Another good day for the markets, DOW in general. 3 of the 20 DOW components reported earnings before the market opened and all surprised to the upside. The market did get a kick, for a second consecutive day, out of a bank reporting earnings. J.P Morgan surprised to the upside and beat analyst expectations by 10 cents. Coke and United Health were the other components propping up the market. One big stimulus was provided by a drop in oil prices for a third consecutive day. Oil is down to $129 a barrel, the lowest close since June 5. Last week's record was $147/barrel. This helped the market in the afternoon after the early morning gains were surrendered.
A lot of the money flowed in to the financials for the second straight day. The Financial sector led the market again, rising 3.6%, and materials were hit hardest, declining 2.2%. Probably investors are expecting the bubble to pop or atleast are hoping that it pops sooner than later. This has been a trend lately - with materials declining on the day when oil price declines and financials are strong (not that we've seen a lot of those). Fannie Mae and Freddie Mac had another strong showing, rising 17% and 20% respectively. My opinion is that both these companies have been sold off since the start of this month on the fears that they may become insolvent, a scenario which is pretty unlikely (although anything can happen in this kind of a "fear" driven market).
Merrill Lynch, Microsoft, IBM, and Google are set to report their second quarter's results after hours. Google has already reported and surprised the market to the downside. The stock is down almost 10% after hours (as I'm writing this) and is taking a toll on other big tech names as well. This could be a good entry point into this stock as "One bad quarter does not a trend make". Merrill Lynch reported their results just now and as expected, they are not good. They lost almost $5B last quarter and the stock is down 5% after hours. IBM surprised on the upside. Tomorrow is another crucial day for the market since Citi is reporting before market opens. If they disappoint (which I think will be the case) we will be in for a very bad day. The short lived rally in the financial sector, which led some investors and analytsts to belive that the bottom might be close, will be gone.
Among other news today, Apple became the third largest PC retailer in the US last quarter. It overtook Acer and is now behind Dell and HP.
Internationally, China's GDP grew at a 10% annualized rate last quarter. Inflation in India was 11.91% and if that number continues to grow the economy will be in a very rough patch pretty soon. The GDP growth estimates have already been scaled down from 10% to between 7-8% by some economists. The startling news came from Karachi, Pakistan where people stormed the stock exchange and pelted it with stones. This was a result of the third consecutive day of declines in the market and allegations that some of the big brokers were manipulating the market for their own gains.
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