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Stocks Roar Into August, Dow Gains 200 Points

By Ben Rooney, staff reporter
August 2, 2010: 4:51 PM ET

NEW YORK (CNNMoney.com) -- Stocks rallied Monday, extending last month's gains, as investors welcomed upbeat economic reports and strong earnings from European banks.

The Dow Jones industrial average (INDU) rose 208 points, 2%, according to early tallies. The S&P 500 (SPX) index jumped 24 points, or 2.2%, and the Nasdaq (COMP) composite gained 41 points, or 1.8%.

The rally came after stocks rose 7% in July, marking the best monthly gain in a year, on solid second-quarter results from a range of major U.S. companies. The bullish tone carried over Monday as investors cheered quarterly results from European banks HSBC and BNP Paribas.

"I think the market is looking at earnings reports and saying things are not as bad as we thought," said Dave Hinnenkamp, chief executive at KDV Wealth Management. "Yes, the economic recovery won't be at a brisk pace, but companies are still earning money and their balance sheets are in good shape."

Given the strength of corporate earnings, Hinnenkamp said the S&P 500 could be headed back towards its late-April highs near 1,200. The broad stock index ended Monday at 1,125.81 after breaking through a key technical level.

Energy giants Chevron (CVX, Fortune 500) and ExxonMobil (XOM, Fortune 500) both jumped as oil prices surged past $80 a barrel on renewed optimism about global economic growth. But the rally was broad-based too. All 30 Dow stocks were positive, with the biggest gains in the materials and technology sectors.

In addition to encouraging corporate results, stocks were helped by a smaller-than-expected decline in a gauge of U.S. manufacturing activity and a surprise increase in construction spending.

While questions remain about growth in the second half of the year, Monday's reports helped ease worries that the economy could relapse into recession.

"Manufacturing is still holding steady," said Steven Goldman, market strategist at Weeden & Co. "That gives investors a convincing argument that the economy is not going to double dip."

Stocks closed mixed Friday as economic concerns tempered upbeat earnings sentiment. Despite the rally in July, the market is up modestly for the year. Stocks had slumped in April and May amid concerns about the European debt crisis and mixed economic indicators in the United States.

Looking ahead, investors said the focus may shift later this week from earnings to the economy, particularly the outlook for the U.S. job market.

"Earnings are going to start to wane," said Stephen Carl, head equity trader at Williams Capital Group. "So the market is going to be reacting to the economic numbers."

On Tuesday, investors will take in government data on personal income and spending before the market opens, while a report on factory orders comes out later in the morning. Automakers are slated to report July sales throughout the day.

The government's monthly payrolls report is due from the Labor Department on Friday. Economists expect the report to show that the economy lost jobs for the second month in a row in July and the unemployment rate is forecast to increase slightly.

Economy: A key index of U.S. manufacturing activity came in better than expected in July, while construction spending rose unexpectedly in June.

The Institute for Supply Management's (ISM) index eased slightly last month to a reading of 55.5 from 56.2 in June. But the measure has been above 50, the level indicating growth, for a full year. Economists surveyed by Briefing.com had expected the index to fall to 54.2, according to consensus estimates.

Separately, the Commerce Department said construction spending rose 1% in June to a seasonally adjusted annual rate of $836 billion. Economists expected construction spending to fall 0.8% in June, following a 0.2% dip in May.
0:00 /3:06Are you financially fit?

Companies: HSBC (HBC), Europe's biggest bank, said Monday that its earnings more than doubled in the first half of the year. The bank's profit climbed to $6.76 billion during the first six months of the year, up from $3.35 billion in the same period a year earlier.

French bank BNP Paribas (BNP) said net income jumped 32% in the second quarter on strength across all business units.

Shares of BlackBerry maker Research in Motion (RIMM) fell 1.7% after the United Arab Emirates said it will ban the Web operations of more than a half-million BlackBerry users due to security issues.

Bernanke: Federal Reserve chairman Ben Bernanke said Monday that financial markets have improved from the depths of the crisis, but he acknowledged that conditions have become "somewhat less supportive of economic growth in recent months."

