| Market Summary |
Stocks surged on Wednesday as momentum from the previous session spilled over into trading today. The Dow Jones Industrial Average added an impressive 256.72 points before ending the day at 8,616.21. Nine stocks rose for every one that fell on the New York Stock Exchange. Strong earnings and a positive report from Intel (INTC: Charts, News, Offers) sent stocks soaring during morning trading. The positive news fueled speculation that the economy may be making stable progress in the right direction. A report showing that industrial companies cut production far less in June than they had in previous months also contributed to the session’s upswing. Stocks continued to advance into the afternoon as more positive news came from the Federal Reserve. The Feds now expect that the economy will slide at a slower pace than previously forecasted. Looking ahead, investors are now setting their sights on second-quarter results from JPMorgan Chase (JPM: Charts, News, Offers), Citigroup (C: Charts, News, Offers), and Bank of America (BAC: Charts, News, Offers). In corporate news, Gannett (GCI: Charts, News, Offers) was able to turn a profit during the second quarter after posting a loss of $2.3 billion at this time last year. AMR Corp. (AMR: Charts, News, Offers), parent company of American Airlines Inc. reported a $390 million second quarter loss. U.S. light crude oil for August delivery rose $2.06 to $61.58 a barrel on the New York Mercantile Exchange. COMEX gold for August delivery rose $17.70 to $940.50 an ounce.
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| Market News |
U.S. Consumer Prices Gain 0.7%; Core Rate Rises 0.2%
The cost of living in the U.S. rose more than forecast in June, led by a jump in energy costs that overshadowed slower price gains for other goods. The consumer price index increased 0.7 percent after a 0.1 percent advance in May, the Labor Department said today in Washington. Excluding food and energy costs, the so-called core index rose 0.2 percent. Compared with a year earlier, prices fell 1.4 percent, the biggest drop since January 1950. Declines in consumer spending and business investment are forcing companies to boost incentives or keep a lid on prices in order to move merchandise, and preventing them from passing higher energy costs on to customers. A surge in gasoline costs in recent months is now abating, indicating inflation may moderate as the year progresses. (Source: Bloomberg) Click here to read the full article
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How much health care for $1 trillion?
The White House and Democratic congressional leaders, scrambling to pass health care bills within the next few weeks, are trying to keep the cost of legislation that expands coverage and controls costs to about $1 trillion over 10 years -- a benchmark for moderates in both parties. So what can you buy for $1 trillion? Although the eye-popping price tag would help boost insurance coverage to 95% or more of the public, it's not enough to do everything advocates initially want. (Source: USA Today) Click here to read the full article
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Ex-GM boss Wagoner gets $10M in retirement
Former General Motors Corp. Chairman and CEO Rick Wagoner will retire Aug. 1 with a pension and benefit package the automaker valued at more than $10 million. Wagoner, 56, who was ousted by the Obama administration on March 30, will get $1.64 million in benefits annually for each of the next five years, plus an annual pension of $74,030 for the rest of his life, according to company documents filed Tuesday with the U.S. Securities and Exchange Commission. The former CEO, who spent 32 years with the company, can also choose to cash out his company-provided life insurance policy at $2.6 million, according to the filing. (Source: MSNBC) Click here to read the full article
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| Market Analysis |
The Bernanke Market
I remember once buying the stock of a small company and I couldn't believe my luck. Every time my fund bought more shares the stock would go up. So we bought even more and the stock kept climbing. When we finally built our full position and stopped buying the stock started dropping, ending up at a price below where we started buying it. We were the market. Just about every policy move to right the U.S. economy after the subprime sinking of the banking system has been a bust. We saved Bear Stearns. We let Lehman Brothers go. We forced Merrill Lynch, Wachovia and Washington Mutual into the hands of others. We took control of Fannie (FNM: Charts, News, Offers) and Freddie (FRE: Charts, News, Offers) and AIG (AIG: Charts, News, Offers) and even own a few car companies, pumping them with high-test transfusions. None of this really helped. (Source: Wall Street Journal) Click here to read the full article
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Let's Stop Worrying About Inflation
As the economic data continues to send mixed signals about the pace and timing of an economic recovery, we've been treated to a chorus of warnings about the next danger: inflation. An early July client survey done by Credit Suisse showed that investors were "almost unanimously concerned" with inflation. Writing in The Wall Street Journal last month, Arthur Laffer announced that the very policies that stemmed the recession--low interest rates, massive government spending--will provoke an inflationary scenario reminiscent of the 1970s, or worse. Harvard economist Martin Feldstein has said bluntly that inflation is likely to pose a substantial threat to global stability starting next year. And it's not simply conservatives with an aversion to Keynes who are sounding alarmed. Simon Johnson, former chief economist for the International Monetary Fund, has warned that inflation could soon exceed 5 percent and quickly head higher. (Source: The New Republic) Click here to read the full article
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Same Market, Different Bubble
Why do bubbles form and why do markets crash? Both are intriguing questions and both are the result of the inefficiency of human psychology. The cornerstone of my investment approach lies in one core belief: through the study of human psychology we can come to the conclusion that humans are irrational creatures. Put 1 million humans in a room with blinking lights, ever changing prices and money on the line, and you have a recipe for mass hysteria. While it's a nice thought that we are far removed from the rest of the animal kingdom, it's simply false that humans won't do just about anything to survive and to ensure the future well being of the species. (Source: Seeking Alpha) Click here to read the full article
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