Domestic economic data has not been uplifting today, nor has there been the hoped-for quick resolution in discussions between Greece and eurozone finance ministers.
By Peter Martin
Thursday, February 12, 2015
The stock market has advanced nevertheless, finding cause for optimism in the ceasefire reached between Russia and Ukraine and some strong corporate earnings, particularly from Cisco ($CSCO).
Following negotiations through the night, Russian President Vladimir Putin announced that he and Ukrainian President Petro Poroshenko had struck a deal for heavy weapons to be moved out of eastern Ukraine; for all prisoners to be freed; for all foreign troops and weaponry to withdraw from Ukraine’s borders; and for a ceasefire to begin on Sunday between Ukraine’s military and pro-Russian rebels. If the ceasefire holds, this is a major step forward for stability in the region and the news sparked a resurgence of risk appetite in the financial markets.
By early afternoon in New York, the S&P 500 Index has gained 16.1 points or 0.78% to stand at 2085.4. The Dow Jones rose 86 points or 0.48% to 17,948, while the NASDAQ 100 climbed more than 1%. Shares in IT networking giant and Dow Jones component Cisco increased close to 9% today after the company reported expectation-beating earnings and revenue last night.
Quarterly earnings came in at 53c a share, versus expectations for 51c, on revenue of $11.94 billion ($11.8 billion expected), and the company also announced an increase in its quarterly dividend. Cisco CEO and Chairman John Chambers said during the quarter the company ‘grew revenues by 7%, with strong EPS growth, and saw the best balance of growth across all our geographies, products and segments.’
McGraw-Hill Financial and Nvidia were among other companies that reported upbeat earnings, while Expedia jumped more than 16% after revealing it is set to purchase rival Orbitz Worldwide in a deal valued at around $1.6 billion. AIG, Groupon and Kraft are among the companies set to report after the market close on Thursday.
The US dollar slid on the back of disappointing labor market, retail sales and business inventories data. Cheaper gasoline prices mean lower gasoline sales receipts, but unfortunately the money being saved in this area by consumers has not yet translated into greater discretionary spending. Retails sales shrank 0.8% in January, following December’s 0.9% decline, a steeper fall than had been expected, while sales excluding automobiles and gasoline rose just 0.2%, failing to meet the 0.4% advance that had been anticipated for this core level. The failure to see any pick-up in discretionary spending is even more frustrating given the high levels of consumer confidence indicated by key measures recently.
Initial jobless claims rose to 304K last week, an increase of 25K, though the four-week moving average improved to 289,750 from 293,000 in the week prior. Bad weather meant that data for Massachusetts had to be estimated for this week’s report, so there might be some larger-than normal revision next week. Business inventories grew just 0.1% in December, a slower pace than analysts were expecting, but it also accompanied a steep 0.9% drop in sales, which pushes the ratio of inventory to sales up to 1.33, the highest level since the summer of 2009.
The dollar moved strongly lower against many of its major peers: GBP/USD rose more than 1%, while USD/CAD fell 1.2% and USD/JPY dropped 1.3%.
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