Today's Morning Report
U.S. Overnight Market Commentary
The Nasdaq and S&P 500 rose modestly on Friday on relief that the financial regulation bill wouldn't crimp Wall Street profits as badly as feared and as tech company Oracle's strong results revived hopes about business spending. Despite the day's gains, the main stock indexes fell for the week after two straight weeks of gains and recorded their weakest performance in five weeks. Banks climbed after lawmakers agreed on rules that did not make dramatic changes to derivatives and proprietary trading, two highly profitable businesses in lawmakers' crosshairs. The bill must still be approved by both chambers of Congress before it can be signed into law. JPMorgan Chase & Co rose 3.7% at US$39.44 while Bank of America Corp gained 2.7% to US$15.42.The S&P financial sector, which is down 8.4% over the past quarter, rose 2.8%. "Regulation is less onerous than people's fears, so you're seeing a bit of a relief rally in the financials today, which obviously is helping," said Michael James, senior trader at Wedbush Morgan in Los Angeles. Oracle Corp gained 1.7% to US$22.60 a day after it posted a stronger-than-expected quarterly profit on solid sales of new software. "This could be a sign of a pick-up in tech spending, which may mean other tech firms are going to report strong numbers," said Andy Fitzpatrick, director of investments at Hinsdale Associates in Hinsdale Illinois. The Dow Jones industrial average was down 8.99 points, or 0.09%, at 10,143.81. The Standard & Poor's 500 Index was up 3.07 points, or 0.29%, at 1,076.76. The Nasdaq Composite Index was up 6.06 points, or 0.27%, at 2,223.48. The Dow fell 2.9% for the week, the S&P 500 was off 3.6% and the Nasdaq Composite fell 3.7%. The Dow edged lower on Wal-Mart Stores Inc , which fell 2.5% to US$48.80. The week's high and low points covered a wider span than last week's. Closing below the previous week's low in an "outside week" is seen as a technical bearish signal. "It looks like we're stuck in this trading range, with the downside (on the S&P) around 1,040 to 1,050 and upside capped by the 50 day moving average, which right now is around 1,127" said Michael Sheldon chief market strategist, RDM Financial, Westport, Connecticut. In economic news, a survey showed that consumer sentiment rose more than expected while a government report showed first-quarter gross domestic product was slower than previously estimated. "The market was already worried about a downturn, and the GDP data will highlight the idea that we should be concerned about a slowdown," said Chip Hanlon, president at Delta Global Advisors in Huntington Beach, California.
Europe’s Overnight Market Commentary
European shares hit a two-week closing low on Friday, as data showed first-quarter U.S. economic growth was slower than reported, while BP's battle to clean the Gulf of Mexico oil spill weighed on its sector. BP was down 6.4% after hitting a 14-year low as a hurricane looked set to hamper its efforts to contain the worst oil spill in U.S. history. The disaster has wiped more than half off BP's market value since April. Total, BG Group and Tullow were down 1.2% to 1.8%. The FTSEurofirst 300 index of top European shares fell for a fourth straight day and ended down 0.7% at 1,013.58 points, the lowest close since early June. It is down 9% from a peak in April, when worries intensified that the euro zone debt crisis could erode economic growth in the region. Sentiment soured after figures for U.S. economic growth in the first quarter were revised down. "It's just an indication of the fact that economic recovery is fragile. Valuations on the equity market are not cheap, particularly among cyclicals. I would expect the correction to continue," said Felicity Smith, fund manager at Bedlam Asset Management. "The market weakness is perfectly understandable, but within that there are opportunities amongst those companies in Europe which benefit from non-cyclical demand such as healthcare." European banking shares, which fell in the previous three sessions, rose 0.3% as U.S. lawmakers hammered out new Wall Street rules, ending a long period of uncertainty. The measures must still win approval from both chambers of Congress before U.S. President Barack Obama can sign them into law. Among the reforms, banks would face stricter limits on risky trading and investing, but could make small investments in private equity and hedge funds. Global regulators will also dilute a reform that forces banks to hold more reserves to survive shocks without having to rely again on taxpayer help, sources familiar with the negotiations said. The Group of 20 leading countries meet in Toronto on Saturday and Sunday. Standard Chartered, Societe Generale and Credit Agricole gained 1.8% to 2.6%. Among individual companies, Bourbon, a supplier of vessels for the offshore oil industry, rose 0.6%. It is set to invest US$2 billion to expand its fleet, betting on an increase in offshore activity despite BP's oil spill disaster.
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