Markets Higher, Closing News 8/24/11

Centralwings' Boeing 737-400 landing in Gdańsk.

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Markets finished higher today, as the Dow closed up by triple digits for consecutive days. Markets surged higher because bullish sentiment from a good Durable Goods report, and a revised deficit forecast from the Congressional Budget Office were able to outweigh the continued concerns about the Euro-zone. Gold, which many are seeing as a proxy for the VIX, fell sharply today (down 109 points at its lowest point),indicating that the recent rallies may have some investors taking on risk ahead of Bernanke’s speech on Friday.

Durable goods orders for July were up 4.0%, considerably higher than the +2.0% reading that economists were forecasting. The reading was boosted by the July 20th announcement that Boeing received a substantial order for their aircrafts from AMR. Also boosting investor sentiment was the upward revision of June’s figures for Durable goods, the ex-transportation reading, and the Cap Goods orders.

The Congressional Budget Office released their FY2011 deficit forecast this morning, lowering the CBO’s estimate from 9.3% to 8.5% of the total GDP. The deficit is projected to be $1.3 trillion, slightly better than the $1.4 trillion originally forecasted, but marks the third consecutive year with the deficit above $1 trillion. The report also indicated that economic growth, as well as the labor market will grow slowly, forecasting that the unemployment rate will fall to 8.9% by the end of 2011 and 8.5% by the end of 2012.

The Ifo Institute reported that the German business climate index fell to 108.7 for the month, down from 112.9 in July, well below the forecasted reading of 111.0. The month-over-month drop of 4.2 points is being attributed to a slowing of the US economy as well as debt concerns on both sides of the Atlantic, and was the steepest one-month decline since 2008.

Moody’s announced it cut Japan’s credit rating from Aa2 to Aa3 today, citing the country’s debt load and lack of political leadership on their economic recovery strategies following the earthquake/tsunami and subsequent nuclear meltdown. Moody’s had warned about a possible downgrade in May, and Japan is now 3 notches below a triple-A rating, which it lost in 1998.

It feels a little bit like the east coast is going through “The Day After Tomorrow”, just days after a rare earthquake that was felt from Georgia to Canada, we are bracing for a the first Hurricane to hit the US since 2008. Hurricane Irene, currently a category three hurricane, could hit North Carolina by Saturday, and move up the coast, hitting Long Island on Sunday.

Market Indices/Statistics:

  • Dow closed up 143.95 pts/+1.29% to 11,320.71
  • S&P closed up 15.25 pts/+1.31% to 1,177.60
  • Nasdaq closed up 21.63 pts/+0.88% to 2,467.69
  • 29 of the 30 Dow stocks closed higher /XOM closed lower
  • All 10 S&P 500 sectors closed higher
  • Financials was the best performing sector (up 2.70%)
  • The VIX was down 0.91 points to 35.36
  • Oil is down $0.08 to $85.36
  • Nat Gas is down $0.074 to $3.996
  • Gold is down $99.60 to $1,762.40
  • Euro vs. Dollar down $0.0015 to $1.4416
  • Dollar vs. Yen up $0.28 to $76.96

Companies in the News:

Bank of America shares jumped today (+10.95% to $6.99) after comments from Rochdale Securities analyst Dick Bove, indicating that Bank of America will not need to raise more capital. A report from Raymond James was also bullish on B of A, saying the bank has “excess liquidity, a flexible (and sound) balance sheet, very high reserve levels, and more than enough capital.”

Shares of CVS traded higher (+3.14% to $34.44) after its Board of Directors approved a share repurchase plan for up to $4 billion of CVS common stock. The plan is effective immediately, and will be completed by the end of the year.

Calpine Corporation also traded higher (+5.76% to $13.95) following the announcement of a share repurchase plan. After the closing bell yesterday CPN announced its Board of Directors has approved a $300 million share buyback program, as well as a $373 million debt facility that will be used to finance the construction of a 120 MW upgrade of its Los Esteros Critical Energy Facility in San Jose, California.

Computer Sciences Corp. traded higher (+1.10% to $29.34) after announcing it had reached a settlement with the U.S. Government related to a dispute of contract claims asserted under the Contract Disputes Act of 1978. Under the terms of the settlement, CSC will receive $277 million cash in an up-front lump sum as well as a contract extension.

Earnings:

Luxury home builder Toll Brothers traded higher today (+4.61% to $15.42) after reporting Q3 earnings per share of $0.25, beating expectations of $0.03 per share. TOL announced they expect to deliver between 2,475 and 2,675 homes in FY 11.

Shares of La-Z-Boy Inc. also traded higher (+1.70%to $7.76) after announcing earnings after the closing bell yesterday. LZB reported Q1 adjusted earnings per share of $0.04, slightly beating analysts’ forecasts for a break-even quarter. Shares were also higher because same-store-sales for the furniture seller were 9.7% higher for the quarter.

American Eagle Outfitters was under pressure today, falling 8.78% to $10.60 after its earnings report disappointed investors this morning. AEO reported Q2 earnings per share of $0.10 from continuing operations, slightly lower than the $0.11 per share that had been forecasted. What concerned investors was the comments that cotton prices will hurt margins for FY11, and the downward revision of FY earnings per share from about $1.03 to $0.85-0.95 per share.

Coming Thursday:

Economic Reports: Jobless Claims (expected to be -3k to 405k) at 8:30 am; Earnings from Big Lots, H&R Block, Hormel Foods, Krispy Kreme Doughnuts, Pandora and Regis Corp.

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