MarketView for July 25

Summary

The Nasdaq ended the day in positive territory on Thursday, led by a rally in Facebook that came a day after its earnings announcement. However, the broader market's advance was modest after another round of mixed earnings reports. Disappointing earnings in the cyclical sector limited the gains in both the Dow and the S&P 500.

Facebook saw its share price score their biggest daily percentage gain ever – rising 31.6 percent to a session high of $34.88 a day after the online social network company reported a huge jump in mobile advertising revenue. The stock closed at $34.36, up 29.6 percent, and topped the Nasdaq's list of most actively traded names.

Caterpillar was the biggest drag on the Dow, falling 1.6 percent to $82.14. The stock slid for the second day, extending a selloff that began on Wednesday after the world's largest maker of mining and construction equipment cut its 2013 earnings forecast.

General Motors  and Dow Chemical reported profits that exceeded expectations, but that was not enough to help the S&P 500 make a big push into positive territory. GM's stock fell 0.2 percent to $37.08, after touching a two-year high of $37.70. Dow Chemical rose 1.8 percent to $34.99.

Still, the market managed to advance slightly, with nine of the 10 S&P 500 industry sector indexes ending the day higher. Material and utility shares were the best performers, after being among the weakest in Wednesday's session.

Shortly after the closing bell, Starbucks released its third-quarter results and its share price chalked up a 6.8 percent gain in extended-hours trading. Starbucks ended the regular session at $68.17, up 2.3 percent.

Shares of Amazon fell 2.3 percent in extended-hours trading after the world's largest Internet retailer reported second-quarter earnings and gave a cautious forecast for the third quarter. During regular trading, Amazon's stock rose 1.5 percent to close at $303.40.

The major stock indexes have advanced steadily this year. The S&P 500 has climbed 18.5 percent in 2013 after hitting a number of record closing highs along the way. For July, the benchmark index has added 5.2 percent.

With 47 percent of the S&P 500 companies having reported earnings so far, about 68 percent have topped profit forecasts, above the historical average of 63 percent. About 56 percent have reported better-than-expected revenue, a rate that is below the historical average.

TripAdvisor shares rose sharply, ending the day up 16.3 percent to close at $71.10, a day after the company reported a jump in quarterly profit and revenue from its travel website. The stock was the S&P 500's second-biggest percentage gainer.

Natural gas processor Oneok managed a gain of 25.5 percent to $53.77. The stock was the S&P 500's best performer on the day after the company said it would separate its gas distribution business into a standalone publicly traded company called ONE Gas Inc.

Not every sector did well on Thursday. For example, homebuilders' shares fell and weighed on the S&P 500 after Pulte Group and D.R. Horton reported earnings. Shares of the Pulte Group ended the day down 10.3 percent to close at $16.55, while D.R. Horton's share price fell 8.6 percent to close at $19.38. An index of housing stocks fell 2.5 percent.

In a report released by the Labor Department prior to the opening bell, initial claims for jobless benefits increased by 343,000 claims during the latest week from 334,000 in the previous week. New orders for durable goods rose 4.2 percent in June, far stronger than the forecast for a growth rate of 1.3 percent. Approximately 6.4 billion shares changed hands on three major equity exchanges on Thursday.

Capital Goods Spending Likely to Increase

A gauge of planned business spending on capital goods rose in June, buoying hopes of acceleration in economic growth in the second half of 2013. The data on Thursday was the latest to suggest factory activity was regaining some momentum after hitting a soft patch earlier this year and it fit in with views that the drag on the economy from tighter fiscal policy was ebbing.

A separate report showed new claims for jobless benefits edged higher last week, but remained within a range that suggests the labor market's recovery is on track.

Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, increased 0.7 percent last month, the Commerce Department said. May's gain was also revised higher, to 2.2 percent from 1.5 percent.

However, shipments of these so-called core capital goods - used to calculate equipment and software spending in the gross domestic product report, fell 0.9 percent last month. The drop, which followed a 1.9 percent increase in May, was a reminder of just how much economic growth in the second quarter slowed.

Forecasting firm Macroeconomic Advisers cut its projection for second quarter GDP growth by two-tenths of a percentage point to a 0.5 percent annual rate on the weak shipments number. JPMorgan also lowered its forecast to 0.5 percent.

Higher taxes and deep government spending cuts have dampened economic activity in the first half of the year, but the drag appears to be fading.

In addition to the increase in planned business investment spending, the report showed overall orders for long-lasting manufactured goods jumped 4.2 percent as demand for transportation goods and machinery increased.

It was a third straight month of gains and pushed orders for these goods, which range from toasters to aircraft, to a record high, surpassing the previous peak reached in December 2007, the month the economy slipped into recession.

While a separate report from the Labor Department showed initial claims for state unemployment benefits increased 7,000 to 343,000 last week, economists said volatility linked to annual auto plant shutdowns was likely distorting the picture.

Automakers traditionally close plants in July for retooling. However, they have either shortened the shutdown period or completely forgone the closures, throwing off the model that the government uses to adjust the data for seasonal variations.

A four-week average of new claims, which irons out the week-to-week volatility, held at levels that economists say are consistent with improving labor market conditions.

Although a surge in bookings for civilian and defense aircraft and solid demand for motor vehicles buoyed orders for durable goods in June, there were also signs of strength in other categories. In addition, unfilled orders recorded their largest gain since December 2007. Even more encouraging, order books for core capital goods rose a solid 1.7 percent.