shrieking highs.

Dow 11,239.28 Up 276.74 (2.52%)
Nasdaq 2,284.85 Up 69.14 (3.12%)
S&P 500 1,245.36 Up 30.45 (2.51%)
10-Yr Bond 3.934% Up 0.09
NYSE Volume 6,699,922,000
Nasdaq Volume 2,503,838,250

4:25 pm : On Wednesday, the financial sector soared the most in its 19-year history after Wells Fargo (WFC 27.14, +6.63) reported better-than-expected earnings, sparking a rally that was compounded by short-covering. As a result, the stock market posted a large 2.5% gain, as a steep drop in crude prices helped overshadow a disappointingly high inflation reading.

Wells Fargo reported second quarter earnings of $0.53 per share, topping Wall Street's expectation by $0.03. In addition, the San Francisco-based bank raised its dividend by 10%, indicating it is in a solid financial position despite the current environment. The stock spiked 32% on the news.

This, along with better-than-expected earnings from Charles Schwab (SCHW 21.91, +2.69), Northern Trust (NTRS 76.00, +8.81) and Marshall & Ilsley (13.61, +2.02) sent the financial sector soaring to a 12.3% gain -- the largest advance since it was created in 1989.

It was a solid session outside of financials as well, with eight of the ten economic sectors posting an advance, aided by the second straight day of tumbling oil prices, bargain hunting and short-covering.

With regard to crude oil, prices fell 3.1% after a government report showed an unexpected crude and gasoline inventory build, sparking a rally in energy-price sensitive areas.

The consumer discretionary sector jumped 4.4%. General Motors (GM 11.46, +1.62) and Ford (F 5.49, +0.84) posted their largest one-day gain in years as investors scooped up the beaten down names. Meanwhile, retailers spiked 5.5% as oil prices eased.

Airlines surged 18% thanks to the drop in crude prices and better-than-expected earnings from American Airline parent AMR Corp (AMR 5.74, +1.33) and Delta Airlines (DAL 6.03, +1.36).

Other beaten down areas saw a surge in buying interest; the homebuilder group spiked 14% and the building product group rose 11%.

The tech sector performed roughly in-line with the market, unable to outperform despite Intel (INTC 20.91, +0.20) reporting earnings that topped estimates. The semiconductor-giant's margins were on the low side of previous guidance, which kept buying interest in check.

The energy sector was a laggard after the drop in crude prices took a toll on oil producers (-3.0%). The defensive-oriented utility sector slipped 1.9%.

On the economic front, June inflation rose by a higher-than-expected amount due to rising energy and food costs. Core inflation also was higher than expectations due to larger increases in the indexes for shelter, tobacco and smoking products, and the apparel index. Specifically, June CPI rose 1.1% month-over-month, higher than the expected increase of 0.7%. Core CPI, which excludes food and energy, rose 0.3%, which is also higher than the consensus estimate of 0.2%. CPI is now up 5.0% year-over-year (highest since 1991) and core CPI is up 2.4%.

Industrial production rebounded to 0.5% gain in June from the decline of 0.2% in May. The gain is in part due to a 5.4% increase in the output of motor vehicles and parts as activity resumed at plants that had been idled during the American Axle strike. Separately, capacity utilization increased to 79.9% from 79.6%.

Fed Chairman Bernanke gave his semiannual testimony before the House Financial Services Committee. Much of his testimony was a rehash of his appearance before the Senate yesterday. Of note, the chairman said the GSEs (Fannie Mae (FNM 9.22, +2.15)) and Freddie Mac (FRE 6.91, +1.65)) are adequately capitalized and in no danger of failing. He went on to say that action by Congress is justifiable in order to raise confidence in the GSEs.

The FOMC meeting minutes from the June 24-25 meeting were also released this session. The minutes did not provide the market with any new information, and as a result had a limited impact on trade.DJ30 +276.74 NASDAQ +69.14 NQ100 +2.5% R2K +3.7% SP400 +2.4% SP500 +30.45 NASDAQ Adv/Vol/Dec 2218/2.44 bln/670 NYSE Adv/Vol/Dec 2430/1.73 bln/759