US SUMMARY: Shares Rally On Bernanke Rate Halt Hint
DJIA 11011.42 gain 212.19 up 2.0%
NASDAQ 2080.71 gain 37.49 up 1.8%
S&P 500 1259.81 gain 22.95 up 1.9%
Dow Future 11050.00 gain 2.00 0.0%
NASDAQ Future 1500.50 gain 9.75 up 0.7%
S&P Future 1264.00 gain 1.50 up 0.1%
Euro-USD 1.2605 gain 0.0012 up 0.1%
10-Yr US Treasury: 5.06% down 0.08
(Futures values, Treasury, EUR/USD Data as of 0450 GMT)
Wall Street shares and Treasurys surged Wednesday after Federal Reserve Chairman Ben Bernanke soothed investors with his view that economic growth seems to be moderating and inflation remains contained. Oil and the dollar fell.
STOCKS: Investors interpreted Bernanke's testimony before Congress as a sign the Fed is close to ending its streak of interest rate hikes. Bernanke told the Senate Banking Committee, "We think inflation is going to moderate," and said the Fed's previous policy actions, such as rate hikes, could still affect the economy. However, he hedged the inflation outlook by talking about risks that could send prices higher.
Two government reports indicated the economy is slowing, with core inflation coming in lower than expected and new home construction falling. Strong earnings from International Business Machines, United HealthGroup and two large U.S. banks also bolstered stocks.
"I think we are limited to spasmodic moves like this, one-day wonders," said Jon Brorson, head of growth equities at Neuberger Berman in Chicago. "We're still going to be buffeted by concerns about the economy."
The Labor Department said the Consumer Price Index rose by 0.2 percent in June, the smallest increase in four months. But core inflation, which excludes energy and food, rose by 0.3 percent in June, higher than the 0.2 percent Wall Street expected. That increase left core inflation rising for the past three months at an annual rate of 3.6 percent, far above the Fed comfort zone of 2 percent or less.
In corporate news, shares of Qualcomm fell 6% in late trading, after the phone chip company gave fourth-quarter earnings guidance below Wall Street expectations.
Apple's profit jumped 48%, boosted by continued strong demand for iPods and higher sales of Macs. Its shares rallied 8%. Intel's profit shrank 56% as the chip giant took a hit for stock-options expensing and coped with stiff competition from AMD. Intel's shares fell on the news.
Motorola posted a 48 percent jump in second-quarter earnings Wednesday on the strength of record handset sales and shipments that far outpaced Wall Street's expectations.
Yahoo shares tumbled 22%, their biggest-ever percentage drop, after the company said it would delay search-ad improvements.
FOREX: The dollar is still under pressure after falling Wednesday on Bernanke's statements that hinted of a pause in the Fed's interest-rate tightening cycle.
It was "plainly obvious that the market was positioned for a hawkish testimony," noted Alan Ruskin, head of international strategy at RBS Greenwich Capital. "The headline the market seems to be focused on the most is that the Fed expects inflation to moderate and core inflation to decline in coming quarters."
BONDS: U.S. Treasury prices rallied Wednesday, as the bond market expressed relief that Bernanke's congressional testimony hinted at a possible pause in interest rate hikes in August.
Bernanke's comments dispelled "the notion that an August rate hike" is "baked in the cake," said Tony Crescenzi, chief bond market strategist for Miller Tabak in New York.
"I think that Bernanke is acknowledging that monetary policy works with a lag," said Scott Kirby, portfolio manager for RiverSource Investments. Bernanke, in other words, is indicating that the Fed "might have to pause and sit tight for a while and let things play out," Kirby said.
OIL: Futures fell for the third straight session, after a surprising increase in U.S. gasoline supplies in weekly stockpiles data. A barrel of light crude settled at $72.66, down 88 cents, in trading on the New York Mercantile Exchange. Analysts said selling also was spurred by the rising belief in the market that the conflict in Israel and Lebanon would not spread and thus threaten Middle East oil supplies. Bernanke's latest assessment of a slowing economy may also have played a role, by implying that demand could weaken.
