MarketView for July 18

Summary

It was another good day on the Street on Wednesday as the S&P 500 index reached its highest level since early May as corporate profits from bellwethers Intel and Honeywell defied fears of a collapse in earnings. Intel reduced its growth forecast due to macroeconomic concerns late on Tuesday, but gross margins were healthy and the stock rose 3.3 percent to $26.21. In the process, Intel helped to add some momentum to technology stocks in general in addition to assisting the overall market in rising for the second consecutive day. Yet, companies remain cautious about a slowing economy, feeding the market's hopes for further stimulus from the Federal Reserve.

Fed Chairman Ben Bernanke repeated in congressional testimony on Wednesday the Fed's pledge to act if the economy needed it as he underscored his concerns, specifically in the job market. Later in the day, the Fed's anecdotal Beige Book survey showed the economy is still struggling.

Honeywell’s earnings exceeded consensus views in what it called a "tough macroeconomic environment," and its 6.7 percent advance to $58.18 made it a top gainer on the S&P industrial sector.

EMC also aided the tech sector with a 9.4 percent gain to $25.08 after it replaced the head of its VMware unit and reported a preliminary second-quarter profit. VMWare rose 12.1 percent to close at $89.98.

Financials underperformed the broad S&P 500, with Bank of America falling 4.9 percent to $7.53 after it posted a decline in revenue.

Vivus ended the day up 9.6 percent to close at $29 after regulators approved the company's weight-loss drug.

Shares of Starbucks fell as much as 2.7 percent Wednesday after Cleveland Research Co said sales momentum for the coffee maker slowed in June. According to the report obtained by Reuters, analysts at Cleveland Research said they were trimming the company's comparable sales estimates for the Americas region 7 percent to 8 percent for the third quarter. It had expected comparable sales to grow 8 percent to 9 percent earlier.

Economic growth in the United States cooled in June and early July and hiring grew at a tepid pace in much of the country, the Fed said on Wednesday. The Fed's previous Beige Book assessment of the economy, released on June 6, had painted growth in slightly more upbeat light, describing it as "moderate."

Groundbreaking on U.S. homes rose in June to its fastest pace in over three years, lending a helping hand to an economy that has shown worrisome signs of cooling.

Shares of Rovi fell to their lowest in 3-1/2 years after the company sharply reduced its earnings forecast for the year and two brokerages downgraded its stock. Rovi shares ended the day down 43.3 percent to close at $10.01.

About 6.26 billion shares changed hands on the major equity exchanges, as compared with the 50-day moving average of 6.71 billion shares.