Better than expected earnings results from tech titan Intel (INTC) has fueled an extremely widespread rally across the globe. Economic reports like the CPI, NY Empire state index, and industrial production all took a back seat to corporate earnings. Meanwhile a drop in the U.S. dollar is boosting commodities and crude oil stages a comeback with a 3% gain.
Asian and European markets were all in rally mode. The Chinese Shanghai index gained 1.3% to set another one-year high. The Hong Kong Hang Seng rose just over 2%. The Japanese NIKKEI just barely closed positive with a 0.08% gain. The British market ignored news that England's unemployment hit new multi-year highs. The English FTSE gained 2.5%. The French CAC-40 rose 2.9%. The German DAX soared another 3%.
The story today was Intel. The semiconductor giant reported earnings last night that were better than expected. The company is appealing a $1.45 billion fine it had to pay the European Union over an antitrust case but if you back out the fine Intel earned 18 cents a share in the second quarter. Analysts were only expecting a profit of 8 cents a share. Revenues were much better than expected at $8.02 billion versus estimates of $7.28 billion. The ubiquitous semiconductor is such an important part of our economy that Intel's better than expected numbers inspire confidence that business conditions are truly improving. Shares of Intel are up 7.1% at $18.00. The SOX semiconductor index is up 3.5% near 280.
There was plenty of economic data out today. The Labor Department said the Consumer Price Index (CPI) rose 0.7% in June thanks to a huge surge in gasoline prices. This was the biggest one-month gain in almost a year. Economists were expecting a rise of +0.6% following a minor 0.1% rise in May. The Core CPI, which excludes the more volatile food and energy prices, only rose 0.2%. The Federal Reserve New York Empire State manufacturing survey almost made it into positive territory. Economists were expecting this index to improve from -9.4 June to -5.0 in July. The results this morning showed a bigger improvement with a reading at -0.6 for July. Readings under 0.0 indicate a contracting economy. Lastly the industrial production numbers came in at -0.4%, which was both better than last month's 1.2% decline and current estimates for a -0.6% decline.
After weeks of consolidating sideways the U.S. dollar has begun to decline again. This is boosting commodities, building materials and related stocks. The GLD gold ETF is up 1.5% and the gold and silver index is up 4.3%. Crude oil is soaring 3% with a $1.80 jump to more than $61.00 a barrel. The big improvement in oil is lifting the oil and oil service indices to 3% gains. It didn't hurt that the weekly oil inventory numbers came in worse than expected. Economists were looking for a drop in inventories of 2.1 million barrels and inventories actually fell 2.8 million barrels. The Energy Information Administration said supplies are still 16% above year-ago levels.
In less than an hour the Federal Reserve will release their FOMC minutes from the last meeting. I doubt this will have an impact on the market but you never know. Look for this announcement around 2:00 p.m. EDT. Tomorrow we'll get the Federal Reserve's Philadelphia regional manufacturing survey. Thursday also brings China's second quarter GDP data. Tomorrow morning banking giant J.P.Morgan Chase will report earnings. Analysts expect JPM to earn 4-cents a share. Thursday night after the closing bell tech giants IBM and Google (GOOG) will both report earnings.
Currently the S&P 500 index is up 2.3% at 927 and quickly approaching potential resistance near the 930 level. The NASDAQ Composite is up 2.8% and breaking out past the 1800 level and the 1850 level. The Dow Industrials are up 2.3% and rising past several moving averages. The DJIA is quickly approaching potential resistance at the 8600 level. The small cap Russell 2000 index is up 3.2% and also breaking out past several key moving averages and past the 500 level.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list I see that the FXE euro ETF is up on the dollar weakness. The GDX gold-miner ETF is up 4.2%. ORLY is hitting new all-time highs over $40.50. The market strength was too much for our inverse ETF plays on the SDS and SRS. Several of our bearish put plays have been stopped out with today's market rally.