ASIAN SUMMARY: Shares Follow Wall St Higher;
USD-Yen 116.72 loss 0.13 dn 0.1%
AUD-USD 0.7498 loss 0.0004 dn 0.05%
Nikkei 225 14863.99 gain 363.70 up 2.5%
Hang Seng 16406.63 gain 309.00 up 1.9%
S&P/ASX 200 4949.90 gain 68.60 up 1.4%
Taiwan Index 6427.22 gain 149.90 up 2.4%
S.Korea Kospi 1266.40 gain 32.75 up 2.7%
JGB Yield 1.8100% down 0.0300
(All values as of 0450 GMT)
STOCKS: Asian shares surged Thursday in the wake of large gains by U.S. markets following Bernanke's comments to Congress.
Ben Kwong, chief operating officer at broker KGI Asia Securities, said "The market interpretation is that there is no immediate pressure for further rate hikes." Kwong added the news was positive for regional Asian markets in the short term, but cautioned markets were still locked within a trading range.
In Australia, miners BHP Billiton and Rio Tinto each rallied more than 4%.
FOREX: The yen shed earlier gains that came on exporters in Japan selling dollars. Now traders look for USD/JPY to hold above 116.50.
BONDS: Prices of Japanese government debt are higher but limited as investors shifted more funds into shares. Dealers expected the latest 15-year auction to draw a good reception.
OIL: Prices rose 46 cents to $73.12 in Asia as traders corrected what they viewed as an oversold market. Middle East violence lent support. Israeli warplanes renewed airstrikes on Beirut's southern suburbs Thursday just after daybreak, Hezbollah TV reported.
METALS: Copper futures rose on the belief that a pause in U.S. Fed monetary tightening is bullish because demand would remain strong. Gold August futures gained $1.70 to $644.50.
EUROPEAN OUTLOOK: Markets Set For Opening Lift
Euro-USD 1.2605 gain 0.0012 up 0.1%
Stlg-USD 1.8443 gain 0.0020 up 0.1%
USD-Franc 1.2467 loss 0.0014 dn 0.1%
(All values as of 0450 GMT)
European shares, especially technology issues, are likely to see opening gains, with government debt prices and the euro also firmer.
STOCKS: European markets should open on a positive note and if Nokia and SAP report good earnings, the technology sector, which outperformed Wednesday, could have another solid session.
U.K. spreadbettor CMC Markets is calling the FTSE up 17 points at 5795, the DAX up 11 at 5539 and the CAC up 8 at 4855.
"We had good figures from ASML (Wednesday), and that's supportive, but on balance, clients are very, very cautious," said Lex Bouwmeester at Delta Lloyd Securities in Amsterdam.
European shares ended sharply higher Wednesday after comments from Bernanke went some way to offsetting interest rate fears.
BONDS: One more rate hike from the Fed appears likely to end its tightening phase, and that notion could help European government debt higher Thursday. Minutes from the Bank of England Wednesday reinforced the idea that it will stop tightening too.
European government bonds bounced back from early losses Wednesday on what were perceived as dovish comments from Bernanke.
FOREX: The euro is extending gains against the dollar at the open Thursday. The euro reached a record against the yen above 146.42. The notion that the Fed will stop raising rates diffuses some of the dollar's underpinning.
CALENDAR: Thursday, July 20: UK Retail; More Bernanke
GMT Expected Previous
0600 GER July Fin Ministry's monthly report
0645 FRA May Balance of Payments
0645 FRA May Current Account -2.3B -1.0B
0800 ITA May Indus Turnover +1.4%MM -1.9%MM
0800 ITA May Indus Orders -4.0%MM +6.8%MM
0830 UK June Public Sector Net Cash Requirment GBP11.7B GBP7.38B
0830 UK June Public Sector Net Borrowing +GBP6.4B GBP10.0B
0830 UK June Provisional M4
0830 UK June Retail Sales +0.4%MM +0.5%MM
0830 UK June BBA Mortgage Lending +GBP5.5B +GBP5.7B
1230 US Jul 15 Jobless Claims -17K +19K
1230 GER ECB Governing and Genl Council mtg in
1400 US Fed Chairman Bernanke testifies before
US House Financial Services Committee
1400 US June Conference Board Leading Econ +0.2% -0.6%
1400 US July 8 DJ-BTMU Business Barometer -0.3%
1430 US July 14 US Energy Dept Natural Gas Stocks (in +89
billion cubic feet)
1430 US Pres Bush addresses NAACP convention in
1600 US July Philadelphia Fed Business Index 12.0 13.1
1800 US June FOMC minutes
2030 US Jul 14 Money Supply