Trader Talk

Global Rally Ahead of Big Europe Meetings

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

Global stocks are rallying strongly Friday as Eurozone finance ministers meet today and ahead of the EU leaders’ meeting on Sunday. All that will likely come to a head by Wednesday, when a second summit among EU leaders is expected to result in a “definitive agreement” on the EFSF.

Although an agreement on bank recapitalization may reportedly be worked out by tomorrow, lots of differences in opinions related to the EFSF still need to be ironed out. Earlier today, Austrian Finance Minister Maria Fekter told reporters that seven options “are now on the table” for the EFSF.

Meanwhile, a draft of a report from the "troika" — the IMF, the European Central Bank, and the European Commission — on Greece expresses greater concerns for that nation. Although the troika recommends Greece should receive its next tranche of aid as soon as possible, it warns that the second bailout plan is likely no longer sufficient to support the country with its economy continuing to spiral downward. The draft states that "government debt dynamics remain extremely worrying” and that “there is no doubt that Greece is undergoing a recession that is deeper and longer than expected.”

That’s not worrying the stock market right now at least, with the Dow pushing a 200-point rally today. Today’s gain has pushed the Dow and the S&P into positive territory for the week (Dow up 0.9 percent, S&P up 1.1 percent WTD). If the current gains hold at the close today, the Dow will turn in its 4th straight weekly gain – its longest weekly winning streak since January. At the same time, it would be the S&P’s 3rd consecutive weekly gain – its first such streak since February.

An earnings recap:

General Electric reported earnings inline with estimates and better-than-expected revenues, particularly in its overseas markets. However, although the conglomerate’s key industrial orders were up 16 percent, that number was a bit disappointing to the Street. That, along with concerns over narrower profit margins, sends shares down 2 percent. Looking ahead, the Dow component forecasts double-digit earnings growth in 2012.

Honeywell rises 4 percent after easily toping estimates ($1.10 vs. $1.00 consensus) on strong 8 percent organic growth across the company, with particular strength at its Commercial Aerospace operations. CEO Dave Cote expresses some optimism for the aerospace/automation company ahead, noting that “despite signals of slower economic growth, we expect positive organic growth to continue the rest of this year and into 2012.” Earnings guidance for the year is raised to $4.00-$4.05, above $3.97 consensus.

McDonald’s beats estimates ($1.45 vs. $1.43 consensus) on stronger-than-expected revenues. Global comps rose 5.0 percent, with solid comps both in the U.S. (up 4.4 percent) and Europe (up 4.9 percent). The fast food giant also notes that October comps “remain strong,” with global comps expected to rise 4-5 percent.

The stock is set to open close to a new all-time high, and it’s the second best performing stock in the Dow this year (second only to IBM).

Chipotle Mexican Grill rises 4 percent, not far from a new historic high, after beating estimates ($1.90 vs. $1.85 consensus) on an extremely strong 11.3 percent jump in comps. Top line growth was helped by both increased traffic and price increases. But even though the fast food restaurant has been able to hike menu prices, rising commodity costs remain a big issue for the company. Its food costs (as a percentage of overall sales) grew in the quarter and margins shrunk from the year-ago quarter.

Schlumberger falls 2 percent after missing estimates ($0.98 vs. $1.10 consensus), but by disappointing results from the oil service firm’s international operations. Partially offsetting the weakness overseas though was strong activity and profits in North America. CEO Paul Kibsgaard cautions that “financial turmoil introduces some uncertainty over near-term activity.” However, he also believes that “any reductions will be short-lived.”

MGIC Investment drops 11 percent after reporting a wider-than-expected loss (loss of $0.82 vs. loss of $0.79 consensus). As the housing market remains depressed and continued high levels of unemployment, the mortgage insurer saw increased homeowner defaults, forcing the firm to pay more to cover those defaults. New delinquencies (homeowners falling behind in their mortgage payments) also rose to the highest level of the year. Rivals Radian and PMI are also quite weak on MGIC’s report.

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