MarketView for July 13

Summary 

Stock prices moved up sharply on Monday in an effort that repaired much of the damage of the previous week. Comments on financial sector performance from analyst Meredith Whitney raised expectations that quarterly earnings within the banking sector could exceed current Street forecasts.

Whitney, who has in the past been bearish, also upgraded Goldman Sachs to a "buy" sending its shares up 5.3 percent to $149.44. In comments to CNBC television, Whitney said bank shares were in for at least a short-term gain of 15 percent and that major financials, including Bank of America and JPMorgan, could do well in the second quarter. Her comments offset concerns that CIT Group, a lender to many small- and mid-sized businesses, was struggling to stay afloat.

CIT Group said late Sunday it remained in discussions with regulators on measures to improve its near-term liquidity. In addition, the Wall Street Journal reported the company had hired a law firm to explore a possible bankruptcy filing.

This spring, stronger-than-expected first-quarter bank earnings prompted sharp gains in the sector's stocks and helped fuel a rally of as much as 40 percent in the S&P 500 from March through May.

With second-quarter results, investors will be looking for evidence or upbeat comments from companies that suggest the U.S. economy is getting better.

After the closing bell, shares of Dell fell 4 percent to $12.50 as a result of comments from the company that it was forecasting lower gross margins for the July quarter. In regular trading, Dell closed down 1.5 percent at $13.02.

Shares of CSX rose after the bell, after that company reported a stronger-than-expected quarterly earnings number. In extended-hours trading, CSX gained 6.1 percent to $34.54, up from a regular trading close of $32.54. During regular trading and before the release of the earnings report, CSX shares gained 1.6 percent.

Other companies expected to report results this week include General Electric, IBM, Intel and Johnson & Johnson, each of which is a component of the Dow Jones industrial average. Citigroup is also set to report results later this week.

Shares of IBM, up 2.8 percent at $103.62, led the Dow higher, followed by JP Morgan, up 7.3

Volume was on the light side on the New York Stock Exchange, with 1.19 billion shares changing hands, well below last year's estimated daily average of 1.49 billion, while on the Nasdaq, about 1.95 billion shares traded, under last year's daily average of 2.28 billion.

Crude Nearly At Two-Month Low

The price of crude oil settled lower on Monday, briefly touching its lowest level in almost two months. The reason was basically concerns over the state of the global economy. Specifically, sweet domestic crude futures for August delivery settled down 20 cents per barrel  at $59.69, after falling as low as $58.32, the lowest quote since May 18. London Brent settled up 17 cents per barrel at $60.69.

The losses add to last week's 11 percent slide, the market's largest weekly decline since late January. Overall the concern driving prices at this moment is the possibility of a delay in the rebound for fuel due to a strengthening economy.

Adding downward pressure to oil prices, regulators have said they are planning to move aggressively to rein in excessive speculation in energy and commodity markets.

Oil prices had been tracking strong moves in the equities markets for months as dealers took stock market moves as an indication of the economic outlook.

Tempering oil's losses, Nigeria's main rebel group said Monday it sabotaged a loading dock for oil tankers in Lagos state, the first in the area since the group began its latest campaign of violence against Africa's biggest oil producer.

The attack came as the government released Henry Okah, the suspected leader of the Movement for the Emancipation of the Niger Delta, after more than a year in detention for suspected arms dealing.

Dell Offers Up Somber Outlook

Dell forecast lower gross margins for the July quarter, citing higher component costs and an unfavorable product mix, sending its shares down 3 percent. According to the company, it expects to report a slight sequential increase in revenue for its fiscal second quarter ending July 31.

"We continue to believe that customers are deferring IT purchases, and that we will see demand return to more typical levels at some point," Chief Financial Officer Brian Gladden said in the statement.

While demand for Dell's products and services seems to have stabilized, he said that varied significantly by segment and geography. Dell, like other PC makers, have been hurt by slumping tech demand during the global recession, with one of the only bright spots being cheap net book computers that some analysts say offer thinner profit margins.

Dell said it is targeting in the long term 5 to 7 percent compound annual sales growth, operating income at or above 7 percent of revenue, and cash flow from operations exceeding net income. The company said that it is on track to cut annual costs by more than $4 billion by the end of fiscal 2011.

Battered by plunging PC sales and working its way through a painful turnaround, Dell has been focusing on profitability as sales continue to slide.

Dell's revenue fell 23 percent from a year earlier to $12.3 billion in its fiscal first quarter, while gross margin slid to 17.6 percent, or an adjusted 18.1 percent. As for the fiscal second quarter, the Street was expecting revenues of approximately $12.6 billion, which would be up 2 percent sequentially but down 24 percent year on year.

The company working at diversifying its revenue base in order to better competes with larger rivals such as Hewlett-Packard and IBM. It has been upfront in its desire to be acquisitive and Wall Street is hoping for hints on its strategy at the analyst meeting on Tuesday.

Already sitting on $10 billion in cash and short-term investments, Dell recently sold $1 billion in notes and hired IBM's chief M&A strategist. Shares of Dell fell to $12.63 in after-hours trading, from their Nasdaq close of 13.02.