RTTNews - Stocks are seeing strong gains in early afternoon trading on Friday, boosted early by positively surprising results on existing home sales. The major averages are in positive territory by notable margins, looking to close higher for the week.
Risk appetite picked up considerably this morning, as existing home sales increased by much more than expected in the month of July, according to a report released by the National Association of Realtors, with the headline figure rising for the fourth consecutive month.
The markets are also focusing on remarks from Federal Reserve Chairman Ben Bernanke, who spoke about the recent financial crisis at the Kansas City Fed's annual conference in Jackson Hole, Wyoming. The Fed chief stated that global economies are stabilizing, although he said the recovery is likely to be slow, weighed down by the continuing high levels of unemployment.
In earnings news, Gap Inc. (GPS), Ann Taylor Stores (ANN) and J. M. Smucker Company (SJM) reported earnings that beat Wall Street estimates on the bottom line.
The major averages have seen choppy movement in recent trading, hovering near their highs of the day. The Dow is currently up 136.64 at 9,486.69, the Nasdaq is up 26.53 at 2,015.75 and the S&P 500 is up 16.43 at 1,023.80.
Housing stocks are continuing their strong performance in early afternoon trading, with the Philadelphia Housing Sector Index posting a 3.4 percent gain. With the move, the index has offset nearly all of its recent losses, boosted by today's existing home sales data.
The resource sector is also rallying, led by the gains by oil service stocks. The Philadelphia Oil Service Sector is up by 3.3 percent, reaching a two-month intraday high after being stuck in a trading range for roughly a month.
The index is being helped by a strong performance by Cameron International Group (CAM), which is posting gain of 4.6 percent on the day. The advance has propelled the stock to its best intra-day price in eleven and a half months.
The upward move by resource stocks comes amid an increase in commodity prices, with oil up $0.98 at $73.89 a barrel and gold up $11.90 to $953.60 an ounce.
Defense, commercial estate, trucking, airline and banking stocks are also moving considerably higher, reflecting the day's strength in a variety of equity segments.
Stocks In The News
Salesforce.com (CRM) is surging higher in early afternoon trading after the company reported second quarter earnings of $0.17 per share, which beat the consensus estimate of $0.15 per share. The stock has jumped by 15.7 percent, reaching an eleven-month intraday high.
Mentor Graphics (MENT) is also skyrocketing amid reaction to the firm's second quarter earnings of $0.02 per share, which beat expectations for a loss of $0.10 per share. Further, the company expects a third quarter profit of $0.01 per share compared to the consensus estimate of a loss of $0.02 per share. The stock is up by 14.1 percent, reaching its highest intraday price in ten months.
On the other hand, shares of Foot Locker (FL) are retreating after the company reported breakeven results for second quarter, which fell short of Wall Street forecasts for earnings of $0.07 per share for the quarter. Sales also failed to meet expectations. The stock has slipped by 8.3 percent, falling to its worst level in five and a half weeks.
In Focus: Economic Data, Earnings News
As mentioned above, the National Association of Realtors said that existing home sales rose 7.2 percent to an annual rate of 5.24 million units in July from a 4.89 million unit rate in June. Economists had been expecting a more modest increase to a 5.0 million unit rate.
NAR noted that the increase in sales was the largest monthly gain on record for the total existing-home sales series dating back to 1999. With the increase, existing home sales rose for the fourth consecutive month, the first four-month winning streak since June of 2004.
Traders have also looked to comments from Fed Chairman Ben Bernanke, who stated that economic activity appears to be leveling out, both in the United States and abroad, while adding that prospects for a return to growth in the near term appear good.
However, Bernanke warned that the recovery may be sluggish at first, with unemployment declining only gradually from high levels.
In earnings news, apparel retailer Gap Inc. reported second quarter net income of $0.33 per share compared to $0.32 per share in the year-ago quarter. Net sales decreased to $3.25 billion from $3.50 billion in the prior-year quarter. Wall Street analysts expected the company to earn $0.32 per share on revenues of $3.23 billion.
Ann Taylor Stores reported adjusted second-quarter net income of $0.06 per share along with net sales of $470.23 million, while analysts forecast earnings of $0.03 per share on sales of $472.21 million.
Jelly maker J. M. Smucker Company reported first-quarter net income of $0.83 per share, while net sales came in at $1.05 billion. Analysts expected the firm to earn $0.80 per share on revenues of $1.04 billion.
In overseas trading, stock markets across the Asia-Pacific region saw a mixed performance on Friday. Japan's benchmark Nikkei 225 Index slipped by 1.4 percent, while China's Shanghai Composite rose by 1.7 percent.
Meanwhile, the major European markets all closed substantially higher, with the French CAC 40 Index and the German DAX Index rising by 3.2 percent and 2.9 percent, respectively, while the U.K.'s FTSE 100 Index finished up by 2 percent.
In the bond markets, treasuries are continuing to see substantial weakness amid the strength on Wall Street. Subsequently, the yield on the benchmark ten-year note is trading at 3.541 percent, posting a gain of 10.6 basis points.
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