Markets closed higher, sent soaring after the European leaders struck a deal early this morning on the terms of the EFSF. The Dow closed 339 points higher on the news as well as Q2 GDP and jobless claims that were in-line with expectations. The Dow closed above 12,000 for the first time since August 1, the day before the U.S. debt ceiling agreement.
At 4:00 am local time this morning, European leaders released a fifteen page document outlining the agreement on the terms for the European Financial Stability Fund. The agreement included a voluntary 50% haircut for Greek debt-holders, but sources are reporting that Angela Merkel gave the banks and insurers a 50% haircut or 100% default ultimatum, and the ability to leverage the fund to €1 trillion after stripping out commitments already made to Greece, Ireland, and Portugal. The Euro traded 2.21% higher to $1.4187 vs. the U.S. Dollar. The VIX, which measures volatility in the markets, fell 14.70% today to 25.47, the lowest level since August 3rd.
Second quarter GDP was reported as up 2.5% in line with expectations, but much higher than the 1.3% reported for the first quarter. Consumer spending was also higher, up 2.4%, beating expectations. The reading, combined with the measures being taken in Europe are relieving some of the concerns that we are facing a double dip recession.
Jobless claims were relatively flat for the fourth straight week, falling just 2k to 402k, in-line with economists’ expectations. The claims continue to sit just above 400k, the level where the economy is shedding more jobs than it is creating.
The Republicans serving on the “super committee” set up as a result of the August debt ceiling agreement proposed a plan that will cut $2.2 trillion from the nation’s deficit. The plan includes significant cuts to Medicare and Medicaid, and Republicans claim that lowering corporate taxes will increase revenue. The plan is expected to be met with opposition by the Democrats on the committee, who are skeptical of the ability for tax cuts to generate revenue.
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Market Indices/Statistics:
- Dow closed up 339.51 pts/+2.86% to 12,208.55
- S&P closed up 42.59 pts/+3.43% to 1,284.59
- Nasdaq closed up 87.96 pts/+3.32% to 2,738.63
- All 30 Dow stocks closed higher
- All 10 S&P 500 sectors closed higher
- Financials was the best performing sector (up 6.16%)
- The VIX was down 4.40 to 25.46
- Oil is up $3.49 to $93.69
- Nat Gas is down $0.001 to $3.910
- Gold is up $19.30 to $1,742.80
- Euro vs. Dollar up $0.0305 to $1.4187
- Dollar vs. Yen down $0.27 to $75.95
Companies in the News:
Hertz Global Holdings Inc. traded higher (+7.81% to $11.87) after announcing this morning that it is withdrawing its offer to acquire Dollar Thrifty Inc (-0.42% to $61.39). Hertz said it still believes it is in the two companies’ best interest to merge, and will continue to pursue anti-trust clearance.
Valero Energy Corp. announced this morning that the Board of Directors has approved a 300% increase in the quarterly dividend, tripling the distribution from $0.05 per share to $0.15 per share, reflecting improved operations and favorable industry conditions. Shares of Valero closed 4.33% higher to $26.24 in today’s session.
Shares of Sony Corp. traded higher (+7.04% to $22.06) after announcing it will take full control of the Sony Ericsson mobile phone joint venture with Ericsson, which was set up in 2001. Sony will pay Ericsson €1.05 billion for its 50% stake.
Earnings:
Exxon Mobil reported earnings before the opening bell this morning of $2.13 per share on $125.33 billion in revenue, both in-line with expectations. Shares of Exxon were up only 1.00% to $81.88 in today’s trading.
Corn Products International Inc. traded higher (+8.05% to $49.00) after reporting Q3 adjusted earnings per share of $1.20, beating expectations of $1.10 per share. Shares were also pushed higher because CPO’s full year guidance also exceeded expectations, reported at $4.62-4.72 per share vs. analysts’ consensus of $4.54 per share.
Dow Chemical also closed higher (+8.22% to $29.10) after reporting earnings per share of $0.62 excluding items on $15.1 billion. Earnings per share were reported in-line, but revenue was higher than expected ($15.1 billion vs. $14.63 billion).
Coming Friday:
Economic Reports:Personal Income (expected to be +0.3%) and Personal Spending (expected to be +0.6%) at 8:30am; Earnings from Arch Coal, Cablevision, Chevron, Newell Rubbermaid, Whirlpool Corp.