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Market Update by Miriam Gottfried and Will Swarts
Last-Minute Gains After Recession End Call
News at a Glance
- BAC/Merrill Analysts: Recession is over.
- Indexes Swing: Stocks edge higher.
- New Earnings: Intel, Yum Brands, Altera up next..
- Oil Uptick: Crude prices settle under $60.
The Lowdown
Stocks had a last-minute uptick Tuesday after Bank of America Merrill Lynch (BAC) analysts called an end to the global recession.
A report published Tuesday afternoon by Michael Hartnett, head of the bank's research investment committee, said recovery will take time and require sustained government support, but that "our global economists believe the recession ended in Q2 2009 and a fragile recovery has begun."
Stocks wavered throughout the day after a welcome earnings beat from Goldman Sachs (GS).
The Dow Jones Industrial Average closed up 28 at 8359. The Nasdaq held minor gains too, closing up 7 at 1800. The S&P 500 closed up 5 at 906.
Goldman reported earnings of $4.93 a share, compared to earnings of $4.58 a share in the same quarter a year ago. It was expected to earn $3.48 a share. While that signaled that the financial sector had moved away from the abyss, much of the revenue came from underwriting secondary share offerings of troubled banks and other institutions struggling to raise capital.
Dow component Johnson & Johnson (JNJ) also beat expectations, earning $1.15 a share, compared to $1.17 a share in the second quarter of 2008. Forecasters had expected earnings of $1.11 a share.
Eyes turned to the next set of major earnings as Intel (INTC) reported better than expected results, losing 7 cents a share for the quarter due to a fine from the European Commission. Absent the charges, it would have earned 18 cents a share, down from 26 cents in the year-ago period. Street analysts expected profit of 8 cents a share. As of 5:04 p.m., Intel was up 7% in electronic trading. Yum Brands (YUM) and Altera (ALTR) also reported after the close.
Oil prices pulled back from early gains, retreating below $60 a barrel. As of 5:04 p.m., crude traded on the Nymex was up 23 cents at $59.75.
Corporate News
- Goldman Sachs (GS) announced second-quarter earnings of $3.44 billion or $4.93 a share Tuesday, compared to earnings of $2.05 billion or $4.58 a share in the same period a year ago. Analysts had expected Goldman to earn $3.48 a share. RELEASE
- Johnson & Johnson (JNJ) announced second-quarter earnings of $3.2 billion or $1.15 a share, compared to $3.3 billion or $1.17 a share in the same period in 2008. Forecasters had expected the company to have earned $1.11 a share. RELEASE
- CIT (CIT) is in advanced talks with regulators about a financial rescue plan. One possible source of funds is a Federal Deposit Insurance Corp. program that guarantees new debt issues, The Wall Street Journal reported Tuesday, citing anonymous sources. So far, the government has treated CIT as if it were not too big to fail, although concerns remain about the effects of the lender's potential to hobble small businesses should it collapse.
The Economy
- The Producer Price Index for finished goods rose 1.8% in June, compared to an increase of 0.2% in May, the Labor Department reported Tuesday. The index, a measure of wholesale inflation, was expected to rise 1.0%. The core index, which excludes volatile food and energy prices, rose 0.5%, compared to a decrease of 0.1% in May. It was expected to have risen 0.1%. REPORT
- Retail sales rose 0.6% in June to $342.1 billion the Commerce Department said Tuesday. Total retail sales, a key indicator of consumer spending, was expected to have risen 0.4%, compared to an increase of 0.2% in May. Excluding automobiles, sales were $285.1 billion, a 0.3% increase over May. Analysts had expected sales, excluding automobiles to rise 0.5%. REPORT
- The Commerce Department announced that business inventories fell more than expected for May, dropping 1.0%, more than the earlier forecast of a 0.8% drop. Inventories fell 1.1% in April. REPORT
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