The Dow Jones Industrial average rebounded 202 points on Tuesday, its best day of 2011, closing at 12,587. The rebound was fueled by strong corporate earnings from Coca-Cola, IBM and Harley-Davidson, according to the Wall Street Journal. Additionally, President Obama said he was in support of a $3.7 trillion debt reduction measure proposed by the Senate's "Gang of Six", inferring that some thawing was occurring in the debt reduction talks.
World markets up
World markets are also up on Wednesday due to the earnings reports and increasing discussions in Europe to solve the Greek debt crisis, according to the Associated Press. Earnings reports are a strong driver, especially the Apple earnings reports released after the close of market yesterday which are anticipated to add energy to today's trading.
Apple earnings much higher than anticipated
Apple's results, released after close of the U.S. markets on Tuesday, indicated that Apple's net income doubled from one year ago. Revenues were at $28.6 billion up 82% or $15.7 billion from a year ago. Analysts predicted earnings per share would be $5.82 but actual earnings were $7.79 per share. The growth was spurred by allowing the iPhone to be sold through multiple service providers such as Verizon, growth in sales of the iPhone in Asia, and sales of the iPad and iPad2. The iPad has sold 29 million units since it went on sale in April of 2010.
Greek debt crisis may result in tax on EU banks
One of the proposals to solve the Greek debt crisis is to propose a tax on EU banks that hold the debt, according to the Financial Times. This tax would raise $42.5 billion and help to avoid a default on the debt. Yet Germany and the Hague still believe that additional options must be included. Some of those options include bond buy backs, a German proposed bond swap and a French bond rollover. The talks will resume today pushing towards resolution. The IMF would like to resolve the matter and add stability to the markets.
Dodd-Frank implementation continues to be pushed back
The CFTC regulators say that implementing Dodd-Frank has become increasingly difficult and sought a 6 month extension until year end, according to the Financial Times. This alternative was not supported by all of the regulators. Tensions continue to increase especially with European regulators as the laws seek to increase transparency in the derivative markets. Three rules have been agreed upon including a process for swaps designated for clearing, a member risk management rule, and the timing of acceptance of derivative contracts for clearing.
Chinese continue to buy U.S. debt
Despite the threat of default on U.S. debt should Congress fail to raise the debt ceiling, the Chinese continue to buy U.S. debt. Currently China holds $1.16 trillion of U.S. debt, according to USA Today. In May, China increased its holdings according to U.S. Treasury data. This data includes only direct sales and does not include debt purchased by China through other markets. Clearly the Chinese feel somewhat confident the debt issues will be resolved and have urged the U.S. to be "responsible".
Saturday mail delivery to be cut
Postmaster General Patrick Donahue indicates that the Post Office will suffer a $8.3 billion loss this year and has proposed stopping Saturday delivery, according to the USA Today. This measure will save the Post Office $3.1 billion. Donahue predicts that in the long term the Post Office will need to move to 3-day per week delivery. So much for "during rain or snow......".