MarketView for July 26

Summary

Thursday’s trading activity on Wall Street rode a wave of hope inspired by comments from European Central Bank President Mario Draghi, ignoring mixed corporate results to focus on the strongest signal yet of the ECB's intentions to protect the euro zone. Europe's debt woes have taken a toll on stocks at times during the past two years and more recently have manifested themselves in lackluster corporate results. Draghi hinted the ECB would target high sovereign bond yields, a measure the ECB has been reluctant to take in the past. Policymakers have made similar statements about saving the euro before, but if these remarks result in decisive action in European bond markets, it could spur a sizable rally in stocks. 

The most recent disappointments came from United Technologies and Dow Chemical, which blamed overseas demand for weak results. Shares of United Technologies ended the day up 0.4 percent at $72.93 while shares of Dow Chemical fell3.6 percent to $29.18.

Shares in sectors more sensitive to risks in Europe and economic demand, such as energy-related stocks and industrials, were among the day's best performers, with the S&P 500 energy index up 2.7 percent.

Worries about Europe have also pressured earnings forecasts, with third-quarter S&P 500 earnings now seen falling for a year-over-year decline. 3M, whose share price was up 2.1 percent to $90.59 after its results beat estimates, helped send the Dow Jones Industrial Index higher, in addition to being one of brighter spots of the earnings season.

Zynga saw its share price end the day down 37.5 percent to close at $3.17 after hitting an all-time low, a day after the company slashed its profit outlook after fading enthusiasm for its games on Facebook.

In afterhours trading, shares of Facebook fell 11 percent to $23.87. The company reported its first quarterly results since Facebook's market debut. During the regular sessions its shares lost 8.5 percent. Amazon.com was also down 0.5 percent at $218.88 after the close following the release of its results. The online retailer forecast third-quarter revenue that lagged Wall Street's projections.

During the regular session, shares of Sprint Nextel rose 20.2 percent to $4.05 after the company posted earnings.

Sales performance this reporting period has lagged earnings. With results in from about half of the S&P 500 companies, 65 percent have beaten analyst earnings estimates but just 41 percent have beaten on revenue, Thomson Reuters data showed.

The S&P 500 ended above the technically important 1,333 level, and a sustained move above that level is seen as bullish. The level marks a convergence of several technical factors, including the index's 50-day moving average, and has served as support for stocks.

In economic news, the number of Americans filing new claims for jobless benefits fell last week near a four-year low, although the figures have been volatile due to summer factory shutdowns. Durable goods orders for June were better than expected, but a slip in pending home sales underscored the fragility of the economy.

Approximately 7.44 billion shares changed hands on the three major equity exchanges, as compared with the year-to-date daily average of 6.74 billion shares.