Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

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

Stock-Markets

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: customerservice@moneymorning.com

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 http://www.MarketOracle.co.uk - 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