Submitted by Fox First at Ten on July 9th
By MATTHEW CRAFT
AP Business Writer
NEW YORK (AP) - Stronger earnings from JPMorgan Chase and other big banks launched a stock market rally Friday.
JPMorgan surged 6 percent, by far the biggest gain in the Dow Jones industrial average. The Dow jumped 174 points to 12,748 at 2 p.m. Eastern. The Dow is coming off a six-day slump, the longest losing streak since mid-May.
JPMorgan, the country's biggest bank, earned $5 billion in the most recent quarter, easily beating Wall Street's forecasts. That came as a relief to investors who had been worrying about weaker earnings at major U.S. companies.
Investors were also relieved that JPMorgan's trading loss wasn't as bad as the most dire predictions. JPMorgan revealed that the loss from a derivative trade it first disclosed in May had grown to $5.8 billion, nearly triple the original estimate. The bank's stock shot up $2 to $36.05.
JPMorgan's underwriting business also fared better than many expected. Those results rubbed off on the investment banks Goldman Sachs and Morgan Stanley, driving both up more than 3 percent. Goldman jumped $3.45 to $97.47. Morgan Stanley rose 46 cents to $14.01.
Wells Fargo, the other major bank reporting results Friday, said a rise in lending drove its net income up 18 percent. Wells Fargo has managed to avoid problems plaguing other big banks and is now the country's largest mortgage lender. The bank's stock gained 3 percent, or $1.07, to $33.92.
Todd Salamone, director of research at Schaeffer's Investment Research, said the rally in bank stocks shows that investors had been preparing for the worst. When they're too gloomy on an industry, the slightest bit of good news can jolt their stocks up.
"The bar for earnings is set extremely low, and a lot of people have been betting against banks" he said. "The lower the bar, the easier it is for positive surprises."
In other trading, the Standard & Poor's 500 index rose 19 points to 1,353 and the Nasdaq composite gained 38 points to 2,904.
The rally swept across the stock market. Five stocks rose for every one that fell on the New York Stock Exchange, and only 35 companies in the S&P 500 were lower. All 10 industry groups within the S&P 500 rose, led by financial stocks.
Even with the surge Friday, major market indexes are still on their way to weekly losses. The Dow is down 0.2 for the week, and the S&P 500 is off by 0.1 percent. The technology-heavy Nasdaq, which is more sensitive to swings in the economy, has slumped 1.2 percent.
The stock market took a beating this week as the U.S. corporate earnings season got off to a weak start and Europe stumbled along in its latest attempts to resolve the region's debt crisis.
Among other stocks making big moves:
- Procter & Gamble rose 2 percent after reports emerged that board members of the consumer products giant are considering the removal of Chief Executive Officer Robert McDonald. On Thursday the Federal Trade Commission cleared activist investor William Ackman's hedge fund to make an investment in the company, whose many products include Tide, Bounce and Duracell. P&G rose $1.34 to $65.05 and is up 6 percent for the week.
- Lexmark International plunged 15 percent. The printer maker warned late Thursday that it fared worse during the second quarter than expected, a result of slowing business spending. Its stock fell $3.55 to $20.76.
- Phillips 66 jumped 5 percent, following news that Warren Buffett said Berkshire Hathaway has invested in the refining company. The stock rose $1.66 to $34.68.
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