Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
The Beatings Will Continue Until the Economy Improves - 6th Jul 20
The Corona Economic Depression Is Here - 6th Jul 20
Stock Market Short-term Peaking - 6th Jul 20
Gold’s Major Reversal to Create the “Handle” - 5th July 20
Gold Market Manipulation And The Federal Reserve - 5th July 20
Overclockers UK Custom Build PC Review - 1. Ordering / Stock Issues - 5th July 20
How to Bond With Your Budgie / Parakeet With Morning Song and Dance - 5th July 20
Silver Price Trend Forecast Summer 2020 - 3rd Jul 20
Silver Market Is at a Critical Juncture - 3rd Jul 20
Gold Stocks Breakout Not Confirmed Yet - 3rd Jul 20
Coronavirus Strikes Back. But Force Is Strong With Gold - 3rd Jul 20
Stock Market Russell 2000 Gaps Present Real Targets - 3rd Jul 20
Johnson & Johnson (JNJ) Big Pharma Stock for Machine Learning Life Extension Investing - 2nd Jul 20
All Eyes on Markets to Get a Refreshed Outlook - 2nd Jul 20
The Darkening Clouds on the Stock Market S&P 500 Horizon - 2nd Jul 20
US Fourth Turning Reaches Boiling Point as America Bends its Knee - 2nd Jul 20
After 2nd Quarter Economic Carnage, the Quest for Philippine Recovery - 2nd Jul 20
Gold Completes Another Washout Rotation – Here We Go - 2nd Jul 20
Roosevelt 2.0 and ‘here, hold my beer' - 2nd Jul 20
U.S. Dollar: When Almost Everyone Is Bearish... - 1st Jul 20
Politicians Prepare New Money Drops as US Dollar Weakens - 1st Jul 20
Gold Stocks Still Undervalued - 1st Jul 20
High Premiums in Physical Gold Market: Scam or Supply Crisis? - 1st Jul 20
US Stock Markets Enter Parabolic Price Move - 1st Jul 20
In The Year 2025 If Fiat Currency Can Survive - 30th Jun 20
Gold Likes the IMF Predicting a Deeper Recession - 30th Jun 20
Silver Is Still Cheap For Now - 30th Jun 20
More Stock Market Selling Ahead - 30th Jun 20
Trending Ecommerce Sites in 2020 - 30th Jun 20
Stock Market S&P 500 Approaching the Precipice - 29th Jun 20
APPLE Tech Stock for Investing to Profit from the Machine Learning Mega trend - 29th Jun 20
Student / Gamer Custom System Build June 2020 Proving Impossible - Overclockers UK - 29th Jun 20
US Dollar with Ney and Gann Angles - 29th Jun 20
Europe's Banking Sector: When (and Why) the Rout Really Began - 29th Jun 20
Will People Accept Rampant Inflation? Hell, No! - 29th Jun 20
Gold & Silver Begin The Move To New All-Time Highs - 29th Jun 20
US Stock Market Enters Parabolic Price Move – Be Prepared - 29th Jun 20
Meet BlackRock, the New Great Vampire Squid - 28th Jun 20
Stock Market S&P 500 Approaching a Defining Moment - 28th Jun 20
U.S. Long Bond: Let's Review the "Upward Point of Exhaustion" - 27th Jun 20
Gold, Copper and Silver are Must-own Metals - 27th Jun 20
Why People Have Always Held Gold - 27th Jun 20
Crude Oil Price Meets Key Resistance - 27th Jun 20
INTEL x86 Chip Giant Stock Targets Artificial Intelligence and Quantum Computing for 2020's Growth - 25th Jun 20
Gold’s Long-term Turning Point is Here - 25th Jun 20
Hainan’s ASEAN Future and Dark Clouds Over Hong Kong - 25th Jun 20
Silver Price Trend Analysis - 24th Jun 20
A Stealth Stocks Double Dip or Bear Market Has Started - 24th Jun 20
Trillion-dollar US infrastructure plan will draw in plenty of metal - 24th Jun 20
WARNING: The U.S. Banking System ISN’T as Strong as Advertised - 24th Jun 20
All That Glitters When the World Jitters is Probably Gold - 24th Jun 20
Making Sense of Crude Oil Price Narrow Trading Range - 23rd Jun 20
Elon Musk Mocks Nikola Motors as “Dumb.” Is He Right? - 23rd Jun 20
MICROSOFT Transforming from PC Software to Cloud Services AI, Deep Learning Giant - 23rd Jun 20
Stock Market Decline Resumes - 22nd Jun 20
Excellent Silver Seasonal Buying Opportunity Lies Directly Ahead - 22nd Jun 20
Where is the US Dollar trend headed ? - 22nd Jun 20
Most Shoppers have Stopped Following Supermarket Arrows, is Coughing the New Racism? - 22nd Jun 20

