MarketView for July 25

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MarketView for Wednesday, July 25
 

 

 

MarketView

 

Events defining the day's trading activity on Wall Street

 

Lauren Rudd

 

Wednesday, July 25, 2012

 

 

 

Dow Jones Industrial Average

12,676.05

p

+58.73

+0.47%

Dow Jones Transportation Average

4,934.00

q

-19.51

-0.39%

Dow Jones Utilities Average

481.08

q

-0.73

-0.15%

NASDAQ Composite

2,854.24

q

-8.75

-0.31%

S&P 500

1,337.89

q

-0.42

-0.03%

 

 

Summary

 

It was a mixed day on Wall Street on Wednesday, as the S&P 500 fell for a fourth day and the Nasdaq dropped on Wednesday after a rare earnings stumble from Apple, while strong results from Boeing and Caterpillar lifted the Dow.

 

Apple, the most valuable U.S. company by market capitalization, reported sales late on Tuesday that fell short of Wall Street's expectations as the European economy sagged and consumers held off buying iPhones before a new version expected in the autumn. Shares fell 4.3 percent to $574.97. Without Apple's losses, the S&P would have ended higher.

 

The price-weighted Dow industrials managed gains thanks to Caterpillar and Boeing. Caterpillar rose 1.4 percent to $82.60 after its quarterly profit easily beat Wall Street's expectations. The world's largest maker of construction machines also raised its 2012 forecast.

 

Hope that the Federal Reserve will act soon to provide more stimulus to the economy also supported stocks. A report in The Wall Street Journal on Tuesday said Fed officials may be moving closer to taking more steps to aid the flagging economy.

 

Housing stocks were among the day’s worst performers as data for June indicated the largest drop in single-family home sales in more than a year. Feeling the effect were companies such as D.R. Horton, which saw its share price fall 3.7 percent to $17.98.

 

The S&P 500 once again tested its 50-day moving average around 1,332. The benchmark index broke through that level on Tuesday but rebounded above it after reports the Fed was likely to provide more stimulus.

 

Boeing also helped the Dow when it reported a larger-than-expected increase in second-quarter profit and raised its full-year earnings forecast. The company said rising airplane deliveries offset higher pension costs. Boeing's stock gained 2.8 percent to $74.03.

 

Sixty-three percent of S&P 500 companies have surpassed earnings expectations so far, just a touch above the 62 percent long-term average, Thomson Reuters data showed.

 

Ford reported a better-than-expected second-quarter profit but roughly doubled its forecast for losses in Europe where a deepening economic crisis pushed the auto industry's sales to their lowest level in nearly 20 years. Ford shares edged down 1 percent to $8.97.

 

After the closing bell, shares of Zynga, a game publisher, fell 37.6 percent to $3.17. The company cut its 2012 earnings outlook and reported results below expectations. Shares of Facebook, which relies on Zynga for some 15 percent of its revenue, fell 7.5 percent to $27.15.

 

Shares of Visa rose 1.1 percent to $123.58 in extended-hours trading after the credit card company reported an adjusted profit that topped Wall Street estimates and raised its full-year earnings forecast for the second time this year.

 

Volume saw about 6.43 billion shares change hands on the three major equity exchanges, as compared with the year-to-date daily average of about 6.74 billion shares.

 

New Home Sales Plummet

 

According to a report released by the Commerce Department on Wednesday, new home sales recorded their largest drop in more than a year in June and prices resumed their downward trend, dealing a setback for the budding housing market recovery. Single-family home sales tumbled 8.4 percent to a seasonally adjusted 350,000-unit annual rate, the slowest pace in five months.

 

The percentage decline was the largest since February 2011 and much of the drop in sales reflected a record 60 percent plunge in the Northeast, which had enjoyed hefty gains since December last year.

 

The drop in new home sales last month came on the heels of a decline in home re-sales during the same period. Housing had appeared to be bucking the broad weakness in the economy, marked by a sharp slowdown in job growth and a cooling in manufacturing against the backdrop of fears of tighter U.S. fiscal policy in early 2013 and a lingering debt crisis in Europe.

 

While sales of both new and previously owned homes fell last month, other parts of the housing markets exhibited strength. New home construction in June hit its highest since October 2008 and confidence among home builders this month touched its best level in more than five years, reports showed last week. This offers cautious optimism the pullback in sales will be temporary.

 

May's sales pace was revised to show 13,000 more units sold than previously reported. New home sales were up 15.1 percent, compared to June last year.

 

The weak sales and a rare earnings stumble from Apple weighed on the Standard & Poor's 500 index and the Nasdaq composite index.

 

The S&P 500 index fell for a fourth straight day, but strong results from plane maker Boeing and construction equipment maker Caterpillar lifted the Dow Jones industrial average.

 

An 8.2 percent unemployment rate and stringent lending conditions remain major challenges for the housing market.

 

Applications for loans to buy homes fell last week despite record-low mortgage rates, a separate report from the Mortgage Bankers Association showed.

 

Caterpillar forecast housing starts this year to exceed 750,000 units, a decline from its previous estimate of 800,000.

 

The median price of a new home fell 3.2 percent from a year earlier after rising strongly in May. The home price decline had appeared to have bottomed, with other measures of home values trending higher in recent months.

 

The inventory of new homes on the market increased 0.7 percent to 144,000 in June but remained near record lows. At June's sales pace it would take 4.9 months to clear the houses from the market, up from 4.5 months in May.

 

New home sales last month were dragged down by the record plunge in the Northeast, which puzzled economists. Sales in the South fell 8.6 percent. In the West, sales rose 2.1 percent and were up 14.6 percent in the Midwest.