2:45PM Banking and housing companies rallied on the hope that future rate hikes may be postponed.
Fed Chairman’s testimony to the Senate Banking Committee and strong earnings from J P Morgan and Bank of America supported a solid advance in the banking stocks. Bank of America (BAC: chart) stock advanced 3% on the second quarter earnings of $1.22 per share compared to $1.14 per share a year ago. Excluding merger charges related to MBNA, earnings per share would have been $1.22 per share. In the prior merger chares related to Fleet Boston reduced earnings by 2 cents. Revenue grew 25% from a year ago. For the first six month the bank earned $10.46 billion or $2.25 per share compared to $9.05 billion or $2.21 per share on a split adjusted basis.

J.P. Morgan (JPM: chart) reported second quarter earnings of 99 cents compared to 28 cents a year ago on revenue rise of 52% and 11% lower than in the first quarter of this year. In the second quarter 2005 the company had a legal reserve charge of 33 cents per share. The strong revenue gains were supported by a 42% increase in investment banking fees and 30% rise in bonds and debt underwriting fees. The company allocated $21 billion and generated 16% return on equity. The bank’s stock gained 5.5% at late afternoon trading.


11:30AM Stock markets rallied on Federal Reserve Chairman Testimony.
Stocks moved sharply higher on well received comments from Federal Reserve Chairman Ben Bernanke, interpreted as an indication that the Fed will leave interest rates unchanged at its next meeting in August. Bernanke also predicted that a projected slow down in economic growth should help limit inflation pressures over time.

The broad based strength in the market included strength in the airline sector as airline stocks benefited from declining oil. The decrease by the price of oil is partly due to the release of a report from the Energy Department that showed that U.S. crude oil and gasoline inventories unexpectedly increased. Gold stocks also posted significant gains, as the price of the precious metal moved back to the upside after sharp declines in the previous two sessions. Housing and financial stocks moved sharply higher, as Bernanke's comments offset recent concerns about interest rates. The health insurance sector also moved notably higher, with the Morgan Stanley Healthcare Payor Index rising 3%.In morning trading, the Dow rose 160.16, or 1.48%. The Standard & Poor's 500 index rose 18.44, up 1.49%, and the Nasdaq composite index rose 26.01, or 1.27%.

Crude oil and gasoline stockpiles rose
Crude oil inventories ticked slightly higher during the most recent week, according to government statistics released Wednesday. This broke a recent string of declines. Stockpiles of gasoline and distillates also ticked up during the week. The Department of Energy's Energy Information Administration said that crude oil inventories edged higher by 200,000 barrels for the week ended July 14. Specifically, the measure ticked up to 335.5 million barrels from the previous week's level of 335.3 million barrels. This broke a recent string of declines, with inventories dropping by 6 million barrels in the previous week. Oil inventories for the July 14 week were 3.2% higher than last year. Meanwhile, gasoline inventories showed a week-over-week advance of 1.5 million barrels. This followed a decline of 400,000 barrels in the previous week. The level of gasoline inventories was 0.8% above last year. Distillate fuel oil had an inventory advance of 1.2 million barrels during the week. This built on a recent streak of gains, including an advance of 2.6 million barrels in the previous week.


10:30AM Stock markets rallied on Bernanke’s comments.
Stock markets rallied in morning trading, following comments from Federal Reserve Chairman Ben Bernanke of moderating pace of economic growth and contained inflation. The Dow Jones industrial average shot up more than 100 points. In morning trading, the Dow rose 108.70, or 1.01%. The Standard & Poor's 500 index rose 15.27, up 1.23%, and the Nasdaq composite index rose 24.29, or 1.19%. Bonds were down but recovering some lost ground on Bernanke's comments. The yield on the 10-year Treasury note was 5.16%, up from 5.14% Tuesday.

The airline sector turned in one of the market's best performances in early trading, with SouthWest Airlines (LUV: chart) climbing 7.6% after the airline reported strong Q2 earnings growth. The health insurance sector rebounded from yesterday’s sharp decline to show significant strength, as reflected by the 2.8% gain shown by the Morgan Stanley Healthcare Payor Index. Housing stocks also moved sharply higher in spite of the Commerce Department report that showed a bigger-than-expected decrease in housing starts in the month of June.


9:45AM Stocks opened higher on strong earnings.
U.S. stocks advanced at opening on signs of cooling economy and stronger-than-expected earnings from International Business Machines Corp. and JPMorgan & Chase. However, a disappointing revenue outlook by Yahoo Inc. limited gains on the Nasdaq.