Market Oracle FREE Newsletter

AI Stocks 2020-2035 15 Year Trend Forecast

Two Reasons the Dow’s Rally to 10,000 Will Keep Moving Higher

Stock-Markets / Stocks Bull Market Oct 15, 2009 - 08:27 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleJason Simpkins writes: The last time Dow Jones Industrial Average hit the 10,000 mark, it was plummeting from an all-time high of 14,163.53 as shell-shocked investors sought shelter from the worst financial crisis since The Great Depression. But this time around the blue chip index was on the upswing, surging 1.4% yesterday (Wednesday) to a close of 10,015.86.

Of course, it’s not necessarily the number 10,000 that investors should be focused on; it’s how we got there.

“This rally is about much more than a number,” Richard Ross, chief technical strategist at Auerback Grayson, told Forbes. “We have a market and an economy that is in the process of one of the greatest comeback stories ever told. To ascribe any importance to an arbitrary line detracts from the true drivers of the rally.”

And while there have been many drivers of the current really there are two main catalysts for the rise to 10,000:

  • Strong Corporate Earnings
  • The Return of Risk Appetite

Earnings Energizing the Market

Stellar earnings were a major factor in yesterday’s surge to 10,000. A blowout third quarter for JPMorgan Chase & Co. (NYSE: JPM) sent its shares and more than 600 other stocks 52-week highs.

JPMorgan delivered its strongest performance since the financial crisis first took hold two years ago, as the company reported a six-fold increase in third-quarter profit. The bank made $3.6 billion, or 82 cents a share in the three months through September, up from $527 million, or 9 cents a share, a year earlier.

That was far better than Wall Street was anticipating.

Analysts polled by Thomson Reuters Corp. (NYSE: TRI) expected the company to report a profit of $2.03 billion for the quarter, or 52 cents a share, according to CNNMoney.

What’s more is that the rally could be extended today (Thursday) when JPMorgan’s chief rival Goldman Sachs Group Inc. (NYSE: GS) reports its earnings. Goldman reported record earnings in the second quarter, with revenue of $13.8 billion, compared with $9.43 billion in the first quarter and $9.42 billion in the second quarter a year earlier. Net income rose to $3.44 billion, or $4.93 a share.

“We have got JPMorgan [Wednesday], we have got Goldman Sachs [Thursday],” David Morrison, market strategist at GFT Global Markets U.K. Ltd. told Reuters. “There has been a lessening of competition within the investment-banking arena. Activity is basically picking up. There has been expectation that both banks should do very well. Certainly JPMorgan results today have shown that expectation was completely warranted.”

Whereas just a year ago financial firms were swamped toxic securities, many appear to have turned a corner.

“The results are very good for the sector,” said Geoff Wilkinson, head of investment research at the London-based Mint. “It is very hard to sell the market at all if we’re seeing the main U.S. banking indices also very near their highs. It’s an absolutely definitive catalyst for a positive market and has a very positive impact on sentiment. The one point is that if the broad U.S. banking indices are supported by this then everything else will be supported as well.”

JPMorgan stock has rallied nearly 196% since March 9, while Goldman Sachs shares have surged 161%. Meanwhile shares of Bank of America Corp. (NYSE: BAC) and Wells Fargo Corp. (NYSE: WFC) are up 384% and 214% respectively. Shares of Citigroup Inc. (NYSE: C) are up 383%.

In addition to the banking sector, technology businesses have been out in front of the U.S. recovery. The tech-heavy Nasdaq Composite Index is up about 66% from its March lows. Dow component Intel Corp. (Nasdaq: INTC) helped JPMorgan in giving the markets a boost by also topping analysts’ estimates.

Intel reported a 6% decline in third-quarter profit and an 8% drop in revenue – both better than market forecasts. The company has been asserting for months that personal computer sales are rebounding.

