Financial Sector Could Give Rally Legs (MON, FDO, GIS, BAC, V, EXFO)

Stocks rose for a third-straight day, helped by the Greek parliament passing austerity measures despite the violent protests in Athens. We thought the market could pull back on the news after two strong days in anticipation of the vote and the fact that another Greek bailout doesn’t really solve the problem, but the market nonetheless showed strength. Financial stocks, meanwhile, finally had a good day, helped by the Bank of America (BAC) mortgage settlement and the late announcement by the Fed that it would raise its proposed cap on interchange fees. If the financial sector can rise from the doldrums, then this market rally could find some legs. However, we’re still cautious in the near term, and continue to look more for a fall rally.

The Credit Card Stocks Index was the top performing tickerspy Index on the day, led by Visa (V) with a 15% gain. The Optical Networking Stocks Index was the day’s worst performing tickerspy Index, with EXFO Inc (EXFO) down -17%.

Stocks rose on the day, with the Dow up 73 points to 12,261. The S&P and Nasdaq, meanwhile, both added 11 points to close at 1,307 and 2,740, respectively. Oil jumped $1.88 to $94.77 a barrel, while gold climbed $10.20 to $1,510.40 an ounce.

In economic news, pending sales of previously owned homes rose 8.2% in May after falling -11% in April, according to the National Association of Realtors. Economists were expecting a 3% increase in the May number.

In earnings news, shares of genetic seed maker Monsanto (MON) jumped 5.0% after the company said its fiscal third-quarter profit nearly doubled to $680 million, or $1.26 per share, from $384 million, or 70 cents a share, a year earlier as revenue surged 21% to $3.59 billion. That topped the $1.10 per share profit and $3.4 billion in revenue analysts were expecting. Missouri-based Monsanto raised its full-year profit outlook to $2.84-$2.88 from $2.72-$2.82.

Discount retailer Family Dollar (FDO) said its fiscal third-quarter profit increased 6% to $111.1 million, or 91 cents per share, from $104.4 million, or 77 cents per share, a year earlier. Sales rose 8% to $2.15 billion, while same-store sales increased 4.7%. Analysts were expecting a profit of 95 cents on revenue of $2.17 billion. North Carolina-based Family Dollar forecast a fourth-quarter profit of 62-70 cents a share on a same-store sales increase of 5%-7%. Analysts are expecting a profit of 65 cents a share with same-store sales rising 5.1%. The company gave full-year guidance of $3.08-$3.16 a share. Analysts were expecting full-year EPS of $3.16. Shares of Family Dollar rose 0.8%.

General Mills (GIS), the second-largest U.S. food company, said its fiscal fourth-quarter profit soared 51% to $320.2 million, or 48 cents per share, from $211.9 million, or 31 cents per share, a year earlier as revenue climbed 3% to $3.63 billion. On an adjusted basis, General Mills earned 52 cents. Analysts were expecting a profit of 52 cents a share on sales of $3.66 billion. The Minnesota-based company forecast fiscal 2012 earnings of $2.60-$2.62 a share on mid-single digit revenue growth. Analysts were expecting a profit of $2.68 a share. Shares of General Mills rose 0.5%. Twenty-six pros held General Mills in their portfolios at the end of Q1 and more than 510 tickerspy members own the stock in their portfolios.

Shares of Dow component Bank of America, the largest U.S. bank by assets, rose 3.0% after the company said it will pay $8.5 billion to settle claims that it sold low-quality mortgage-backed securities to investors. The settlement amount exceeds the total profits posted by North Carolina-based Bank of America since 2008, according to The Wall Street Journal. Nearly 180 pros held Bank of America in their portfolios at the end of Q1 and nearly 6,700 tickerspy members own the stock in their portfolios.

Tags: BAC, EXFO, FDO, GIS, MON, V