Stocks Soar on Earnings; Intel Beats Street

NEW YORK ( TheStreet) -- The Dow Jones Industrial Average managed to capture a triple-digit jump despite news of a widened trade deficit, as raised aluminum demand expectations from Alcoa ( AA) buoyed economic confidence.

The Dow finished 147 points higher, or 1.4%, to 10,363. The S&P 500 added 17 points, or 1.5%, to 1095, and the Nasdaq went ahead by 44 points, or 2%, at 2242.

And after the closing bell, tech giant Intel ( INTC) beat both profit and revenue estimates, earning 51 cents a share, compared to forecasts calling for 43 cents a share, on $10.8 billion in revenue. In a press statement, CEO Paul Otellini called it, "the best quarter in the company's 42-year history."

The market got some positive news late Monday after Alcoa ( AA) beat estimates by a penny and reported better-than-expected sales. The company also raised its aluminum consumption expectations to 12%, from 10%, citing better end-market demand.

"It's a light-volume, good news rally," said Mike Shea, a managing partner at Direct Access Partners, on the session's strong gains, adding that the two most recent trading sessions were the lightest volume trading days of the year. "We have to keep this rally in perspective yet, at the same time, let's all be happy that Alcoa numbers were good because this is much better than the alternative."

Volume on the Dow stood at 104.6 million shares by midday, compared with an average of 200.4 million shares.

"I always like the first week of earnings season because you get such a nice snapshot of a range of different sectors," he said, pointing to upcoming results from JPMorgan Chase ( JPM), Bank of America ( BAC), J.B. Hunt Transport Services ( JBHT), General Electric ( GE) and Intel.

"It should give a nice snapshot of what's going on in multiple layers of this economy, so by the end of the week, I think we'll get more clarity. This is a good week to be paying attention," Shea said.

Greece raised roughly $1.6 billion in its first debt auction since receiving international bailout loans.

Moody's downgraded Portugal's bond ratings to A1 from AA2 with a stable outlook, citing the country's weak growth prospects.

Overseas on Tuesday, Hong Kong's Hang Seng lost 0.2%, and Japan's Nikkei slipped 0.1%. The FTSE in London advanced 1.8%, and the DAX in Frankfurt soared 1.9%.

In the U.S., financial reform legislation appeared to be on the brink of completion as Senator Ben Nelson (D., Neb.) indicated that he would support the revised bill, following similar moves from three Republicans: Sens. Scott Brown, Olympia Snowe and Susan Collins, according to CNBC.

The Economy

The Department of Commerce said the trade deficit widened to $42.3 billion in May from April's deficit of $40.3 billion. Economists had expected the deficit to narrow to $39.5 billion. U.S. exports increased 2.4% in May, after dropping 0.7% in April and imports rose 2.9%, after slipping 0.4%.

In the afternoon, the U.S. Treasury Department said the U.S. budget deficit shrank to $68.4 billion in June. Economists were projecting a narrowed deficit of $70 billion compared to the $94.3 billion deficit reported in the same month last year. In May, the deficit stood at $135.9 billion.

At 4:30 p.m., the American Petroleum Institute will issue its weekly read on oil inventories. Analysts polled by Platts are expecting to see that crude oil stockpiles shed 2.6 million barrels in the week ended July 9.

Company News

Conglomerates, basic materials and financials took shares higher as Caterpillar ( CAT) led gains on the Dow, followed by JPMorgan Chase, American Express ( AXP) and Bank of America ( BAC). Pfizer ( PFE) was the only Dow component to finish in the red.

Networking component maker Tyco Electronics ( TEL) plans to acquire ADC Telecommunications ( ADCT) for $1.25 billion to improve its wireless connectivity offerings. The stocks gained 2.5% and 41.2%, respectively.

RadioShack ( RSH) saw its stock climb 4.1% higher on rumors that Blackstone Group ( BX) agreed to buy the retailer.

Apple's ( AAPL) antenna problem continued to weigh, dragging the stock down by 2.1%.

Shares of Chevron ( CVX) rose 1.9% after the oil company's late Monday announcement that it expects second-quarter earnings to surpass the first quarter's profit of $4.55 billion, or $2.27 a share. Analysts have been projecting earnings of $2.18 a share when the company reports earnings on July 30.

Infosys Technologies ( INFY) said first-quarter net income slipped 6.6%, although sales rose 4.8% quarter over quarter.

BP ( BP) attached a tighter-fitting cap over the oil leak in the Gulf of Mexico. Although the cap is merely a temporary fix, BP hopes it will be enough to keep oil from gushing into the Gulf for the first time in nearly three months.

Industrial and construction supplies company Fastenal ( FAST) said manufacturing and non-residential construction demand lifted sales 20.3% in the second quarter. Earnings of 47 cents a share outpaced the profit 44 cents a share that analysts had been expecting but the company didn't provide specific guidance and shares slipped 4.1%.

According to a report from The Wall Street Journal, a Transportation Department analysis suggested driver error could be an issue in several accidents involving Toyota ( TM) vehicles.

Tuesday also brought a key earnings report from Yum! Brands ( YUM) late in the day, which reported a profit of 58 cents a share compared to forecasts for 54 cents a share.

Commodities and the Dollar

The August crude oil contract settled $2.20 higher at $77.15 a barrel.

Elsewhere in commodity markets, the August gold contract traded $14.80 higher to finish at $1,213.50 an ounce.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.7%.


A Treasury auction of some $21 billion in 10-year notes brought in a yield at 3.119% and a below average bid-to-cover ratio at 3.09, according to MarketWatch.

The benchmark 10-year Treasury was down 14/32, raising the yield to 3.115%.

The two-year note was down 1/32, increasing the yield to 0.661%. The 30-year bond decreased 24/32, lifting the yield to 4.101%.

--Written by Melinda Peer and Sung Moss in New York.

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