The results “underscore that computing is essential to people’s lives, proving the importance of technology innovation in leading an economic recovery,” Intel Chief Executive Officer and President Paul Otellini said.

Otellini predicted in August that PC sales could defy predictions by growing in 2009, and thus avoid the first year-over-year sales decline since 2001. His company’s third-quarter sales jumped 17%, to $9.4 billion, easily surpassing Wall Street expectations, as businesses and consumers around the world took advantage of falling prices to purchase new machines.

He and others have cited aging machines and next week’s introduction of Windows 7 as main catalysts for a resurgance in corporate PC sales.

“We remain encouraged that corporate PC sales will improve and recover some in 2010, potentially a baton handoff to the next growth driver,” FBR Capital Markets Corp. (Nasdaq: FBCM) analyst Craig Berger said in a note.

Risk Appetite Returns

Indeed, many corporations appear to have made the necessary adjustments and are returning to profitability much quicker than anticipated. And as the stock market has stabilized over the past several months, there has been a noticeable increase in risk appetite.

That has been evidenced by the resumption of share offerings after a long hiatus and the acceleration in mergers and acquisition (M&A) activity.

A record $289 billion of stock was sold through initial public offerings (IPOs) in 2007, but that figure was cut by about two-thirds in 2008. In the past few months, however, offerings have come back into fashion with 230 companies going public to raise $32.5 billion in the first nine months of the year.

Seven IPOs flooded the market in the week ended Sept. 25 – the most in one week since 2007. Four more took place the following week, which led into October.

“We’re seeing clients start to get very excited about the IPO market – [in a way] they haven’t been in months or even years,” Brent Siler, a partner at the law firm Cooley Godward Kronish, which helps companies prepare IPO filings told BusinessWeek.

To satisfy investor demand many companies are lining up IPOs as quickly as they can.

The Blackstone Group LP (NYSE: BX), the world’s largest private-equity firm, is planning to list up to eight companies and sell five more to take advantage of rising stock markets and return money to investors, a person familiar with the situation told Bloomberg News.

Hyatt Hotels Corp. and beef and pork processing giant JBS Swift & Co. are also planning IPOs.

Meanwhile, Kraft Foods Inc. (NYSE: KFT) has headlined a resurgence in M&A activity with its $16.7 billion bid for Cadbury PLC (NYSE ADR: CBY). Abbott Laboratories (NYSE: ABT), a smaller rival of drug-industry bellwether Johnson & Johnson (NYSE: JNJ), purchased the pharmaceutical business of Belgium’s Solvay SA (OTC ADR: SVYSY) for as much as $7 billion. And Technology heavyweight Xerox Corp. (NYSE: XRX) added to the frenzy by announcing it would pay $6.4 billion in cash and stock for outsourcing and information-services company Affiliated Computer Services Inc. (NYSE: ACS).

[Clients] seem to be much more interested in thinking about acquisitions and growth plans. They have finished the cost-cutting by and large,” Bill Achtmeyer, the chairman and managing partner of the Parthenon Group, told NPR.

“You have the makings of a recovery,” he added. “I think it will be a gradual uptick, but I think it will be sustained.”

[Editor's Note: It's not always what you buy that determines whether you are a winner or loser as an investor.

Sometimes, it's what you don't buy.

Throughout the global financial crisis, longtime market guru Martin Hutchinson has managed to call both sides of the game correctly. Not only has he assembled high-yielding dividend stocks, profit plays on gold, and specially designated "Alpha-Bulldog" stocks into high-income/high-return portfolios for savvy investors. His warnings about the dangers of credit-default swaps - issued half a year before those deadly derivatives ignited the worldwide financial firestorm - would have kept investors who heeded his caveats out of ruinous bank-stock investments. In fact, Hutchinson even issued a highly accurate prediction of when and where the U.S. stock market would bottom out (a feat that won him substantial public recognition).

Experts are taking notice. And so should you.

Hutchinson is now making those insights available to individual investors. His trading service, The Permanent Wealth Investor, combines high-yielding dividend stocks, gold and his "Alpha-Bulldog" stocks into winning portfolios. And the strategy is designed to work in any kind of market- bull, bear or neutral.

To find out more about the Alpha-Bulldog strategy - or Hutchinson's new service, The Permanent Wealth Investor - please just click here.]

©2009 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investment advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules