Stock Market News for August 05, 2014 - Market News

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Benchmarks ended in the green on Monday buoyed by upbeat earnings results and announcement of a rescue plan by Portugal's central bank. The S&P 500 rebounded from its biggest weekly decline in two years and the Dow halted its four-day losing streak. However, weakness in the utilities sector offset some of the gains.

For a look at the issues currently facing the markets, make sure to read today's  Ahead of Wall Street  article

The Dow Jones Industrial Average (DJI) rose 0.5% to close at 16,569.28. The Standard & Poor 500 (S&P 500) rose 0.7% to close at 1,938.99. The tech-laden Nasdaq Composite Index closed at 4,383.89; rising 0.7%. The fear-gauge CBOE Volatility Index (VIX) declined 11.2% to settle at 15.12. A total of 5.6 billion shares were traded yesterday, lower than last five day's average of 6.2 billion. Advancers outpaced declining stocks on the NYSE. For 60% stocks that advanced, 37% declined.

Shares of Berkshire Hathaway Inc. ( BRK.B ) gained 3.1% after reporting strong second quarter earnings growth. The company reported second quarter operating earnings of $1.75 per share, compared to $1.59 per share reported in the year-ago quarter. Earnings were in line with the Zacks Consensus Estimate. Total revenue came in at $49.8 billion, up 11.3% year over year. The increase was driven by higher contribution from Insurance, Railroad, Utilities and Energy as well as Finance and Financial Products segments.

Berkshire Hathaway's Insurance Group was the best performer in terms of revenue growth. Revenues from Insurance Group increased 4.5% year over year to $10.8 billion led by higher premium earned from GEICO, General Re and Berkshire Hathaway Primary Group.

According to Thomson Reuters, 381 companies out of S&P 500 have reported second quarter earnings. Among these companies, 68.8% have beaten estimates on earnings, and 64.1% have topped expectations for revenues. Annual earnings growth for the second quarter is 7.8%.

However, Michael Kors Holdings Limited's ( KORS ) shares declined nearly 6% despite posting better-than-expected fiscal first quarter earnings per share of 91 cents. Earnings outpaced the Zacks Consensus Estimate of 81 cents. Nonetheless, the company reported a steep increase in inventories. Inventories rose 65% from the year-ago quarter. The company also anticipates margins to decline in the next quarter. The company forecasted its fiscal second quarter earnings to be between 85 cents and 87 cents, lower than that of the fiscal first quarter.

Markets were also boosted by steps to combat Portugal's banking crisis. On Sunday, Portugal's central bank announced a rescue plan of Banco Espírito Santo (BES). BES had incurred loss of €3.58 billion in first half of 2014. This is the biggest loss in Portuguese banking history. The central bank announced it will split BES into a "good bank" and a "bad bank". The 'good bank' will receive a bailout of €4.9 billion from the bank resolution fund. Out of this, €4.4 billion will be provided by the Portuguese government as a loan and the rest as cash.

The "good bank" will be called Novo Banco. BES' potential assets such as deposits and loans, which can be repaid, will accrue to the "good bank". Good bank will use BES' existing branding and framework to continue its operation.

BES will be the "bad bank". The "problem" assets of the bank will remain with BES. Shareholders and the creditors will be liable for these assets and may lose all of their investments. The Espírito Santo Financial Group which is one of the owners of BES and Crédit Agricole, one of the biggest French lenders, are included in the group. Investors welcomed this plan as it may help Portugal recover from the banking crisis.

Some of the day's gains were eroded by a decline in the utilities sector. Utilities Select Sector SPDR (XLU) was the only decliner among the S&P 500 sectors. It declined 0.5% on Monday. Key utilities stocks from the sector such as Ameren Corporation ( AEE ), Exelon Corporation ( EXC ), Southern Company ( SO ) and Entergy Corporation ( ETR ) decreased 0.7%, 0.6%, 0.5% and 0.8%, respectively.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , US Markets

Referenced Stocks: XLU , KORS , AEE , EXC , SO

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