The Labor Department said the CPI rose by just 0.2% in June, the smallest increase in four months, but core inflation, excluding energy and food, rose by 0.3%, higher than the 0.2% expected. Signs of slowing housing market were received from the Commerce Department report which said that construction of new homes fell by 5.3% in June.

Shares of J.P. Morgan (JPM: chart) climbed 3.3% after the No. 3 U.S. bank said its Q2 profit tripled. Dow component International Business Machines Corp. (IBM: chart) rose 2.8% after reporting a stronger-than-expected quarterly profit. Shares of Internet media company Yahoo (YHOO: chart) dropped 19% to $26.08 after it gave a 2006 revenue outlook below forecasts. In the first hour of trading, the Dow rose 54.59, up 0.51%. The Standard & Poor's 500 index rose 4.71, up 0.38%, and the Nasdaq composite index fell 0.87, or 0.04%.

The airline sector turned in one of the market's best performances in early trading, with SouthWest Airlines (LUV: chart) climbing 7.6% after the airline reported strong Q2 earnings growth. The health insurance sector rebounded from yesterday’s sharp decline to show significant strength, as reflected by the 2.8% gain shown by the Morgan Stanley Healthcare Payor Index. Housing stocks also moved sharply higher in spite of the Commerce Department report that showed a bigger-than-expected decrease in housing starts in the month of June.

Housing starts and building permits declined.
The Commerce Department released its report on housing starts in the month of June on Wednesday, showing that housing starts fell more than economists had expected. The report also showed a notable decline in building permits. The report said that housing starts fell 5.3 percent to a seasonally adjusted annual rate of 1.850 million units from a revised 1.953 million unit rate in May. Economists had expected starts to fall to a 1.890 million unit rate from the 1.957 million unit rate originally reported for May. The decrease in housing starts reflected double-digit percentage declines in housing starts in the Northeast and the West. Housing starts in the South showed a more modest decrease while housing starts in the Midwest increased modestly. Single-family housing starts fell 6.5 percent to an annual rate of 1.486 million units in June from a 1.590 million unit rate in May, while the rate for buildings with five units or more fell 4.1 percent to 306,000 units. The Commerce Department also said that building permits fell 4.3 percent to a seasonally adjusted annual rate of 1.862 million units in June from a 1.946 million unit rate in May. Building permits are seen as an indicator of demand. Decreases in building permits were seen in the Midwest, South, and West, while building permits in the Northeast rose by 6.1 percent.

Consumer prices index rose 0.2% in June.
Wednesday morning, the Labor Department released its report on consumer prices in the month of June, showing that price growth came in line with economist estimates. At the same time, core prices rose a little more than expected. The report showed that the consumer price index rose 0.2 percent in June following a 0.4 percent increase in May. The increase came in line with economist estimates of an increase of about 0.2 percent. A decrease in energy prices helped to limit the upside for the index, with energy prices falling 0.9 percent in June after showing significant increases in the three previous months. The decrease came as the index for petroleum based energy fell 0.9 percent while the index for energy services fell 1.1 percent. Meanwhile, food prices rose 0.3 percent in June after edging up 0.1 percent in May. Prices for both medical care and education and communication also increased by 0.3 percent. The Labor Department also said that core prices, which exclude food and energy prices, rose 0.3 percent in June, matching the increase seen in the three previous months. Economists had expected a more modest increase of about 0.2 percent.


9:00AM Stock futures pointed to a mixed opening ahead of data.
U.S. stock futures pointed to a mixed opening Wednesday, with investors awaiting inflation data and congressional testimony by Federal Reserve Chairman Ben Bernanke.

Market also awaited another batch of earnings news from major companies, including Motorola Inc. (MOT: chart). After Tuesday's close, Yahoo Inc. (YHOO: chart) gave a 2006 revenue outlook below forecasts, sending its shares 15% before the opening bell. In contrast, International Business Machines Corp. (IBM: chart) reported stronger-than-expected quarterly profit. Shares of IBM, the world's largest computer services company, rose 3.1% to $76 in after-hours trading. Standard & Poor's 500 futures were up 0.40 point, slightly above fair value. Dow Jones industrial average futures were flat, and Nasdaq 100 futures were down 4.75 points.

Piper Jaffray Companies (PJC: chart) posted second-quarter earnings of $4.1 million, or 21 cents a share, up from $1.2 million, or 6 cents a share, a year ago. Excluding one-time restructuring and transaction-related expenses, earnings for the latest quarter would have come in at 75 cents a share. Revenue rose to $114.4 million vs. $102.1 million last year on increasing investment banking and interest revenue, which compensated the drop in the company’s institutional brokerage revenue.