A big rally for stocks
Wall Street advances as investors scoop up a variety of shares ahead of the first big wave of quarterly results
NEW YORK (CNNMoney.com) -- Stocks surged Monday, with financial and consumer shares leading the advance, as investors welcomed an analysts' improved outlook on Goldman Sachs one day ahead of its quarterly report.
Stocks gained through the morning, after a shaky start. But the advance got an extra boost after influential banking analyst Meredith Whitney upgraded her view on Goldman Sachs (GS, Fortune 500) and said that Bank of America (BAC, Fortune 500) could provide value for investors.
Both companies are due to report results this week, with Goldman due Tuesday and BofA due Friday. Other financial companies set to report include JPMorgan Chase (JPM, Fortune 500) on Thursday and Citigroup (C, Fortune 500) on Friday.
"I think a lot of what we're seeing today is around banks, following the comments on Goldman," said Tyler Vernon, chief investment officer at Biltmore Capital.
However, he said that Goldman Sachs, considered to be the strongest bank amid the collapse, is an anomaly and shouldn't be seen as reflective of other financials or other quarterly results.
JPMorgan and Bank of America are both Dow components. Four other Dow companies are due to report results this week: Johnson & Johnson (JNJ, Fortune 500), IBM (IBM, Fortune 500), General Electric (GE, Fortune 500) and Intel (INTC, Fortune 500).
This week brings the first big batch of quarterly financial results, with 31 of the S&P 500 companies due to report. S&P earnings are expected to have declined 36% in the second quarter versus a year ago, according to the latest Thomson Reuters estimates.
"Financials and tech will probably turn out well, but the rest will be kind of blah," Vernon said. "It will be similar to last quarter, where they meet or beat, but it's mostly due to cost cutting."
But unlike last quarter, meeting or beating on earnings won't be enough to push Wall Street higher, he said. Investors are going to want to see revenue growth and improved forecasts.
After the close, Dell (DELL, Fortune 500) said it expects to report a slight increase in revenue when its second quarter ends at the end of July. The computer maker also said it expects to see a small decline in gross margins, a key measure of profitability.
On the move: Stock gains were broad-based Monday with all 30 Dow stocks rising, led by oil components Chevron (CVX, Fortune 500) and Exxon Mobil (XOM, Fortune 500), tech leader IBM (IBM, Fortune 500) and financial components JPMorgan Chase (JPM, Fortune 500) and Travelers (TRV, Fortune 500).
Stocks had been mixed Friday at the end of another down week on Wall Street. The Dow and S&P 500 have slumped for four straight weeks and the Nasdaq for three of the past four weeks. A spring rally propelled the broad market by 40% in three months, but since then investors have backed off amid worries that the recession could drag on.
Economy: The federal budget deficit increased in June, pushing the total budget shortfall to over $1 trillion in the first nine months of the fiscal year.
Reports are due Tuesday on June retail sales, June wholesale inflation and May business inventories.
Bonds: Treasury prices were little changed, with the yield on the benchmark 10-year note at 3.30%, near where it stood late Friday. Treasury prices and yields move in opposite directions.
Other markets: In global trade, Asian markets ended lower and European markets ended higher.
In currency trading, the dollar fell against the euro and gained against the Japanese yen.
U.S. light crude oil for August delivery fell 20 cents to settle at $59.69 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery rose $10 to settle at $922.50 an ounce.
Market breadth was positive. On the New York Stock Exchange, winners beat losers five to one on volume of 1.19 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 1.95 billion shares.