Markets & Finance

Lower Oil, JPMorgan Spark Stock Rally


Crude oil is down $15 per barrel in the past three days. Better-than-expected profits from JPMorgan Chase also lightened investors' mood

Stocks rallied for a second straight session Thursday as oil prices fell and investors received more, much-needed good news from the financial sector in the form of better-than-expected earnings from JPMorgan Chase (JPM).

In three days, the price of a barrel of oil has plunged more than $15. On the NYMEX Thursday, crude oil fell $5.31 to $129.29 per barrel. Evidence of easing tensions between the U.S. and Iran might be contributing to oil's fall, Action Economics says.

JPMorgan posted earnings of 54 cents, vs. $1.20 a year ago, and revenue fell 2.7%. However, Wall Street was expecting earnings about 10 cents per share lower. The bank took a $540 million hit related to its acquisition of Bear Stearns.

The JPMorgan report isn't the only evidence that some financial firms are avoiding the full impact of the financial crisis. Also Thursday, PNC Financial Services (PNC), the largest bank in Pennsylvania, said its second quarter profits rose 19%. Earnings of $1.45 per share beat analysts estimates by 29 cents. On Wednesday, Wells Fargo (WFC) sparked a stock market rally when it raised it dividend and its second quarter profits impressed investors.

"A little more optimism is warranted," says John Merrill, chief investment officer of Tanglewood Capital Management. Financial firms are "still performing poorly, but just not as poorly as expected."

But a fresh batch of earnings reports released after the closing bell Thursday painted a less than favorable picture for Friday's session, with a lower than expected profit from tech heavyweights Google (GOOG), a disappointing outlook from Microsoft (MSFT), and word of more big losses at Merrill Lynch (MER).

On Thursday, the Dow Jones industrial average rose 207.38 points, or 1.85%, to 11,446.66. The broader S&P 500 rose 14.95 points, or 1.2%, to 1,260.31. And the tech-heavy Nasdaq gained 27.45 points, or 1.2%, to 2,312.30.

On the New York Stock Exchange, 24 stocks rose for every eight that fell in price. On the Nasdaq, the ratio was 19 to 9 positive.

On Wednesday, the Dow rose 277 points, and both the Dow and S&P 500 rose more than 2.5%. The Nasdaq jumped 3.12%.

Second quarter earnings season was in full swing Thursday, as Coca-Cola (KO), United Technologies (UTX) and EBay (EBAY) and many other firms posted results.

In economic news, U.S. jobless claims rose 18,000 to 366,000 in the week ended July 12, from 348,000 the week before. However, the four-week moving average fell, and continuing claims slipped 81,000 to 3.1 million in the week ended July 5.

U.S. housing starts surged 9.1% to a pace of 1.066 million in June, from 977,000 in May. Starts are still down 26.9% from a year ago. And, much of the increase in starts was due to a change in New York City construction code that went into effect July 1, and prompted builders to seek permits for construction multi-family dwellings.

Among stocks in the news, Coca-Cola Company (KO) posted earnings of $1.01 per share, vs. 80 cents a year ago, as revenue rose 17%. However, Coke shares fell 3.82% Thursday because those results excluded a 40 cent per share charge related to an equity stake in Coca-Cola Enterprises. The company is planning $400 to $500 million in annual savings from productivity initiatives by 2011.

BlackRock (BLK) reported earnings of $2.05 per share, vs. $1.69 a year ago, as revenue rose 26%. The firm said Merrill Lynch (MER) has decided not to sell any of its stake in the company. News reports do say Merrill, which reported earnings after the market's close Thursday, is planning to sell its 20% stake in Bloomberg for about $4.5 billion. BlackRock shares rose 16.4%.

United Technologies (UTX) reported earnings of $1.32 per share, vs. $1.16 a year ago, as revenue rose 13%. Based on strong performance in the first half of the year, the conglomerate raised its 2008 earnings forecast. The stock rose 5.9%.

Yum! Brands (YUM) posted earnings of 45 cents per share, vs. 39 cents a year ago, with worldwide same-store sales growth of 4%. The firm raised its 2008 earnings guidance from $1.87 to $1.89 per share.

Continental Airlines (CAL) posted a narrower-than-expected loss of 3 cents per share, vs. earnings of $2.03 per share a year ago. Revenue rose 9% but high fuel prices, the weaker economy and a weak dollar took their toll on the airline.

Colonial Bancgroup (CNB) posted a 5 cents per share loss, vs. earnings of 16 cents a year ago. The bank says it significantly increased capital in the second quarter to very strong levels. A JPMorgan analyst reportedly upgraded the bank's shares from neutral to overweight.

Nokia (NOK) reported earnings of 0.36 Euros, vs. 0.32 Euros a year ago, as sales rose 4.5%.

EBay (EBAY) posted earnings of 43 cents, vs. 34 cents a year ago, as revenue rose 20%. A Thomas Weisel analyst reportedly downgraded the stock from overweight to market weight.

Harley-Davidson (HOG) posted better-than-expected earnings of 95 cents per share, vs. $1.14 a year ago. Revenue declined 2.9%. The firm expects to ship 74,000 to 78,000 motorcycles in the third quarter.

Alliance Data Systems (ADS) reported earnings of $1.04 per share, vs. 91 cents a year ago, as revenue rose 5%.

Major European indexes moved higher Thursday. In London, the FTSE 100 index rose 2.63% to 5,286.30. In Paris, the CAC 40 gained 2.76% to 4,225.99, while Germany's DAX index added 1.88% to 6,271.27.

In Asia, Japan's Nikkei 225 rose 1% to 12,887.95, while Hong Kong's Hang Seng Index rose 2.41% to 21,734.72.

Treasury market

Treasury prices fell Thursday. The two-year Treasury lost 05/32 to 100-21/32 for a yield of 2.51%; 10-year notes fell 17/32 to 98-31/32 for a yield of 4.0%; and the 30-year bond dropped 11/32 to 96-08/32 for a yield of 4.61%.


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