July 20 - Finally, a rally!

Boy, did we catch a break! Just last week we said that the markets were to rally about 5-10%, and here they are! True to their word, and they made quite a spirited rally. All indexes ended up for the week: Dow Jones, up 396 points, or 3.57% to close at 11,497, Nasdaq Composite, up 44 points , or 1.95%, to close at 2,283 and the S&P 500, up 21 points, or 1.71%, to close at 1,261.
Who let the financials out? Nice surprises, after all the bloodbath: Citigroup (ticker: C) posted a loss, but it was smaller than expected, JP Morgan Chase (ticker: JPM) managed to top estimates, and Wells Fargo (ticker: WFC) managed to top estimates. As a result, the Financial Select SPDR (ticker: XLF) bounced 23% off its mid-week low. Time to buy banks? Barron’s thinks so; take a look at the attached article.
Low expectations about the financial sector may help these stocks over the summer. Only 49% of financial stocks have beaten the expectations, the worst among the S&P sector. However, the financial companies that beat expectations saw their stock jumping 10.1%, as investors are grabbing on any piece of good news. To contrast, the 71% of the consumer staples companies that beat estimates only saw their shares pull back 4.7%.
The rise in stocks was helped by the slide in oil, which fail from $145 to $129, an astonishing drop.
What else happened?
• Inflation on the wholesale and consumer levels has jumped up, with producer prices spiking 9.2% for the 12 months ended in June, the fastest pace since the summer of 1981, and consumer prices jumping 1.1% in June, higher than expected. Don’t worry, the Fed is watching! Minutes from the Fed’s last meeting showed officials believing that the next rate move will likely be up.
• Google misses the estimates; its Q2 EPS rose 30% to $4.63 ex items, missing by 11 cents. Revenue ex items met the estimates. Google blamed on weaknesses in real estate and auto sectors, which hurt business. The stock plunged almost 10% on Friday, stopping at $481.32.
• Ebay’s Q2 EPS rose 27% and sales went up 20%, both topping the expectations, but the outlook for Q3 forecasts lower than expected. Shares went down 14% to a 2-yr low.