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Dow Back in Black for 2010

Bob Pisani is off; this post was written by CNBC producer Robert Hum.

A couple of takeaways from Friday’s solid gains:

1) No sell-off materialized following Thursday’s strong rally. Instead, the extension of Thursday’s rally on Friday gave the markets a modest 3 percent gain for the week – their second weekly gain over the last 3 weeks.

See live-time data for stocks in this article.

2) Another encouraging result of Friday’s gains that traders noted: higher highs for the markets for the first time in a number of months. Recall, following the S&P 500’s 19-month high of 1,217 back in April, the index has only seen lower relative highs since then (1,117 in June and 1,096 earlier in July). Friday’s gain gave the S&P 500 a 1-month high as it broke above the highs set earlier on July 15. The next technical level that traders have their highs on: the 1,117 mark, which was last seen in mid-June.

Markets Get Boost from FedEx, New Home Sales

Early on this morning, all indications were for a slightly lower open today, but strong earnings guidance out of FedEx and better-than-expected new home sales have given stocks some life after the open. With today’s gains, the Dow Industrials has swung back into positive territory for the year.

FedEx jumps 5 percent after the shipper raised its fiscal Q1 and full-year guidance (the company will report earnings on September 16). The Dow Transport company now sees Q1 earnings of $1.05-$1.25, above estimates of $1.01 and provides a full-year outlook of $4.60-$5.20 vs. $4.98 consensus. The reasons for the bullish guidance: “better-than-anticipated growth in FedEx Express and FedEx Ground volumes." Just like rival UPS, which reported last week, international package volumes have been particularly strong, soaring over 20 percent this quarter for FedEx.

Another very encouraging sign: FedEx announced it is reinstituting its company matching policy for its employees’ 401(k) contributions. The company had suspended that program to help contain costs during the economic crisis.

Following FedEx’s announcement, transports are having another stellar day. The Dow Transports is up 2 percent (outperforming all other indices today), and follows up on a strong 6 percent gain last week (nearly double the Dow and S&P’s gains). UPS rises nearly 2 percent, while truckers Con-Way, Expeditors, and CH Robinson are all up over 2 percent.

Home Sales, BP, Europe & Japan...

Meanwhile, stocks moved another leg up after a stronger-than-expected June new home sales report (330,000 vs 316,000 consensus). However, despite the strong headline number for June, it was dampened by a downwardly-revised May number, which was already at a record low (revised to 267,000 vs. 300,000 prior). Also disappointing, June housing prices remained depressed, falling 0.6 percent from the prior year. Following the release of the report, homebuilders got a bounce with Lennar, DR Horton, Toll Brothers, Ryland, Pulte Homes, and KB Home all up 2 percent to 4 percent.

Elsewhere:

a) European markets are up slightly while European banks are mixed in their first full day of trading following the release of the bank stress tests.

b) BP is up 4 percent after U.S. officials confirmed reports of the impending resignation of BP CEO Tony Hayward in a mutually agreed upon exit. However, the oil company itself has firmly denied that any decision on Hayward’s future as CEO has been made.

c) IBM announced it has received notice of two antitrust probes being launched by the European Union. The EU claims IBM abused its dominance in the mainframe computer industry, but the U.S. tech company says the complaints have no merit.

d) Japanese newspaper The Nikkei reports that Sony will return to profitability this quarter – a surprising profit since analysts had still been expecting a loss for the quarter. According to the paper, sales of cameras, video cameras, and PCs have been strong, especially in China. Also helping Sony: solid sales of LCD TVs and more profitable mobile phone and gaming operations.

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ALPOL
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CNW
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DHI
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EXPD
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LEN
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RYL
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TOL
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IBM
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KBH
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UPS
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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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