Back to Main

Murphy Oil, Fossil, First Solar Fuel Stock Rally

By: Investor's Business Daily
Posted: 10/16/2012 3:13:00 PM
Referenced Stocks: FOSL;FSLR;MUR;QQQ;SPY

Murphy Oil ( MUR ),Fossil ( FOSL ) andFirst Solar ( FSLR ) helped power Tuesday's broad stock market rally as some companies reported upbeat earnings, homebuilder confidence increased, consumer prices rose less than expected and industrial production beat forecasts.

In midday trade, the SPDR S&P 500 ( SPY ) was up 0.95% to 145.45. It rebounded from support at its key 50-day moving average.

PowerShares QQQ ( QQQ ), tracking the 100 largest non-financial stocks on the Nasdaq, surged 1.34% to 68.07. It's trying to regain the 50-day moving average.

SPDR Dow Jones Industrial Average (DIA) climbed 0.92% to 135.26. It also bounced off support at its 50-day line.

Murphy Oil gapped up 9.34% to 64.51 in nearly six times average trading volume. The oil and natural gas explorer and refiner said it will spin off its retail gasoline business, pay a special dividend of $2.50 a share and buy back $1 billion in shares to return cash to its investors. The spinoff should be finished by mid-2013.

Murphy's stock broke out of a bullish cup-with-handle chart pattern and is currently trading 8% above a 59.89 buy point. It sports an IBD Relative Strength Rating of 71, which means its price action is outpacing 71% of the market. Its A+ IBD Accumulation-Distribution Rating is the highest possible on an A to E scale. That shows institutional investors are loading up on the stock and hanging on. Murphy releases Q3 earnings Oct. 31.

Watch-maker Fossil surged 7.19% to 91.21. But it's still trading below its long-term 200-day moving average, which is bearish. The biggest intraday trading ranges tend to occur below that line. Citigroup upgraded shares to buy from neutral.

The company has applied to market in India through a wholly owned business. Earnings are due Nov. 6.

First Solar soared 7.68% to 23.96 in slightly above-average trade as it climbed above its 200-day moving average for the first time in a year and a half. The largest U.S. maker of solar modules and gear signed an agreement with Pembangkitan Jawa Bali Services (PJB Services) of Indonesia to develop 100 megawatts of utility-scale solar power plants in the country, Reuters reported. First Solar reports Q3 results Oct. 29. Its shares have been in a downtrend for four and a half years.

Major Economic News

The National Association of Home Builders said its confidence index rose one point from September to 41 in October. That's highest reading since June 2006.

"The data signal no let-up in the recovery in housing," wrote Jim O'Sullivan, chief U.S. economist at High Frequency Economics in Valhalla, N.Y.

But the index still remains lower than 50, which means that more builders see conditions as bad than good.

The consumer price index, a common gauge of inflation, rose by 0.6% in September, ahead of expectations, owing to high gas prices. Excluding food and energy prices, the index edged up 0.1% -- less than expected. Federal Reserve officials say inflation remains on target.

"The jump in gasoline prices appears to have run its course," O'Sullivan wrote. "Based on the latest weekly data, gasoline prices are likely to be close to flat in October."

Industrial production and capacity utilization readings came in a little better than expected. Production rose 0.4% in September -- above the 0.2% projected. Utilization came in at 78.3%, which means manufacturers have room to grow output without having to build new plants. Capacity utilization measures the extent to which the highest potential output levels are being met or used. Production data for August was revised downward.

"The trend in manufacturing is clearly weaker than the trend in nonmanufacturing now, consistent with manufacturing being more exposed to slumping exports and nonmanufacturing benefiting more from what appears to be an improving trend in domestic spending," O'Sullivan wrote.

Mixed manufacturing readings overall point to further uncertainty about third-quarter growth.

In a 16-page report released Tuesday, The Levy Forecast said that the world economy is slowing and vulnerable to fall into a recession.

"The trends of important economic activities remain mixed. Clearly, the global economy has been weakening, and exports have rolled over," wrote economists at the Jerome Levy Forecasting Center in Mount Kisco, N.Y. "Capital spending is sliding. Nonresidential construction appears to be stalling, if not turning down. General merchandise retail sales have been flattening. Employment growth has remained sluggish, even with some indicators improving somewhat."

Follow Trang Ho on Twitter @TrangHoETFs .