Market Wrap: Stocks Edge Higher on Corporate News, Earnings

AP/Mark LennihanThe New York Stock Exchange. By STEVE ROTHWELL

NEW YORK -- U.S. stocks gained on Monday as investors focused on corporate news instead of geopolitical worries.

Kinder Morgan (KMI! ) surged after announcing that it would combine a group of businesses that it controls to create the fourth-biggest U.S. energy company by market value. Banana seller Chiquita Brands (CQB) International soared after the company received a $611 million buyout offer.

The stock market was extending a rebound from Friday when it logged its biggest one-day gain in five months following signs that tensions in Ukraine might be easing. In July stocks had slumped as tensions between Russia and the West had escalated.

"We're hopeful that geopolitical tensions will ramp down," said Jim Russell, a regional investment director at US Bank. "The fundamental economic backdrop remains pretty firm, even though investment sentiment remains less than certain."

The Standard & Poor's 500 index (^GPSC) rose 5.33 points, or 0.3 percent, to 1,936.92. The Dow Jones industrial average(^DJI) climbed 16.05 points, or 0.1 percent, to 16,569.98 percent. The Nasdaq composite (^IXIC) ! gained 30.43 points, or 0.7 percent, to 4,401.33.

Kinder! Morgan was the biggest gainer in the S&P 500. The energy company rose $3.25, or 9 percent, to $39.37 after the company said Sunday that the group of oil and gas pipeline and storage companies that it controls will combine.

Investors were also tracking corporate earnings reports.

Shares of Priceline (PCLN) rose $27.72, or 2.2 percent, to $1,309.20 after the company reported second-quarter earnings that topped Wall Street expectations. The online travel company said the summer season got off to a strong start. Shares of rival Expedia (EXPE) gained $1.39, or 1.7 percent, to $83.94.

More than 90 percent of the companies in the S&P 500 index have now reported earnings for the second quarter.

Company earnings are expected to grow by 10.1 percent in the period, according to data from S&P Capital IQ. That compares with growth of 4.9 percent in the second quarter last year and growth of 3.4 percent in the first quarter.

Stocks have also bee! n getting a lift as the flow of mergers and acquisitions has picked up this year.

On Monday, Chiquita Brands International surged $3.04, or 30 percent, to $13.10 after the company received a buyout offer from investment firm Safra Group and the Brazilian agribusiness and juice company Cutrale Group.

Safra and Cutrale are offering $13 per share, a 29 percent premium to Chiquita's closing price of $10.06 on Friday. Chiquita said its board would review it and asked shareholders to await its recommendation. The unsolicited bid disclosed Monday comes as Chiquita and Fyffes of Ireland were working on their own transaction. The two companies agreed in March to merge in a stock-for-stock deal to create the world's biggest banana supplier.

Even though stocks have rallied over the last two days, investors should get used to the prospect of increased volatility in the market as the Federal Reserve nears the end of its economic stimulus program and gets closer to rais! ing interest rates, said Kristina Hooper, U.S. Investment Strategist at! Allianz Global Investors.

"Stocks are a lot more vulnerable with markets pricing in a less accommodative Fed," said Hooper.

U.S. government bond prices were little changed. The yield on the 10-year Treasury note held at 2.42 percent from Friday, close to its lowest level in a year.

Longer-dated Treasury notes and bonds have surged this year even though the Federal Reserve is winding down its economic stimulus and purchasing fewer bonds. Analysts say that demand for the notes has increased because the yields on the bonds of other developed nations have fallen further. The yield on the 10-year German government bond is 1.06 percent and the yield on France's government bonds with a similar maturity is 1.47 percent.

In commodities trading, gold was little changed at $1,310.50 an ounce. Silver rose 15 cents, or 0.8 percent, to $20.10 an ounce. Copper was little changed at $3.18 a pound. The price of oil rose 43 cents, or 0.4 percent, to $98.08.

What to Watch Tuesday:

• The Labor Department releases the job openings and labor turnover survey for June at 10 a.m. Eastern time.
• The Treasury Department releases the federal budget for July at 2 p.m.

These major companies are scheduled to release quarterly financial statements:

• King Digital Entertainment (KING)
• Kate Spade & Co. (KATE)
• LaQuinta Holdings (LQ)
• Towers Watson (TW)
• Valspar (VAL)

• Yes they can.

  The CARD Act did get rid of the most outrageous abuse: they can no longer increase the interest rate on existing balances unless you go 60 days past due.

  However, you need to remember that:

  • Most credit card interest rates are variable and are linked to the prime rate. Your high rate will only go higher when interest rates increase.
  • Based upon risk, your credit card company can still increase your interest rate on all future purchases. Your existing balances are protected, but future purchases would be at the higher rate. And determining risk is not limited to your behavior on your existing card. If you miss a payment with another lender, that could lead to an increase on all of your credit cards.
  • After 12 months, they can increase your rate for almost any reason. But the increased rate only applies to future purchases, and they need to give you 45 days notice.

  Credit cards are incredibly expensive ways to borrow money. If you use a card, your goal should be to pay off the balance in full every month. Then, the interest rate doesn't matter.

  Bottom line: If you do have debt, you should never be paying the purchase APR. Look for a balance transfer, or get a personal loan to cut your interest rate. And take a long hard look at your spending to put more money towards paying off that debt.
   

