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Stock Market News for July 26, 2013

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Mixed earnings reports from major companies limited the Dow Jones and the S&P 500 from extending gains on Thursday. However, better-than-expected earnings from social media giant Facebook lifted the Nasdaq higher. A few economic reports were released on the home front. The number of Americans filing for unemployment benefits increased modestly in the previous week. Meanwhile, durable goods orders jumped in the month of June. On the international front, Spain’s unemployment rate declined surprisingly for the first time in two years. Housing stocks were the worst performers, following disappointing earnings reports from two major companies PulteGroup and D.R. Horton. The materials sector was the biggest gainer among the S&P 500 industry groups.

For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article.      

The Dow Jones Industrial Average (DJI) gained 0.1% to close the day at 15,555.61. The S&P 500 added 0.3% to finish yesterday’s trading session at 1,690.25. The tech-laden Nasdaq Composite Index increased 0.7% to end at 3,605.19. The fear-gauge CBOE Volatility Index (VIX) declined 1.6% to settle at 12.97. Consolidated volumes on the New York Stock Exchange, American Stock Exchange and Nasdaq were roughly 5.9 billion shares, below 2013’s average of 6.4 billion shares. Advancing stocks outnumbered the decliners. For the 56% that advanced, 41% declined.

Shares of Facebook Inc (NASDAQ:FB) soared 30% yesterday after the company reported second quarter results. The company’s results comfortably surpassed the Street’s estimates. Facebook earnings and revenues were boosted by the growth of its mobile advertising business. Revenue increased 53% from the year ago period to $1.81 billion. Speaking to CNBC, Facebook CFO David Ebersman said: “The investments we have made over the past year are really paying off to position the company to thrive in a mobile world.”   

General Motors Company (NYSE:GM) reported quarterly results yesterday. The company’s earnings came in above analysts’ expectations. Excluding one-time items, the company earned 84 cents per share. Revenue increased nearly 4% to $39.1 billion. The company reported stronger-than-expected earnings due to robust demand in North America and aggressive cost cutting in European business. 3M Co (NYSE:MMM) reported second quarter earnings, which came in marginally above the Street’s estimates.  The company’s revenue increased nearly 3%. Shares increased 0.2% after the announcement of results.

Two major companies from the housing sector reported earnings. D.R. Horton, Inc. (NYSE:DHI) earnings surpassed the Street’s estimates. The company’s earnings in the third quarter increased as it sold more homes at higher prices.  Revenue increased 47% to $1.64 billion. Despite robust earnings, the company’s shares dropped 8.6%.  On the other hand, PulteGroup, Inc. (NYSE:PHM) second quarter earnings came in below the Street’s expectations. The company said the number of homes booked declined 12%.  Net income decreased to $36.4 million from $42.4 million a year ago period.  Shares declined more than 10% yesterday.        

Meanwhile, the U.S. Department of Labor reported initial claims numbers. Initial claims increased 7,000 to 343,000 from the prior week’s revised figure of 336,000. This was marginally above the consensus estimate of 342,000. The 4-week moving average jumped 1,250 to 345,250 from the earlier week's revised figure of 346,500. 

According to the U.S. Department of Commerce, new orders for durable goods increased 4.2% to $244.5 billion. This was considerably above the consensus estimate of an increase of 1.3%. Excluding defense, new orders gained 3.0%. Nondefense new orders for capital goods increased 6.3% to $91.6 billion.

On the international front, the unemployment rate in Spain declined for the first time in two years in the second quarter. According to the country's National Statistics Institute, the unemployment rate declined to 26.3% from 27.2%. Most of the jobs increased in the Balearic Islands and Andalusia. But jobs in manufacturing and construction continued to decline.

Housing stocks were the worst performers yesterday and the SPDR S&P Homebuilders (XHB) declined 1.4%. Stocks such as The Ryland Group, Inc. (NYSE:RYL), M.D.C. Holdings, Inc. (NYSE:MDC), KB Home (NYSE:KBH) and Lennar Corporation (NYSE:LEN) lost 5.1%, 1.5%, 6.7% and 1.6%, respectively.

The materials sector was the biggest gainer among the S&P 500 industry groups and the Materials Select Sector SPDR (XLB) gained 1.0%.  Stocks such as Air Products & Chemicals, Inc. (NYSE:APD), Airgas, Inc. (NYSE:ARG), The Dow Chemical Company (NYSE:DOW) and Eastman Chemical Company (NYSE:EMN) gained 6.5%, 1.0%, 1.8% and 0.6%, respectively.

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