Marc Pado Comments: Beaten-Down Dow Retakes 10000, Soars 275

July 7, 2010, FOXBusiness

After weeks of gloom and doom on Wall Street, the Dow surged 275 points and recaptured the 10000 mark on Wednesday as the markets begin to look beyond recent crummy economic reports and focus on the start of earnings season.

Today’s Markets

The Dow Jones Industrial Average jumped 274.66 points, or 2.82%, to 10018.28, the Standard & Poor's 500 gained 32.21 points, or 3.13%, to 1060.27 and the Nasdaq Composite picked up 65.59 points, or 3.13%, to 2159.47. The FOX 50 added 20.59 points, or 2.74%, to 772.82.

The burst of buying marked the Dow's third-strongest strongest performance of the year and gave the benchmark index a rare two-day winning streak. It also returned the S&P 500 above the closely-watched 1040 level. The gains were broad based and increased steadily throughout the day, with the major indexes ending at session highs.

Financial stocks enjoyed the heaviest buying in the wake of State Street’s (STT: 36.6595, 0.0195, 0.05%) bullish earnings guidance and solid rallies for European banks like Spain’s Banco Santander (STD: 12.54, -0.06, -0.48%). Fears about a potential double-dip recession in the U.S. took a back seat as the markets look forward to the kickoff to earnings season next week.

“It doesn’t make any sense at all that we would see an actual double-dip and that’s what is coming to reality,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald. “I just think we overdid it on the downside. Now you’re finally getting a snapback day.”

The Dow posted its strongest gain since surging 285 points on May 27. Every Dow stock closed in the green, led by JPMorgan Chase (JPM: 38.195, 0.045, 0.12%), American Express (AXP: 42.0101, 0.8801, 2.14%) and tech bellwether Cisco Systems (CSCO: 22.57, 0.09, 0.4%). Defensive stocks like Wal-Mart (WMT: 49.16, 0.24, 0.49%) and Verizon (VZ: 26.4899, -0.0101, -0.04%) trailed the broader markets but still made headway.

The big gains come after the Dow posted a 170-point rally on Tuesday that vanished by midday before the markets ended modestly higher. Wall Street had been stuck in a seven-day losing streak, its longest slump since the height of the financial crisis in 2008.

“When people are just focused on what’s going on in the U.S. economy and block out what is going on internationally, there is a pretty good story here,” said Jason Weisberg, senior vice president at Seaport Securities.

After weeks of ugly economic reports signaling a slowdown in the U.S., the markets finally have a break in the schedule with the next major catalyst being earnings season, which starts on July 12 when Alcoa (AA: 10.57, 0.03, 0.28%) reports results. Given the economic gloom and doom, the bar has been set very low; some say too low.

“Companies have a lot of cash, very low inventories and maintain very tight cost structures. Therefore, they will be able to withstand any kind of economic slowdown in the third quarter,” said Pado.

State Street may have provided some evidence of that on Wednesday as it projected second-quarter operating EPS of 92 cents, compared to the Street’s view of just 72 cents. The world’s second-largest custody bank also sees in-line revenue of $2.2 billion. Rivals Bank of New York (BK: 26.125, -0.175, -0.67%) and Northern Trust (NTRS: 48.429, -0.711, -1.45%) also soared.

The financial sector was the catalyst for the midmorning rally as European banks like Barclays (BCS: 18.3, 0.39, 2.18%) and Deutsche Bank (DB: 62.18, 1.18, 1.93%) posted strong gains. Spanish banks like Banco Santander (STD: 12.54, -0.06, -0.48%) were among the biggest winners and the cost to insure banks continued to fall.

Also, discount rtailer Family Dollar (FDO: 35.6675, -0.5325, -1.47%) posted better-than-expected quarterly results and the markets reacted positively to its disappointing outlook for the current quarter. While low-end Family Dollar’s stock dropped 8%, high-end retailers like Saks (SKS: 7.78, 0.22, 2.91%) and Tiffany (TIF: 39.23, 0.51, 1.32%) saw their shares rise sharply.

Economically-sensitive commodities also enjoyed big gains as crude oil snapped a six-day losing streak. Crude jumped $2.09 a barrel, or 2.90%, to $74.07. Copper gained 1.54% a pound to $3.0055. Gold rose $3.80 a troy ounce, or 0.32%, to $1,198.90.

Wall Street also received a boost from the recovering euro, which erased early losses and hit six-week highs. The euro was up 0.12% to $1.2640 as U.S. markets closed.