  1. My credit card company cannot raise my interest rate

• No, they are not.

  There is a big difference between a 0% balance transfer (where the interest is waived during the promotional period, discussed above) and 0% purchase financing offered at many stores (where the interest is only deferred).

  I regularly encourage people to use balance transfers to help them pay off their debt faster. With a balance transfer, interest is switched off or reduced during the promotional period. Once the promotional period is over, interest starts to accrue on a go-forward basis. This can take years off your debt repayment.

  But stores offer 0 percent financing at the checkout. With a lot of these programs, interest is charged from the purchase date if you do not pay off the balance in full during the promotional period. So, if you have a 12-month 0 percent offer -– and do not pay off the balance in 12 months -– then in month 13 you will be charged a full 13 months of interest. They r! etroactively charge interest, and it will be like you never had a 0 percent offer at all.

  This is a common practice. Online, Apple (AAPL) does this, via their partnership with Barclaycard (BCS).

  And stores like Walmart (WMT) do the same thing.

  Bottom line: I don't like deferred interest deals. Most people do not understand the difference between waived and deferred interest, and this practice feels deceptive. If you take one of these offers, make sure you pay off the balance in full before the promotion expires.
   

  2. All 0% offers are the same
• Not always.

  Credit card companies have different rates for different types of transactions. The interest rate charged on a purchase (high) is different from a balance transfer APR (low).

  Before the CARD Act, banks would apply your payment to the lowest APR balance first. Imagine you have a $1,000 balance. $500 is at 0 percent (balance transfer), and the other $500 is at 18 percent (purchase). If you make a $100 payment, banks would apply that to the balance transfer. That way, they reduce the balance transfer (at 0 percent) to $400, while protecting the $500 purchase balance (at 18 percent).

  The CARD Act changed that. Banks now need to apply payments to the highest interest rate first. But this only applies to payments higher than the minimum due.

  If you only pay the minimum due every month, your payment will still likely be applied to the lowest interest rate balance first.

  Bottom l! ine: You should never spend and have a balance transfer on the same credit card. Banks can only "trap" balances when you have multiple balance types on one card.

  3. My credit card payment always goes to the highest interest rate first
• Not exactly true.

  The CARD Act has stopped the handout of T-shirts on the steps of the school libraries, but they can still give sign-on bonuses. And they advertise on campus. For example, Citibank (C) has a "Thank You Preferred" card for college students. If you spend $500 in the first three months, you get 2,500 thank you points as a bonus. That is $25 of value.

  Bottom line: I actually find this worse. Before, you got a free T-shirt just for signing up. Now, the credit card companies encourage spend on the card for the "free gift."

  4. College students can't get freebies to sign up for credit cards

• In the past, banks would charge you a fee if you went over your credit limit. Today, the CARD Act requires banks to receive your consent to charge an over-limit fee. So, in most cases, banks just eliminated those fees -- which is good news (kind of).

  You can still go over your credit limit, if the bank approves your transaction. But the full amount by which you've exceeded your limit will be part of your minimum payment come the next bill, which could cause a payment shock.

  More importantly, utilization (the percentage of your available credit that you use) is a big factor in your credit score. Your credit score determines the price you pay for credit. So, if you're over-limit on an account, you are considered riskier. That can result in the credit card company increasing your interest rate. And it could also result in other lenders increasing your rates with them. So you do pay, but it's an indirect cost.

  Bottom ! line: We're glad the fee is gone, but you still need to be diligent and try to avoid going over your limit. If you pay your balance in full every month but are frequently bumping up against your credit limit, ask for a credit line increase.

  5. It no longer costs me to go over the limit on my credit card
• Completely false.

  I have heard from so many people that the way to eliminate overdraft fees is to opt out of overdraft protection. But it is impossible to completely opt out of overdraft.

  Federal regulation requires consumers to opt into overdraft protection only for debit and ATM transactions.

  But, the regulation does not cover checks and electronic transactions (including bill-pay and monthly direct debits, like gym memberships). The banks have all the power. If they approve the transaction, you would be charged an overdraft fee (typically $35 per transaction at banks and $25 at credit unions). If they decline the transaction, then you would be charged an NSF fee (non-sufficient funds), which is usually just as expensive as the overdraft fee.

  Bottom line: You can't opt out of all overdraft fees. To avoid them, keep a buffer or find an account, like Ally, that doesn't charge th! ose junk fees.

  6. I opted out of overdraft protection for checking to avoid those fees
• Not always true.

  To be protected, you need to report the fraudulent transaction within 60 days. Otherwise, you give up a lot of your rights.

  On ATM/debit cards, the bank can make you responsible for up to $500 of fraud if you report more than two days (but less than 60 days) after the transaction. On a credit card, you would never be liable for more than $50 (and most banks won't even hold you accountable for $50.)

  One area where you will almost always lose is when your Personal Identification Number is used. If someone manages to get your PIN and takes money out of your account, then the bank will almost always assume that you authorized the transaction. Make sure you change your PIN often and never write it down.

  Bottom line: Avoiding liability it your responsibility. Track your transactions regularly and call as soon as you detect any suspicious activity. And make sure you neve! r share your PIN with anyone, or make it obvious.

  7. If there is fraud on my debit or credit card, I am always protected
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