Stocks Showing Some Strength On Positive Corporate Earnings - U.S. Commentary

(RTTNews) - After showing considerable strength at the start of trading, stocks have pared their gains in morning trading on Thursday. While the initial strength came on better than expected quarterly results from several big name companies, some mixed economic news reminded investors of the continued difficulties in the economy.

The financial sector is once again getting a boost after JP Morgan Chase (JPM) reported second quarter earnings that beat analysts’ expectations. While profit tumbled more than 50 percent from the previous year, JP Morgan reported earnings of $0.54 per share, while analysts were looking for a profit of $0.44 per share.

Likewise, United Technologies (UTX) reported second quarter net income that increased 11 percent from the previous year. Excluding restructuring costs in both periods, earnings per share grew 17 percent year-over-year. Additionally, the company raised its full year 2008 revenue and earnings per share guidance.

On the economic front, the pace of new homes starting construction surged in June, according to a government report issued Thursday. Economists have been scrutinizing housing data recently for signs that the beleaguered sector might finally be finding a bottom.

The U.S. Department of Commerce revealed that housing starts climbed 9.1 percent in June from the previous month to reach an annual pace of 1.066 million units. This compared to a revised rate of 978,000 units in May. Economists were looking for housing starts to rise 960,000 in June.

However, enthusiasm has been tempered as Commerce pointed out that much of the unexpected increase could be chalked up to a recent change to New York City’s building code, which boosted starts and permits for multifamily dwellings in the Northeast.

Meanwhile, manufacturing in the Philadelphia region continued to shrink in July for an eight straight month. The Federal Reserve Bank of Philadelphia’s Philly Fed index improved to minus 16.3 from minus 17.1 in July, although a negative reading signals a decline. Nonetheless, the decline was less than analysts were expecting.

In recent trading, the major averages have moved well off of their intraday highs, with the Nasdaq briefly dipping below the unchanged line. The Dow is currently up 39.82 at 11,279.10, the Nasdaq is up 4.36 at 2,289.21 and the S&P 500 is up 5.90 at 1,251.26.

Sector News

The Financial sector is turning in one of the biggest gains, boosted by positive earnings from JP Morgan Chase. Within the financial sector, both brokerage and bank stocks are sharply higher. The S&P Bank Index is climbing 4.6 percent, adding to a gain posted in the previous session.

Likewise, the Amex Securities Broker/Dealer Index is seeing an increase of 3.7 percent, adding to Wednesday’s gain. Earlier in the day, the index set a monthly intraday high.

Following some positive housing data, housing stocks are also seeing significant buying interest. The Philadelphia Housing Index is up 1.3 percent. The index set a three week intraday high earlier in the session.

Helped by a gain in the price in oil, oil service stocks are posting substantial gains as well. The Philadelphia Oil Service Index is climbing 2.9 percent, bouncing off of a two month closing low set in the previous session.

Other stocks that are seeing notable gains include gold and chemical stocks. The Amex Gold Bugs Index is up 2 percent, compared to a 1.7 percent gain in the S&P Chemical Index.

On the other hand, utility stocks are seeing notable declines. The Dow Jones Utility Average is down 1.2 percent, extending a recent downtrend. With the drop, the average set a three month intraday low.

Airline stocks are also sharply lower, as the price of oil climbs nearly $2 a barrel. The Amex Airline Index is falling 1.4 percent after showing earlier strength.

Stocks Driven By Analysts Comments

Among individual stocks, Steven Madden (SHOO) is seeing significant buying interest after being upgraded by an analyst at Wedbush Morgan. The analyst upgraded the stock to a Buy rating from a Hold rating.

Shares of the retailer are currently trading 4.9 percent higher adding to a strong gain posted in the previous session. Earlier in the day, the stock set a six week intraday high.

PF Chang’s China Bistro (PFCB) is also posting a substantial gain. The stock was upgraded to a Buy rating at Piper Jaffray after being upgraded by two other analysts the day before. The stock is gaining 1.1 percent, adding to increases seen in the past two days. Shares of the restaurant operator set a monthly intraday high earlier in the session.

On the other hand, Strategic Hotels & Resorts (BEE) is showing considerable weakness. A Wachovia analyst downgraded Strategic Hotels to an Underperform rating. The same analyst downgraded four other lodging companies at the same time. Shares of Strategic Hotels are currently down 5.1 percent.

Other Markets

Stock markets across the Asia-Pacific region closed mostly higher on Thursday, led by a 4% rally in India and Taiwan, buoyed by Wall Street’s rally and a sharp decline in crude oil prices overnight. The Japanese market closed higher after a mixed performance on Wednesday. The benchmark Nikkei 225 index gained 1 percent.

The major European markets are trading higher as well. The French CAC 40 Index and the German DAX Index are gaining 2.7 percent and 2.1 percent, respectively, while the U.K.’s FTSE 100 Index is advancing 2.6 percent.

Meanwhile, treasuries are seeing some weakness in morning trading, although the benchmark ten-year note is off of its session low. Subsequently, the yield on the ten-year note is currently up 2.2 basis points at 3.956 percent.

For comments and feedback: contact editorial@rttnews.com

Posted in Categories: Economy, Eurozone, Japan, Releases, USA.