Back-to-back weekly gains for U.S. equities, Oct. 10-14

Despite warnings by European Central Bank President Jean-Claude Trichet that the European debt crisis had “reached a systemic dimension;” the defeat in the Senate of U.S. President Barack Obama’s US$447 billion job-creation package; a recent shift among some Wall Street brokers away from equities into fixed income and cash; and mounting consumer anger in the U.S. against the financial system that has erupted into protest rallies across the country, U.S. equities were remarkably resilient and posted their first back-to-back weekly gain since early July. The Dow Jones Industrial Average climbed 4.9% to close at 11,644.49, while the S&P 500 index jumped 6% to 1,224.58 points. The Philadelphia Gold and Silver index gained 5.5% to 197.77.

Speculation of a takeover bid sent shares of  Walter Energy surging 26.6% or US$16.28 to US$77.36 per share. The Australian newspaper reported that BHP Billiton was contemplating a US$6 billion bid for the company, while Britain’s The Independent reported that both BHP and Anglo-American were considering acquiring the company. Other U.S. coal stocks also rose sharply in anticipation of higher prices for coal and steel. Alpha Natural Resources was the third most-actively traded stock of the week, rising US$3.26 to US$21.65, while Arch Coal advanced US$2.16 to US$17.50. Peabody Energy gained US$4.81 to US$39.46 per share on news that its proposed joint acquisition with European steelmaker ArcelorMittal of Australia’s Macarthur Coal had received final regulatory approval.

Alcoa was the most actively traded stock of the week, climbing 55¢ to US$10.26. The company reported higher revenue and earnings in the third quarter of 2011 compared with the same quarter a year ago, but lower sequential earnings due to lower metal prices, seasonal factors and weakness in Europe. Net income reached US$172 million, up 182% over the year-earlier quarter, but down 47% from the second quarter of this year. Revenues climbed 21% year-on-year to US$6.4 billion, but were down 3% from the second quarter of 2011. The company forecasts growth of 12% this year and believes aluminum demand will double by 2020.

News that Cliffs Natural Resources had resumed longwall operations at its Pinnacle mine in West Virginia helped send its shares up US$9.34 to US$65.21. The mine was closed in May due to detected levels of carbon monoxide. 

Finally, potash players were back in vogue with Agrium increasing US$7.12 to US$75.83, Potash Corporation of Saskatchewan up US$6.05 to US$50.70 per share, and Mosaic advancing US$5.92 to US$57.11, all on no news.