US markets continue to advance

The US markets rallied further on Friday, 13 July 1007, as investors digested news that retail sales fell 0.9% last month, the largest decline in nearly two years, due to weak demand for durable goods and falling gas prices. The decline was much larger than the 0.3% drop estimated by economists, but the the expectations of strong global growth, helped by a weaker dollar, continue to fuel strong gains for the markets.

US stocks rose further into record territory and posted strong weekly gains that saw the Dow Jones Industrial Average close in on the 14,000 level, as investors continued the previous session's record rally after in-line earnings from General Electric Co.

On Thursday, 12 July 2007, the Dow Jones Industrial Average surged more than 280 points to new record highs, posting its best one-day performance in nearly four years. The blue-chip average continued to advance in record territory on Friday, 13 July 2007.

The Dow Jones Industrial Average gained 45 points to close at 13,907, a new record closing level. It earlier reached a new intraday high of 13,932. For the week, the Dow gained 1.8%.

A lower US dollar, following the Bank of Japan's decision to leave rates unchanged at 0.50%, reinforced the liquidity of the carry trade and helped boost those large-cap, multinational companies that benefited the Dow.

The S&P 500 rose 4.8 points to close at 1,552, also a record closing high, on Friday. The broad index gained 1.3% for the week. The Nasdaq Composite gained 5.3 points to 2,707 and gained 1.4% on the week. Fifteen of the 30 blue-chip components advanced over the week.

On companies news, General Electric was in focus after releasing second quarter figures and stating it will increase its 2007 share buy back programme to $14 bilion.The company said second-quarter earnings rose on the back of record orders and earnings from continuing operations rose 12% to US$5.4 billion, or US$0.52 per share, which was up 13% on the same time last year.Total orders jumped 32% to a record US$25 billion, with the total backlog increasing US$18 billion, or 42%, year-on-year.

General Electric said it expects third-quarter EPS from continuing operations in a range of US$0.54-0.56, up 15-19% compared with the year before, and reaffirmed its full-year guidance.

Meanwhile, Alcoa was in the spotlight after the company withdrew its hostile takeover bid for Alcan, making Alcoa itself a prime takeover target, according to analysts. The company’s stock rose by 4.4% to end at $47.35.

In the financial sector, Bank of America was also in for some positive news, after the Dutch Supreme Court ruled that ABN Amro does not need to hold a shareholder vote to proceed with the sale if its US unit LaSalle.

However, Airline shares ended the week with a loss as the sector pulled back amid a steep rise in oil prices ahead of next week's earnings reporting season. The Amex Airline index fell 0.9% to 50.79 points Friday, 13 July 2007, pushing it down 2.6% for the week. Seven of the 11 stocks in the index ended lower Friday, led by roughly 2% losses in the shares of American Airlines parent AMR Corp.

Crude oil prices skyrocketed on Friday, continuing a rally that primarily started on the back of below average gasoline inventories in the US exacerbating the demand – supply mismatch for the commodity in the peak summer driving season. NYMEX crude futures jumped $1.43 to $73.93, topping an intraday high of $74 a barrel- its highest level in 11 months after the International Energy Agency said global oil demand growth in 2008 will be the strongest in years.