He said concerns about the fiscal health of many European economies had weighed on the market this year, although a recent round of bank "stress tests" have eased those worries.

In a speech about the financial challenges facing state governments, Bernanke said the economy should continue to grow at a "moderate pace" as businesses restock depleted inventories and consumer spending gradually resumes. However, the recovery faces "notable restraints," he said, such as high unemployment and weakness in the housing market.
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Financial reform: Treasury Secretary Tim Geithner is due to speak on Wall Street reform at New York University after the market closes.

Geithner will promise to press federal bureaucrats to swiftly translate a sprawling 2,300-page regulatory reform bill into clear new financial rules, according to excerpts of the speech released by the Treasury.

"We will move as quickly as possible to bring clarity to the new rules of finance," Geithner will say in the speech. "The rule writing process traditionally has moved at a frustrating, glacial pace. We must change that."

World markets: European stocks rallied Monday. The CAC 40 in France closed 3% higher. The FTSE 100 in Britain rose 2.6% and Germany's DAX added 2.3%.

Asian markets also rose. The Hang Seng in Hong Kong jumped 1.8%, the Shanghai Composite rose 1.3% and Japan's Nikkei gained 0.4%.

China's manufacturing sector is still growing, but the pace is starting to slow, according to data released over the weekend from the government-run China Federation of Logistics and Purchasing.

Currencies and commodities: The dollar was lower versus the euro and the British pound, but up against the Japanese yen.

U.S. light crude oil for September delivery rose $2.51 to settle at $81.46 a barrel.

COMEX gold's December contract edged up $1.50 to close at $1,185.40 per ounce.

Bonds: Treasury prices fell, pushing the yield on the 10-year note up to 2.96% from 2.90% late Friday. Bond prices and yields move in opposite directions.



Yahoo! Finance

4:10 pm : 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. DJ30 +208.44 NASDAQ +40.66 SP500 +24.26 NASDAQ Adv/Vol/Dec 1903/1.94 bln/764 NYSE Adv/Vol/Dec 2609/1.03 bln/462

3:30 pm : The CRB Commodity Index finished well higher today, lead by a 2.3% gain in the industrials. Aluminum futures gain 4% on the day to close at $2163.25 per ton.

The rally in global equity indices helped Sept crude oil close higher by 3.1% to $81.34 per barrel. Crude oil traded to its best levels since May 5 and finished just shy of those highs. Sept natural gas did not partake in today's rally as it shed 4.1% to close at $4.721 per MMBtu. It finished near its session lows at $4.681.

Dec gold finished higher by 0.1% to $1185.40 per ounce. Sept silver rallied for % to finish at $18.419. It traded to its best levels in over a month and traded through the top of its recent. DJ30 +217.10 NASDAQ +43.22 SP500 +24.96 NASDAQ Adv/Vol/Dec 1915/1.5 bln/741 NYSE Adv/Vol/Dec 2597/702.3 mln/454

3:00 pm : Stocks head into the final hour on track to settle trade at their highest level in more than one month. That said, it should be noted that participation has been rather unimpressive in that only little more than 600 million shares have been traded, so far, on the NYSE. Such low volume can often lead to exaggerated moves among stocks, since each buy order carries more weight when there is a lower relative total share volume. DJ30 +213.20 NASDAQ +42.86 SP500 +24.46 NASDAQ Adv/Vol/Dec 1914/1.41 bln/727 NYSE Adv/Vol/Dec 2593/634 mln/453

2:30 pm : Stocks continue to trade in a tight range along session highs. That has the broader market holding steady to a 2% gain. Though the steady support has locked in robust gains, the S&P 500 would have to climb even more to match the 2.3% advance that it logged less than two weeks ago. DJ30 +188.08 NASDAQ +37.95 SP500 +21.79 NASDAQ Adv/Vol/Dec 1820/1.29 bln/825 NYSE Adv/Vol/Dec 2550/574 mln/470

2:00 pm : Energy stocks have made their way to a 3.4% gain, which puts them at a fresh session high and on pace for their best single-session percentage advance in almost two months.

