Investors sit back and again enjoy ECB President Mario Draghi’s “Save-The-EU” song and dance
Dow: 13,076 (+1.46%) S&P 500: 1,386 (+1.91%)
We’re not poets (not professionally at least), but we’d like to go on record saying there’s no better way to end a volatile market week than with a volatile market day. After 3-straight triple digit losses earlier in the week, the Dow added to yesterday’s huge gain with 188 points to finish above 13,000 for the first time in 2 months. The government’s bitter-sweet GDP announcement controlled the market in the morning…Then in the afternoon, stocks shot upward on more optimistic words from European Central Bank President Mario Draghi for the 2nd day in a row. A wide range of earnings results was overshadowed by a brutal investor reaction to Facebook‘s first public earnings report. And the Thomson Reuters/University of Michigan consumer sentiment index showed American buyers’ confidence improved slightly in July, but remains low.
Second quarter GDP at 1.5%, above forecasts, but below first quarter
The Commerce Department’s initial reading of the US 2nd quarter GDP (there will be 2 more readings to revise this in the coming months) showed annualized growth at 1.5%. On the one hand, it’s good to see the GDP number beat economists’ expectations of 1.3% growth – on the other hand, it’s a slowdown from the 1st quarter’s upwardly revised rate of 2%. Stocks drifted slightly positive in the morning as investors weighed the mixed news (the economy’s not as broke as some feared, but it’s not exactly whipping out a bottle of Hennessy and dancing up a storm at the club either). The GDP measures all the goods and services produced and sold by an economy and the US historical growth rate averages around 2-3% per year. Economists believe this quarter’s slowdown is mostly the result of Americans limiting spending as the job market calms.
ECB President Draghi taking specific steps to save Eurozone with policymakers
After boosting stocks up big yesterday by stating that Greece won’t drop the euro, Mario Draghi backed up his words with more of a plan to help the markets again today. Channeling his inner Bruce-Wayne-saving-Gotham-as-Batman, Draghi is going to personally try to persuade European policy makers to strengthen the Eurozone. Reports leaked that Draghi will meet with the head of Germany’s central bank (the “Bundesbank”) over the weekend to discuss specific options. With German Chancellor Angela Merkel and French President Francois Hollande issuing “statements of support” for Draghi’s moves, investors were excited to see some more unity out of Europe’s leaders.
Facebook falls to new low, other earnings reports mixed
Now in the dark heart of the corporate earnings season, today’s reports on 2nd quarter performance were all over the place. Expedia (EXPE) leapt 20% after beating forecasts and increasing its quarterly dividend thanks to greater revenues, while Starbucks (SBUX) lost nearly 10% for missing expectations and lowering its outlook for the remainder of the year. The big gossip story though was Facebook (FB). After falling 8% yesterday on worries about the firm’s first public earnings announcement, the social network reported yesterday afternoon that revenue growth came out slightly ahead of analysts’ expectations, but had slowed sharply. Investors were more concerned though that Zuckerberg isn’t providing any reliable outlook on future performance and punished the stock with an 11.7% loss to $23.70 (remember the IPO price? That was a whopping $38).
Next Week:
- Next week’s packed with an artery-clogging amount of rich, heavy econ data: the focus will be on the government’s major employment report for July on Friday
- The 2nd quarter earnings season continues: General Motors, MetLife, Pfizer, Time Warner, Kraft…and even Martha Stewart
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