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Market Snapshot

Stocks Rally, with Dow Topping 9,000

closed sharply and broadly higher Thursday, sending the Dow industrials above the 9,000 level for the first time since January. Each of the major indexes gained more than 2% on the session. Paving the way for the rally: Better-than-expected earnings posted by ( (F)), ( (T)), ( (EBAY)), and ( (MMM)), and news that sales of existing homes rose for a third straight month in June. On Thursday, the 30-stock Dow Jones industrial average finished higher by 188.03 points, or 2.12%, at 9,069.29. Twenty-six of the blue-chip benchmark's components were higher; only ( (C)), ( (BA)), ( (MCD)), and ( (WMT)) fell. The broad Standard & Poor's 500-stock index was up 22.22 points, or 2.33%, to 976.29. The tech-heavy Nasdaq composite index rose 47.22 points, or 2.45%, to 1,973.60. The Nasdaq achieved its 11th consecutive winning session; S&P technical analyst Chris Burba nothes that the index has achieved that feat only 10 other times in the past 50 years. On the New York Stock Exchange, 26 stocks were higher in price for every five that declined. Nasdaq breadth was 21-6 positive. "Right now we are in a momentum driven rally," says Prudential Financial market strategist Quincy Krosby. "Traders in particular are saying, 'we can't afford to be short this market.'" "This is a market that's gotten ahead of itself," says Michael Church of Addison Capital Management. However, he says, "It may start to become self-fulfilling." He notes that a higher stock market could lift consumer confidence and help the economy get back on its feet. Treasuries, faced with a rising equity market and a huge supply of new government debt to be sold next week, fell sharply in price, with the yield on the benchmark 10-year note rising to 3.72%. The dollar index climbed, driving gold futures lower. Oil futures rose, topping $67 per barrel. There was little reaction to a report that weekly initial jobless claims rose 30,000 to 554,000 but continuing claims fell 88,000. Some M&A news cheered the stock market Thursday. ( (AMZN)) shares gained after the company reached a deal to buy online shoe retailer Shares of Medarex ( (MEDX)) jumped after Bristol-Myers Squibb ( (BMY)) agreed to acquire the biotech firm for $16 per share in cash, or an aggregate price of $2.4 billion. Bloomberg News reports advisers to bondholders that rescued ( (CIT)) with a $3 billion loan said creditors should push the company into Chapter 11 bankruptcy after a debt swap next month, according to a person familiar with the matter. The lenders should require New York-based CIT to restructure its debt through a so-called pre-packaged bankruptcy, even if the company succeeds in swapping 90% of the $1 billion of floating-rate notes that come due Aug. 17, Jeffrey Werbalowsky, chief executive officer of bondholder adviser Houlihan Lokey Howard & Zukin, said on a call with creditors yesterday, according to the person. Investors led by Pacific Investment Management Co. and Centerbridge Partners LP in New York, are preparing to take more control of CIT. The Wall Street Journal reports Ford Motor Co. returned to profitability in its second quarter and slowed its cash burn amid speculation that it may issue more equity to reduce its debt. The auto maker reported a net income of $2.3 billion or 69 cents a share, compared with a loss of $8.67 billion, or $3.89 a share for the same period a year earlier. The company burned through about $1 billion in cash during the quarter as it controlled incentive spending around the world while increasing output in its North American plants. Ford's profit came largely from a $3.4 billion gain it received related to debt-restructuring actions in April. Excluding the one-time gains, the company would have narrowed its quarterly loss to $424 million compared with a loss of $1.03 billion a year earlier. Bloomberg News reports President Obama signaled support for a proposal to impose fees on some of the nation's largest financial firms to cover losses from risky transactions and avert another market meltdown. Obama, at a White House news conference last night, said the U.S. may need a mechanism similar to the Federal Deposit Insurance Corp. for firms that engage in "some of these other far-out transactions" that put the financial system at risk. "So if you guys want to do them, then you've got to put something into the kitty make sure that if you screw up, it's not taxpayer dollars that have to pay for it, but it's dollars coming out of your profits," he said. The president also said executives at firms that have received government bailout money should "feel a little remorse and feel embarrassed" about taking million-dollar bonuses. In economic news Thursday, U.S. existing home sales rose 3.6% to a 4.89 million unit annual rate in June, from a downwardly revised 4.72 million pace in May (from 4.77 million previously). That's a third straight monthly increase. Single family sales rose 2.4% after climbing 1.2% in May. Condo/coop sales were up 14.0% following a 2.0% jump previously. The month's supply of homes fell to 9.4 from 9.8 (revised from 9.6). The median sales price rose to $181,800 from $174,700 (revised from $173,000). On a year-over-year basis, the sales price is still down 15.4%. U.S. jobless claims rose 30,000 to 554,000 in the week ended July 18, from a revised 524,000 the week before (from 522,000 previously). Continuing claims fell 88,000 to 6,225,000 in the week ended July 11, from a revised 6,313,000 (was 6,237,000). There have been considerable distortions in the claims data related to the typical auto retooling period, which was itself disrupted by the auto sector restructuring associated with the bankruptcies of GM and Chrysler, notes Action Economics, and that will limit the informational value of the data. "Nevertheless, claims remain below the 600k level, suggesting the labor market might be bottoming," says Action Economics. In earnings news Thursday, ( (MCD)) posted second-quarter earnings per share (EPS) of $0.98, vs. $1.04 one year earlier, despite a 4.8% rise in global comparable-store sales. ( (EBAY)) posted second-quarter non-GAAP earnings per share (EPS) of $0.37, vs. $0.43 one year earlier, on a 4% revenue decline. Wall Street was looking for $0.36 EPS. AT&T posted second-quarter EPS of $0.54, vs. $0.63, on a 0.6% revenue decline. Wall Street was looking for EPS of $0.51. 3M reported second-quarter EPS of $1.12, vs. $1.33, on a 15% sales decline. Wall Street was looking for EPS of $0.94. ( (UPS)) posted second-quarter EPS of $0.49 (excluding a charge), vs. $0.85, on a 17% revenue decline. Qualcomm Inc. ( (QCOM)) posted third-quarter EPS of $0.44, vs. $0.45, on flat revenue. Pro forma EPS, excluding the Qualcomm Strategic Initiatives segment and other items, were $0.54. Wall Street was looking for $0.52. Raytheon Co. ( (RTN)) reported second-quarter EPS from continuing operations of $1.24, vs. $0.99, on a 3.4% revenue rise. Wall Street was looking for $1.13.

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