Within the sector, oil and gas equipment stocks are still in the strongest shape as they boast a 4.6% gain. Of the sector's 39 members, only QEP Resources (QEP 33.99, -0.43) and Tesoro (TSO 12.70, -0.21) are in the red. DJ30 +190.27 NASDAQ +37.02 SP500 +21.91 NASDAQ Adv/Vol/Dec 1807/1.19 bln/810 NYSE Adv/Vol/Dec 2540/527 mln/466

1:30 pm : Stocks eased off of their highs just a little bit ago, but the step down has been limited. In turn, the major market averages now trade in a relatively tight range.

Steady strength among stocks this session has put pressure on Treasuries. As such, the benchmark 10-year Note is down 13 ticks. That has its yield back up to 2.95%. DJ30 +182.40 NASDAQ +36.11 SP500 +21.13 NASDAQ Adv/Vol/Dec 1761/1.11 bln/845 NYSE Adv/Vol/Dec 2512/486 mln/493

1:00 pm : Gains have been heady since the open. The sharply positive tone has been primarily underpinned by strong data and upbeat earnings.

Overseas markets put things in motion this morning as China's Shanghai Composite and Hong Kong's Hang Seng rallied amid news of a weaker-than-expected PMI reading, which helped ease concerns about tighter policy. Several European countries posted solid PMI readings, which provided confidence in the continent's recovery status. Upbeat earnings from some of Europe's biggest banks - BNP Paribas and HSBC (HBC 53.71, +2.63) - also helped the continent's major bourses, which climbed between 2% and 3%.

Strong overseas action has also bolstered the euro, which is currently up 0.8% to trade near a three-month high. The British pound is up 1.3% to trade near a six-month high. Their strength has dragged the dollar down 0.8% to a new three-month low, just above its 200-day moving average.

Domestic data has encouraged additional buying. To note, both the ISM Manufacturing Index for July and construction spending for June bested expectations.

Some of this session's strongest gains have been made by energy plays. The sector is up 3.1% at the moment. In addition to broader market support, the sector has been helped by a rise in oil prices to six month highs. The commodity was last quoted with a 3.1% gain at $81.35 per barrel.

Elsewhere in the energy sector, embattled BP (BP 39.21, +0.74) announced that it will make efforts this week to permanently cap its leaking oil well in the Gulf.

More than 90% of the names in the S&P 500 are in higher ground at the moment. Visa (V 71.69, -1.66) and MasterCard (MA 203.69, -6.35) are among the few that have failed to take part in this session's positive theme. Their weakness comes in response to news that AT&T (T 26.58, +0.64) and Verizon (VZ 29.49, +0.43) are planning a phone payment system.

Earnings announcements slowed down a bit this morning. Loews Corp (L 37.20, +0.05) and Humana (HUM 48.44, +1.42) were among the handful of more widely-held names that recently reported. Keeping with the trend of the past couple of weeks, both companies exceeded expectations. DJ30 +178.84 NASDAQ +35.01 SP500 +21.38 NASDAQ Adv/Vol/Dec 1714/1.03 bln/880 NYSE Adv/Vol/Dec 2502/452 mln/487

12:30 pm : Wal-Mart (WMT 50.96, -0.23) is the only Dow component currently in negative territory. There is no news item or other clear catalyst to account for the retail giant's relative weakness. As a group, retailers are up 1.8%, which is precisely in step with the broader market.

Meanwhile, Coca-Cola (KO 56.29, +1.18) is among the stronger performing blue chips. It is also one of the most actively traded Dow components this session. The action comes after the stock was upgraded by analysts at JPMorgan. DJ30 +169.95 NASDAQ +35.34 SP500 +19.93 NASDAQ Adv/Vol/Dec 1814/946 mln/768 NYSE Adv/Vol/Dec 2523/414 mln/464

12:00 pm : The S&P 500 recently spent about an hour consolidating its gains near the 1122 line, but it has since climbed up another couple of points to trade at a fresh session high. The move wasn't caused by any particular catalyst, but rather comes an extension of this session's already strong, broad gains.

Not only are all 10 major sectors still in positive territory with gains of at least 1%, but seven of them are up by 2% or more.

