August 1st, 2010
Dow +208.44 at 10674.38, Nasdaq +40.66 at 2295.36, S&P +24.26 at 1125.86
[BRIEFING.COM] Positive data and bank earnings out of Europe set the tone for a strong buying effort, sending the major U.S. indices to gains between 1.8% and 2.2%.Confidence in Europe’s economy and financial system was bolstered by solid PMI readings throughout the continent and strong income growth by BNP Paribas and HSBC (HBC 53.76, +2.68). The continent’s major bourses climbed between 2% and 3% in response. In other overseas action, China’s Shanghai Composite and Hong Kong’s Hang Seng each rallied more than 1% overnight. In contrast to Europe’s bourses, their gains came amid a weaker-than-expected PMI reading. The difference in response was largely because it is widely accepted that China’s economy remains robust and will help lead a global recovery, but there are concerns that such growth could lead to a tighter policy intended to curb inflation risk. The positive tone among global traders helped domestic averages gap up at the open. Early action was both strong and broad. The mood improved further still after the ISM Manufacturing Index for July came in at 55.5. That may have marked a pullback from the 56.2 of June, but it exceeded the 54.2 that had been widely expected. Additionally, construction spending for June increased a surprise 0.1% after a 1.0% decline in the prior month. A 0.8% decline had been widely expected for June. Energy stocks made out with the best gains. The sector spiked 3.6% in its best single-session percentage advance in almost two months (compare with a 3.2% gain on 7/7). Even embattled energy giant BP (BP 39.49, +1.02) fought its way back toward two-month highs after it announced that it will make efforts this week to permanently cap its leaking oil well in the Gulf. Not only did the energy sector benefit from broader market support, but a 3.0% spike in oil prices to a six-month closing high of $81.34 per barrel also fueled the space. In contrast, natural gas gave up 4.1% to close pit trade at $4.72 per MMBtu after it outpeformed late last week. The dollar dropped 0.8% to a new three-month low, but it didn’t quite crack its 200-day moving average. Most of the slide was owed to a 0.9% rise in the euro to a near three-month high. A 1.3% spike by the British pound to a near six-month high also detracted from the buck. There was a slowdown in earnings announcements this morning, but things pick back up this evening. Loews Corp (L 37.58, +0.43) and Humana (HUM 48.67, +1.65) were the more notable names in the handful of reports that were made this morning. Both beat expectations. In non-earnings related news, AT&T (T 26.59, +0.65) and Verizon (VZ 29.55, +0.50) are planning a phone payment system. That put pressure on payment processors Visa (V 72.22, -1.13) and MasterCard (MA 202.25, -7.79), which had the ignominious distinction of being among the few plays that failed to follow the broader market to a heady gain.