What European crisis? With skepticism over the European Union summit reaching new highs earlier in the week, leaders seemed to finally come together in Brussels and make meaningful progress toward a stable economic future. Officials agreed to let the European Stability Mechanism directly recapitalize banks in Spain and Italy rather than provide money through each country’s government. These bailout funds will not be prioritized over existing debt, alleviating bondholders’ concerns, and sending yields on Spanish and Italian debt sharply down to provide some needed short-term relief. With low expectations for the summit, the positive news came as a sweet surprise, but the Euro debt crisis is far from over.
The S&P 500 Index (INDEX: ^GSPC) posted its largest one-day gain of the year, climbing 33 points or 2.49%. Likewise, the Dow Jones Industrial Average (INDEX: ^DJI) jumped 2.20%, marking one of its best performances of the year, as well. The day served as a blessed nightcap on a volatile second quarter of 2012. With stocks surging for the first quarter, and then stumbling from mid-April to early June, investors could use a nice end to a tumultuous first half of 2012.
Market in Focus
Ford Motor (NYSE: F) trailed the S&P 500 after announcing expected losses of $570 million in overseas operations in the second quarter that ends today, posting a 5% loss on the day. The company attributes most of its loss to Europe’s fragile economy. The negative projection outweighed any possible gain on the European news that has the rest of the market jumping. Also, the auto industry is expected to post its best June in five years, even if growth has slowed from its torrential pace in May. While Ford, and Detroit peer General Motors Co., trail the pack in terms of annual growth, especially compared to Toyota or Honda, the industry does show signs of life.
MetroPCS Communications (NYSE: PCS) gained 5.8% on the day, showing vigor, after steadily underperforming the S&P 500 since July 2011. According to the Wall Street Journal, the telecommunications sector has performed the strongest out of the 10 sectors in the S&P 500, as investors frequently flock to telecom stocks in times of global uncertainty. Investors should be sure to stay tuned for MetroPCS’s quarterly earnings report set for release on July 26.
Outside of the S&P, Blackberry producer Research in Motion (Nasdaq: RIMM) plummeted 19%, as investors showed their displeasure with RIM’s first quarterly operating loss in over seven years. Shareholders weren’t particularly thrilled to hear about the company’s rapidly declining gross margins, or of its plans to cut a third of its workforce by the end of the fiscal year. Shoemaker Nike also got the cold shoulder from investors, who sent the stock price plunging more than 9% after the company announced quarterly results below expectations.
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