Volatility is down as a result of this session's strength. Specifically, the Volatility Index is off by 5%. That puts it back near the three-month low that it set last week. DJ30 +194.66 NASDAQ +40.53 SP500 +22.53 NASDAQ Adv/Vol/Dec 1914/850 mln/645 NYSE Adv/Vol/Dec 2596/372 mln/381

11:30 am : While this session's advance is broad and, so far, the stock market's best single-session percentage move in more than one week, there are a few issues that have failed to participate in the climb. Among this session's worst performers by percent of price lost, Visa (V 71.27, -2.08) and MasterCard (MA 205.14, -4.91) have been dogged. The couple has come under pressure amid news that AT&T (T 26.62, +0.67) and Verizon (VZ 29.42, +0.36) are planning a phone payment system. DJ30 +176.50 NASDAQ +38.56 SP500 +20.51 NASDAQ Adv/Vol/Dec 1925/740 mln/585 NYSE Adv/Vol/Dec 2597/321 mln/364

11:00 am : Stocks are at their best level in more than a month. The move has been helped by a sharp pullback in the greenback, which is now down 0.9% to its lowest level in more than three months. The slide has the Dollar Index at 80.8, which is only slightly above its 200-day moving average of 78.1.

Most of the dollar's decline has come against the euro, which is currently up 1.0% to a near three-month high. The British pound has been an additional drag; it is up 1.3% to trade near a six-month high. DJ30 +174.53 NASDAQ +39.25 SP500 +20.13 NASDAQ Adv/Vol/Dec 1943/637 mln/542 NYSE Adv/Vol/Dec 2609/276 mln/312

10:30 am : Crude oil and precious metals are seeing notable strength this morning, largely due to the weakness in the dollar index, which is trading near session lows of 80.947. Natural gas, however, has been trending lower this morning and is currently near morning lows.

September crude oil has traded in positive territory all session and has trended steadily higher this morning. Currently session highs sit at $81.50 per barrel and crude is currently trading just under that level at $81.39 per barrel, 3.1% higher.

September natural gas is not benefitting from weakness in the dollar index this morning as it fell into the red just before 8:30am ET and has remained there since. Natural gas put in session lows of $4.73 per MMBtu and is currently 3.2% lower at $4.76 per MMBtu.

Despite weakness in the dollar index, August gold was in the red earlier this morning. However, after hitting morning lows of $1174.70 per ounce, gold rallied just over $15 per ounce and ran to new session highs of $1191.80 per ounce and is currently sitting just under that level, 0.6% higher. Silver has been trading higher all session and rallied along with gold earlier. Currently, silver is showing gains of 2.6% as it's trading at $18.48 per ounce. DJ30 +174.91 NASDAQ +39.83 SP500 +20.02 NASDAQ Adv/Vol/Dec 1958/493.5 mln/480 NYSE Adv/Vol/Dec 2587/211.6 mln/292

10:00 am : Stocks have spiked to even higher levels following the latest round of data.

The ISM Manufacturing Index for July was just released. It came in at 55.5, which is greater than the 54.2 that had been expected, on average, by a sample of economists polled by Briefing.com. However, the latest figure marks a pullback from the 56.2 that had been posted for June.

Separately, construction spending for June increased 0.1%, which is stronger than the 0.8% decline that had been widely forecast. Spending figures for the prior month were revised downward to reflect a 1.0% decrease. DJ30 +165.34 NASDAQ +34.49 SP500 +18.45 NASDAQ Adv/Vol/Dec 1808/289 mln/513 NYSE Adv/Vol/Dec 2517/136 mln/291

09:45 am : Stocks are up broadly with impressive gains. The best move has been made by the energy sector (+2.0%), which has not only benefited from broader market support, but also from leadership among oil and gas explorers (+2.2%) and oil and gas equipment plays (+2.7%) as oil prices climb to six month highs near $81 per barrel. Shares of integrated energy play BP (BP 39.06, +0.59) are also up sharply amid news that it plans to permanently cap its leaking oil well in the Gulf this week. DJ30 +126.85 NASDAQ +22.84 SP500 +13.40 NASDAQ Adv/Vol/Dec 1761/178 mln/480 NYSE Adv/Vol/Dec 2462/97 mln/272

