Traders-Blog.com

Stocks climbed with the Dow industrials scoring it largest weekly gain since March, as positive earnings from Oracle Corp. and Nike Inc. spurred optimism amid high volume triggered by expiring futures and options contracts. This was a great closing for a week driven by the first interest rate cut from the Federal Reserve in more than four years.

Today the Dow Jones industrial average closed up 53.49 or 0.39% to 13,820.19, the broader S&P 500 closed up 7.00 or 0.46% to 1,525.75, and the tech-heavy Nasdaq composite closed up 16.93 or 0.64% to 2,671.22. For the week, both the Dow and the S&P gained 2.8%, and the Nasdaq rose 2.7%.

Market breadth was positive. On the New York Stock Exchange, winners topped losers by 5 to 3 on volume of over 2.0 billion shares. On the Nasdaq, advancers beat decliners by 4 to 3 as 2.4 billion shares changed hands.

Volume was heavier than usual due to the quadruple options expiration, a quarterly event in which stock index futures and options - and individual stock futures and options - all expire simultaneously. This event can sometimes increase market volatility.

Strong earnings have rekindled investor interest. A spate of comments from Fed officials have added to the positive undertones. Fed governor Mishkin said that economic downturns have always been connected to instability in financial markets, and that policy makers should keep that in mind. Fed Vice Chairman Kohn, indicated he is now less opposed to inflation targeting - having specific set goals for price gains - than he has been in the past. He also spoke about whether this week’s Fed rate cut went too far and essentially bailed out investors who made bad decisions, saying that the focus of the central bank is always the macro economy. Fed governor Kevin Warsh, discussed the recent volatility in financial markets, the drying up of liquidity this summer and the sub-prime mortgage market fallout.

Shares of Oracle closed up $0.94 or 4.44% to $21.98, after reporting higher quarterly earnings and revenue that topped estimates. It also reported a large jump in sales of new software licenses. Its net income rose to $840 million, compared with $670 million in the quarter a year earlier. Meanwhile revenue rose to $4.53 billion from $3.59 billion.

Shares of Nike Inc. closed lower $1.06 or 1.82% to $57.26, despite reporting a 51% surge in fiscal first quarter profit, buoyed by a tax benefit and gains in Europe and Asia. Its profit rose to $569.7 million from $377.2 million a year earlier. Sales increased 11% to $4.66 billion, helped by currency translations.

Shares of Texas Instruments Inc. closed up $0.85 or 2.38% to $36.62, after it authorized further funds for stock repurchases and hiked the cash dividend for the second time this year. It plans to buy back up to $5 billion in common stock and lift its quarterly dividend by 25%.

U.S. light crude oil for November fell 16 cents to $81.62 a barrel on the New York Mercantile Exchange. The October contract settled the previous day at $83.32, ending at a record high for the fourth session in a row.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter