Stock Market Today: Can Earnings Drive Market Higher in July?

The bulls came out of the gate at full-speed at the opening of the stock market today.

Less than a half-hour into trading, the Dow Jones Industrial Average jumped 121.99, or 0.81%, to 15,241.40 The Standard & Poor's 500 Index climbed 12.19, or 0.75%, to 1,644.08. The Nasdaq added 14.01, or 0.41, at 3,493.60.

Optimistic investors appear to be betting the second quarter's earnings will come in ahead of scaled-down forecasts.

Pre-announcements have certainly been extremely negative. According to Thomson Reuters, the ratio of negative to positive comments is 6.5 to 1, more than two-and-a-half times the normal pace and the most negative reading since 2001.

Overall, S&P 500 earnings are projected to have grown 1.6% in Q2 from a year ago, while quarterly revenue is expected to increase 2.9%.

But those estimates could be on the light side.

Over the past 15 years, quarterly growth has averaged 8%. In the last eight quarters, analysts' estimated have understated growth by roughly 4 percentage points, according to Christine Short, associate director of S&P Capital IQ. That would mean Q2 earnings could come in up 7%.

It would also be good for stocks.

Howard Silverblatt, S&P Dow Jones Indices' senior analyst told MarketWatch earnings should push the S&P 500 index past its May 21 record close of 1,669.16

With the S&P finishing above its 50-day moving average of 1,626 last week, and the Russell 200 Index remaining over the 1,000 region, Ryan Detrick, senior technical strategist at Schaeffer's Investment Research told CNBC, "It could signal we could have a strong July."

Earnings take center stage with Dow component Alcoa Inc. (NYSE: AA) kicking-off Q2 earnings season after the bell.

Since Alcoa is no longer deemed a true bellwether, investors will get a better pulse on Q2 when banking behemoths JPMorgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co (NYSE: WFC) report Friday.

Fed, Bonds and Oil in Focus

The Fed will again be a major driver for stocks this week with minutes from the FOMC's June 18-19 meeting released Wednesday, the same day Fed Chief Ben Bernanke speaks to the National Bureau of Economic Research.

"The market is so inundated with voices from Fed officials, some far more reassuring than we heard from Bernanke--that there's a lot of confusion," Kristina Hooper, head of portfolio strategies at Allianz Global Investors told Reuters. "Hearing him next week will settle things, especially on the heels of the jobs report. This is such a data-driven environment that to get a sense of how the Fed is viewing things is critical."

Bond yields settled some Monday with the critically important 10-yield ticking down to 2.69%.

Friday, the 10-year U.S. Treasury Note's yield saw its largest one-day increase since September 2008, and soared to a two-year high of 2.73% before settling at 2.70%. That was up from 2.5% Wednesday and 1.6% just a few weeks ago.

Coming off the July 4 holiday, several strategists blamed thin volume for the bond markets' erratic swings.

"It is unlikely that (yields) will rise any more than they already have," Alec Young global equity strategist at S&P Capital IQ in New York told Reuters. "That means that if we get good news, it will come without an accompanying rise in rates, which is great for stocks."

Political unrest in Egypt is likely to keep oil markets jumpy as concerns over supply flare-up. Crude prices climbed to 14-months highs last week. Monday, oil prices dipped $0.77, or 0.75%, to $102.45 a barrel.

Newsmakers in the Stock Market Today

These stocks are headed for big moves this week after making headlines today:

  • Apple Inc. (Nasdaq: AAPL) celebrated its App Store's 5th anniversary Monday by offering many popular apps for free. However, shares fell 1.14% after rival Samsung's Q2 earnings, released Friday, failed to impress. Both are finding it difficult to meet expectations amid a maturing smartphone market.
  • Davita Healthcare Partners Inc. (NYSE: DVA) rose a healthy 1.52% after Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A) bought an additional 639, 200 shares of the kidney care and dialysis company for $73,369, 512, bringing Berkshire's total to 15.6 million shares. DaVita's price recently suffered amid fears of reduced Medicare payments. Buffett bought the dips.
  • Dell Inc. (Nasdaq: DELL) gained 2.66% following leading proxy advisory firm ISS's recommendation Dell shareholders vote in favor of founder Michael Dell's proposed take private sale at $13.65 per share.
  • Intel Corp. (Nasdaq: INTC) tumbled 3.33% after Evercore slashed the semiconductor's shares to "Underweight" from "Equal Weight"
  • Linn Energy (Nasdaq: LINE) rose 12.26% on an upgrade from Bank of America (NYSE: BAC) to "Buy" from "Neutral" and $30 price target. Shares have been under pressure due to an SEC investigation over the company's use of non-GAAP financial measures, its hedging strategies and proposed acquisition of Berry Petroleum Corp. (NYSE: BRY).
  • Inc. (Nasdaq: PCLN) soared $23.83, or 2.80%, thanks to Morgan Stanley's (NYSE: MS) upgrade to "Overweight" from "Equal Weight." Intraday, shares hit $881.88, a new high for the year.

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