Stock Market News for July 21, 2010

Better-than-expected profit reports helped temper fears that a full-blown economic recovery could take time to materialize, helping stocks stage a rally for a second consecutive day.  However, investors were still not convinced that the earnings reports truly reflect the broader economic picture. Some optimism ahead of Apple and Yahoo’s earnings reports, however, sent the Dow industrials up more than 200 points from their day’s low.

After dropping nearly 140 points in early trading, the Dow Jones industrial average closed up 74 points while the broader S&P 500 index tacked on more than 12 points, or 1.1%.  the tech-heavy Nasdaq added 24 points to its prior day’s close to end the day at 2,222.49.  On the New York Stock Exchange, advancing shares beat those that declined in price by a five-to-one margin on volume of 1.13 billion shares.  The market’s measure of volatility, the Vix "fear factor" index eased 7.9% to 23.93; the dollar inched up 0.3% against a basket of currencies; demand for US Treasuries sent the benchmark 10-year up 2/32; crude prices added 90 cents to reach $77.44.

Goldman’s (NYSE:GS - Analyst Report) disappointing profit numbers and Johnson & Johnson’s (NYSE:JNJ - Analyst Report) weak outlook gave markets some initial blip.  Weak trading business sent Goldman’s quarterly profit down 82% from a year ago. However, its shares rose 2.2%. Excluding a $600 million UK tax banker bonus and a $500 million SEC settlement, Goldman’s earnings were in-line with expectations; however, its quarterly revenues did tumble 30.8%, as investment banking revenue dropped 36% and trading business revenue fell 39%.  Yahoo (NASDAQ:YHOO - Analyst Report) reported a 50% jump in quarterly profit, though revenue net of traffic acquisition costs missed average estimates.  Johnson & Johnson’s fell 1.7%.

Apple (NASDAQ:AAPL - Analyst Report) continued to be the blue-eyed boy, dishing out earnings that roared past estimates even as its CEO promised more product launches to come.  The company set a conservative fourth-quarter earnings guidance of $3.44.  Harley-Davidson's (NYSE:HOG - Analyst Report) reported earnings of 59 cents a share, sharply above last year’s 14 cents.

Notwithstanding IBM’s (NYSE:IBM - Analyst Report) revenue drop, JP Morgan (NYSE:JPM - Analyst Report) saw the shares as a buying opportunity and raised its price target to $144.50 from $142.50. Texas Instruments (NYSE:TXN - Analyst Report) reported better-than-expected earnings of 61 cents a share, versus estimates of 20 cents, but sales were slightly lower than estimates. 

This afternoon's testimony from Fed Chairman Ben Bernanke would be parsed for signs of an accommodative Fed.  Hopes are also building that the Fed will possibly mention plans to cut interest rates it pays on banks' excess reserves to invigorate lending.

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