Stocks ended the trading day around the close of Tuesday after seeing some significant intraday price movements as a result of comments from the Federal Reserve Board. The S&P 500 ended the day 0.17% lower. The Dow Jones Industrial Average fell 0.10%, while the Nasdaq managed to squeeze out a 0.02% gain.
Europe
The sentiment in Europe remained positive with the major averages ending in the black. The German DAX-30 rose 0.45%, while the periphery countries were outperforming again. The Italian MIB index rose 2.13% while the IBEX-35 rose 1.53%. Markets reacted positively to comments from French President Hollande who said that European leaders were exploring ways to buy back government debt with European funds from countries who have undertaken structural reforms. German Chancellor Angela Merkel was quick to dismiss the comments from Hollande, saying it was just a legal theoretical possibility but not politically viable. Leaders in Europe expect a request from Spain for a bailout of around 100 billion euro in the coming days. Top European officials including President van Rompuy, ECB President Draghi and European Commission President Barroso are working on a joint plan for the continent to issue short term bills and a common banking supervision authority.
Wall Street Opening
US markets traded with modest losses during the morning session. Shares fell up to 1% around lunch time as the Federal Reserve decided to not actively buy up assets in order to bring rates down further. Bernanke noted the limited credit availability might limit the effectiveness of a further interest rate decrease on the real economy. Instead the Federal Reserve Board will continue with their "operation twist" policy by replacing short term debt with long term debt for $267 billion.
Investors were disappointed with the limited action from Bernanke, but he provided comfort to the market by indicating that the FED will provide additional stimulus if the job markets stall, or the economy weakens further. As a result of the latest comments, confidence among investors returned.
Corporate News
Procter & Gamble (PG) fell 2.9% in Wednesday's trading session after the provider of packaged goods lowered the profit guidance for the full year of 2012. A global economic slowdown, intense competition and a strong US dollar are impacting the company's profitability. Analysts note that the company lacks innovation and offers its products at premium prices while there are many generic alternatives in emerging markets. Analysts also note that the company trades at a "conglomerate discount" as the company is focused on beauty, grooming, health, home care, baby care and snacks, making it too diversified resulting in a lack of focus. Shares in Procter & Gamble have fallen 10% so far this year.
Bed Bath & Beyond (BBBY) the houseware retailer fell up to 11% in after hours trading. The company reported first quarter profits of $0.89 per share, up 24% on the year. For the second quarter Bed Bath & Beyond guides for earnings per share between $0.97 and $1.03. First quarter results are in line with analysts expectations, but whisper earnings have been higher as analysts and investors have driven up their expectations for the earnings report. So far this year, shares have returned 27%.
Red Hat (RHT) the provider of open-source software saw its shares fall more than 10% in after hours trading. The seller of the Linux operating system fell after the company provided a mixed guidance for its second quarter. The company reported first quarter net profits of $0.30 per share, beating analyst consensus of $0.27. Revenues rose 19% to $315 million, ahead of consensus of $311 million. The company gave a disappointing outlook for the second quarter. Red Hat expects earnings per share between $0.28-$0.29 on revenues of $320-$322 million. Analysts were expecting Red Hat to guide for second quarter revenues of $331 million.
JP Morgan Chase (JPM) rose more than 3% in Wednesday's session, outperforming the wider banking sector. The company which suffered a massive $2 billion loss from a "bad hedge" taken in its London CIO unit, reportedly has unwinded over half of its position. Shares in JP Morgan fell over 30% in recent months, hitting lows of $31 after rumors surfaced that the loss in its unit taken by the "London whale" have reached $7 billion. JP Morgan declined to make any comments regarding the loss, even CEO Jamie Dimon declined to disclose details about the trade when he was in a Congress hearing last week. JP Morgan will provide more details about the position and the loss impact when the bank reports its earnings on July 13.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
