(XLK) Stock Market News for July 20, 2011 – Market News

The Dow soared to record its best rally this year, while the broader markets enjoyed their best performance since March thanks to encouraging corporate results and President Obama’s comments about lifting the debt ceiling. IBM and Coke bolstered their respective sectors and also helped the broader rally after posting stellar results.

In its best rally for the year, the Dow Jones Industrial Average (DJIA) shot up by 202.11 points or 1.6% to settle at 12,587.27. The Standard & Poor 500 (S&P 500) gained 1.6% to finish the day at 1,326.71. The tech-laden Nasdaq Composite Index surged 2.2% and closed at 2,826.52. The fear-gauge CBOE Volatility Index (VIX) dropped to settle near 20. On the New York Stock Exchange, NYSE Amex and Nasdaq, consolidated volumes were 7.01 billion shares, compared with the daily average of 7.49 billion. On the NYSE, for every stock that declined, four stocks posted gains.

For the Dow, the gains were led by International Business Machines Corp. (NYSE:IBM) which surged 5.7%. IBM’s second quarter 2011 EPS easily surpassed estimates by 8 cents or 2.7%. Net profit on a non-GAAP basis improved 11.0% year over year to $3.78 billion and revenues increased 12.4% year over year. The tech-giant also upped its profit outlook. Of the 30 Dow components only three settled in the red, namely Bank of America Corporation (NYSE:BAC), Johnson & Johnson (NYSE:JNJ) and 3M Co. (NYSE:MMM) and they shed 1.5%, 0.6% and 0.4%, respectively.

Technology shares were also in for strong gains and the S&P information technology sector (GSPT) was the best performing sector and soared 2.7% while the Technology Select Sector SPDR (XLK) fund gained 2.4%. Technology stocks like Google Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), eBay Inc. (NASDAQ:EBAY), Oracle Corp. (NASDAQ:ORCL) and Dell Inc. (NASDAQ:DELL) jumped by 1.3%, 3.6%, 3.3%, 3.7% and 3.8%, respectively.

Also reporting robust results was the world’s largest soft-drink maker The Coca-Cola Company (NYSE:KO), which posted better-than-expected profits and the company’s shares jumped 3.3%. This development also boosted the retail sector and the SPDR S&P Retail (XRT) fund was up 2.1%.

With investor sentiment weighed down by the impasse over the debt ceiling for the past few days, President Barack Obama provided much needed impetus after he said progress was being made in this direction and praised the Senate’s new $3.75 trillion deficit reduction programme. Obama said: “The framework that they put forward is broadly consistent with what we’ve been working on here in the White House and with the presentations that I’ve made to the leadership when they’ve come over here”. However, few expect the plan to be passed by Senate as it entails spending cuts and modifications to medicare and tax code, among other measures.

Congress and the White House must hurry to reach an agreement over raising the multi-trillion debt-ceiling. On Thursday last week Moody’s Investors Services had put the US’ AAA rating under review for a possible downgrade, citing “the rising possibility” that Congress will fail to pass the debt ceiling by August 2. If Congress does not raise its $14.3 trillion debt ceiling by August 2, the Treasury Department may fail to pay at least 40% of its bills. Additionally, on Monday, Fitch Ratings reiterated that it plans to downgrade the US sovereign debt rating to negative if the federal government fails to meet the August 2 deadline.

Coming back to earnings reports, Apple Inc. (NASDAQ:AAPL) joined the party of robust results from the tech sector. The stock soared 7% after the company announced its results after the closing bell.

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