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Despite Poor Growth, Markets Rise on Further QE Hopes

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Today's financial recap and tomorrow's financial outlook.

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MINYANVILLE ORIGINAL After a two-day, 2% decline, the S&P 500 recovered after progressive reforms from Spain were announced, potentially opening the door for a precautionary aid package from the EU. This caused a nearly 1% spike intraday. This strength continued throughout the day, with the S&P 500 finishing the day up over 1%. Gold futures rose strongly, up 1.5% to $1777.60 on the back of increased asset purchases and reflation.

The economic data in the morning was some of the worst on record. Durable goods new orders fell 13.2% month-to-month, which was one of the worst recordings in history. The details of the report showed that capital goods expenditures had slowed to a historic low. Also in the morning, the third estimate of second-quarter GDP showed growth in the US slowing to 1.3% from 1.7%. Because this is the third estimate, it is the least likely time for a radical change in the reading. However, the market shrugged off these horrible data points, potentially showing that worse growth figures would make the case for increased asset purchases from the Federal Reserve. The Labor Department showed that weekly jobless claims declined from 375,000 to 359,000.

As a result of of new asset purchases from the Federal Reserve, 30-year fixed-rate mortgages fell to a new record low at 3.40%, down from 3.49% last week, according to Freddie Mac.

After the close, Research In Motion (RIMM) reported a loss of $0.27 in earnings, beating estimates of -$0.46 handily. Revenues also beat by a wide margin at $2.87 billion compared to estimates of $2.5 billion. The stock rose over 12% after-hours.

Nike (NKE) also beat earnings at $1.23 per share, $0.09 better than estimates. Revenues also beat at $6.7 billion vs $6.42 billion estimates. However, due to slowdowns in global sales, the stock fell in extended trading.

Tomorrow's Financial Outlook

Additional growth and spending figures will be reported in the morning. The US will report personal income, personal spending, PCE deflator, and PCE core in the morning. The PCE reports are the figures that the Federal Reserve uses to gauge inflation, so a drop could signal the Fed's willingness to increase asset purchases without causing inflation to spin out of control. The University of Michigan and Reuters will report the final estimate for the monthly consumer confidence statement. Two weeks ago, the index unexpectedly jumped from 74.3 to 79.2.

In China, HSBC will report the final estimate for Chinese manufacturing PMI. Earlier this month, the index showed manufacturing growth remained in recessionary territory.

In the morning, Finish Line (FINL) and Walgreens (WAG) will report earnings.

Twitter: @Minyanville

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No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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