Sam Collins

Has the Market Turned?

by Sam Collins   07/16/09

Strong earnings from Intel (INTC) and better-than-expected trust data from American Express (AXP) resulted in a broad-based rally yesterday, led by the technology and financial stocks. The Dow Jones Industrial Average (DJI) vaulted to a gain of 3.1%, its best one-day advance since March 23.

Intel's report was made following the close on Tuesday, when it not only announced earnings that beat analysts' forecasts, but went on to increase its outlook for Q3. This, coupled with the outstanding report from Goldman Sachs (GS), has persuaded some analysts to believe that capital is more freely available than they thought. The Wall Street Journal said yesterday that "companies are buying equipment as a first step toward ramping up production."

Yesterday, the financial sector gained 4.1% after lagging for the past four weeks, and the technology sector rose 4.2%. Basic materials, energy and technology gains were in the order of 3%. In the past five trading days the financials are up more than 10%.

The Federal Reserve's minutes from their June FOMC meeting also helped investors make a decision to spend some of their capital. The minutes showed that members believe that the 18-month U.S. recession will end "before long."

And the New York Fed Empire State manufacturing index rose to negative 0.55 in July, which is the best reading since April 2008, helped by a turnaround in new orders and shipments.

At the close, the Dow was up 357 points to 8,616, the S&P 500 (SPX) gained 27 to 933, and the Nasdaq (NASD) rose 63 points to 1,863.

The NYSE traded 1.37 billion shares with advancers ahead of decliners by 9-to-1. On the Nasdaq volume totaled 846 million shares with advancers ahead by 5-to-1.

Crude oil for delivery in August gained $2.02, settling at $61.54 a barrel, and the Energy Select Sector SPDR (XLE) closed at $47.59, up $1.63.