Markets Surge as China Joins the Speculation Game

It appears to be quite the collaborative effort today with every sector scoring sizable gains, but the big storylines are in financials and energy. As far as earnings are concerned, JPMorgan Chase (NYS: JPM) is performing the perfect act, taking a downtrodden quarter in which it lost $4.4 billion and turning it around and smashing analyst estimates with an overall $4.96 billion second-quarter profit. After reporting EPS of $1.21, almost double the expectation, JPMorgan soared, up 5.55% this afternoon. Wells Fargo also reported earnings today. The conservative bank notched a $4.6 billion profit, increasing 17% year over year. With the expectation of a less-than-stellar earnings season, the banking sector looks to be a much-needed bright spot for investors.

Crude oil prices continue to march higher as investors are now looking toward the People's Bank of China as the next central bank to slash interest rates to jump start its faltering economy. Oil rose earlier this week on reports that U.S. stockpiles shrunk last week. The potential increase in demand comes on top of the Iranian oil embargo, so look for oil to continue its recent ride while the United States is in its traditionally heavy-driving season.

Who's doing what?



Gain/Loss %

Dow Jones Industrial Average (INDEX: ^DJI)



S&P 500 (INDEX: ^GSPC)






WTI Oil Futures



Source: Yahoo! Finance.

The speculation of China lowering interest rates once again is having a strong positive impact on the Dow components today. After peaking slightly above $115 per share in February, Caterpillar (NYS: CAT) has continued to slide lower as the past quarter was plagued with slowing growth in the United States, Europe, and China. Caterpillar strongly relies on emerging economies to fuel its growth and as negative reports continue, investors are increasingly scared away from the large construction equipment maker. However, the company is getting a reprieve today as the good news buoyed the share price by 2.77%.

Outside of the Dow, Green Mountain Coffee Roasters (NAS: GMCR) is heading the wrong direction, shedding 8.78% so far today. The tough year looks like it is even worse than originally expected as the company decreased its full-year earnings by 20%. The coffee company is now down 60% so far this year.

Long-term thinking
Barring any sudden drop, it appears the broad markets are going to end the current losing streak and finish the week out on a respectable note. Remember, now is as important as ever for investors to be focusing on the long term and finding companies they can rely on to return capital for the long haul. Check out the Motley Fool's special report: "3 Stocks That Will Help You Retire Rich." This free report will list three remarkable companies as well as offer great advice on how to invest to secure a comfortable retirement. Get your free report now.

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Joel South owns shares of no company listed above. The Motley Fool owns shares of JPMorgan Chase and Green Mountain Coffee Roasters. Motley Fool newsletter services have recommended buying shares of Wells Fargo and Green Mountain Coffee Roasters. Motley Fool newsletter services have also recommended creating a lurking gator position in Green Mountain Coffee Roasters. The Motley Fool has a disclosure policy.
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