US stocks manage to reverse course

Disappointing earning reports give a slow start to US stocks

US stocks lingered in the red for the entire first half of trading on Tuesday, 20 July 2010. It was mainly due to a couple of disappointing earning reports, that stocks made a weak start today. Then, without the help of any major catalyst, slowly crept back in the green and ended firmly and modestly higher. The materials sector led the way.



For the day, that ended on Tuesday, 20 July 2010, Dow ended higher by 75.53 points at 10,229.96. Nasdaq ended higher by 24.26 points at 2,222.49. S&P 500 ended higher by 12.23 points at 1,083.48. Dow started the day trading lower by 122 points earlier.

Nine out of ten economic sectors ended higher led by materials, energy, and industrial sectors. Healthcare sector was the sole laggard. Twenty-three of thirty Dow components ended higher led by Home Depot and Wal-Mart. IBM led the pack of decliners.

The only economic report scheduled for the day showed a 5% month-over-month decline in housing starts for June. That took starts to an annualized rate of 549,000 units, which is below the annualized rate of 575,000 units that had been widely expected. In contrast, building permits for June increased 2.1% month-over-month to an annualized rate of 586,000, which is above the annualized rate of 572,000 units that had been widely expected.

Companies that disappointed with their earning reports were IBM and Goldman Sachs. The weakness earlier during the day was largely a response to a light top line from Dow component IBM and the tech bellwether's underwhelming increase to its outlook. The company revealed soft service bookings contributing to a disappointing revenue number. Dow component, Johnson and Johnson too issued a downside forecast though the company's earnings beat expectations.

Among other earning reports, Texas Instruments issued upside guidance amid in-line earnings.

Materials stocks jumped today to witness substantial gains as steel stocks and diversified metals and miners led the sector. Such strength came after Moody's said that Japan's steel industry conditions are improving and hinted at higher steel prices in the later part of the year.

In the currency market on Tuesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.3% after rising 0.5% earlier in the day and also dipping in the negative territory in between.

Crude oil prices ended marginally higher on Tuesday, 20 July 2010 at Nymex. Prices rose on anticipation that tomorrow's weekly inventory report will show a drop in crude stockpiles for last week. Prices fell earlier in the day due to a couple of disappointing earning and economic reports. On Tuesday, crude oil futures for light sweet crude for September delivery closed at $77.58/barrel (higher by $0.68 or 0.9%). During intra day trading, prices fell to a low of $76.

On Tuesday, natural gas for September delivery rose 7 cents, or 1.5%, to settle at just under $4.58 per million British thermal units.

Bullion metal prices ended higher on Tuesday, 20 July 2010 at Comex. Both precious metals traded to their best levels in morning trade and spent the remainder of the session chopping around just shy of their respective highs. Prices rose despite a strong dollar. On Tuesday, gold for August delivery ended at $1,191.7 an ounce, higher by $9.9 (0.8%) an ounce on the New York Mercantile Exchange. On Tuesday, September Comex silver futures ended higher by 15 cents (0.9%) at $17.693 an ounce.

For every stock on the decline four rose on the New York Stock Exchange, where 1.1 billion shares traded hands.

Indian ADRs ended mostly higher on Tuesday. Wipro and HDFC Bank were the main gainers soaring 1.7% and 0.8% respectively. Dr Reddys slipped 1.3%.

A number of earning reports are expected tomorrow. No economic reports are due.