09:15 am : S&P futures vs fair value: +15.80. Nasdaq futures vs fair value: +21.80. The stock market appears poised for an impressive start to August. The tone has been helped by some strong PMI data out of Europe and upbeat earnings by some of Europe's biggest banks, namely BNP Paribas and HSBC (HBC). Europe's primary bourses have already put together impressive gains of their own. Asia also saw strong support from buyers as a cooled PMI reading in China helped ease concerns about tighter policy. Meanwhile, the dollar has dropped to a fresh morning low, where it trades with a 0.4% loss against competing currencies. The slide puts it at a fresh three-month low. The strong tone of trade across the globe's major equity averages has perpetuated a positive tone in commodities pits, where oil has been pushed to a 2.4% gain at a near six-month high of almost $80.90 per barrel. Coming up this morning are the latest ISM Manufacturing Index and construction spending figures (10:00 AM ET). Fed Chairman Bernanke is scheduled to speak from South Carolina later this morning (10:15 AM ET).

09:00 am : S&P futures vs fair value: +13.80. Nasdaq futures vs fair value: +18.50. Oil prices have made their way up above $80 per barrel for the first time in nearly three months -- the commodity was last quoted at $80.50 per barrel, up 1.9%. The sharp climb comes amid an upbeat tone to premarket trade.

08:30 am : S&P futures vs fair value: +13.70. Nasdaq futures vs fair value: +19.00. Impressive earnings growth from both BNP Paribas and HSBC (HBC) has helped send Europe's shares sharply higher. As such, Germany's DAX is up 1.8%. Commerzbank is among the bourse's primary leaders, but materials stocks (+3.0%) make up some of the strongest movers. In France, the CAC has climbed to a 2.2% gain. BNP Paribas is a primary leader there; the stock is currently testing multimonth highs on the French index. HSBC has been a leader in Britain, where the FTSE is up 1.9%. Lloyds Banking Group (LYG) has benefited from the interest in banks. Solid European PMI readings have also helped prop up the tone of trade - Norway, Hungary, France, Germany, and Britain all had solid to stronger-than-expected PMI readings for July. In China, financial issues led the Shanghai Composite to a 1.3% gain. Declining issues were limited to less than 2% of the index's 911 members. As for data, China's PMI came in weaker than expected, but the number still showed expansion in the country's manufacturing sector. Almost all 42 members of Hong Kong's Hang Seng climbed - Ping An Insurance was the primary laggard as it finished flat. Such broad-based strength helped the index put together a 1.8% gain. In Japan, the Nikkei booked a 0.4% gain, even though advancers and declining issues traded in near even balance. Honda Motor (HMC) and Fast Retailing were key leaders in the session, but Shionogi and Konica Minolta represented an offsetting force.

08:00 am : S&P futures vs fair value: +13.10. Nasdaq futures vs fair value: +18.00. Strong overseas gains have bolstered domestic stock futures. Strength abroad comes amid improved earnings from foreign banks BNP Paribas and HSBC (HBC) and some solid European PMI readings (China's PMI reading showed expansion, but it was weaker than expected). Europe's currencies are also up as the euro sports a modest 0.2% gain and Britain's pound climbs 0.8% to a near six-month high. There have only been a handful of U.S. companies out with their latest results this morning, but results remain strong. As for the domestic economic calendar, Fed Chairman Bernanke will discuss the economy in a speech scheduled for 9:15 AM ET, then the ISM Manufacturing Index for July and construction spending figures for June will both be released at 10:00 AM ET.

07:57 am : S&P futures vs fair value: +13.20. Nasdaq futures vs fair value: +19.00.

07:57 am : Nikkei...9570.31...+33.00...+0.40%. Hang Seng...21412.79...+383.00...+1.80%.

07:57 am : FTSE...5360.45...+102.40...+2.00%. DAX...6254.30...+106.40...+1.70%.

Special thanks to Bloomberg, CNNMoney and Yahoo! Finance for their market summaries.

Best Regards,
M.A. Perry
Trader and Founder of WRB Analysis (wide range body analysis)
@ http://twitter.com/wrbtrader and http://stocktwits.com/wrbtrader

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