Dow up 189 on bond insurer's good news

By Charley Blaine

Stocks enjoyed a surprising and sharp rally this afternoon after Standard & Poor's Corp. reaffirmed AAA ratings on bond insurer MBIA (MBI, news, msgs).

At the close, the Dow Jones industrials were up 189 points, or 1.5%, to 12,570. The Standard & Poor's 500 Index rose about 19 points, or 1.4%, to 1,372, and the Nasdaq Composite Index was up 24 points, or 1.1%, to 2,327.

The Dow's gain was its third best of 2008 in terms of point change and percentage change. In a year of big volatilty, it was the 10th session in which the index gained 100 or more points. The Dow has gained 283 points, or 2.3%, in the last two trading sessions.

While some traders said they didn't see the market exploding higher with today's news, they did say they believe any declines in the market will be limited. The Dow has regained more than half of the loss it sustained from Dec. 31 through the low on Jan. 22.

The MBIA news eased concerns that downgrades of the bond insurers would force banks and other financial institutions to write off billions of dollars in assets. It may also help ease the credit crunch that has stalled deals worldwide. MBIA was up 20% to $14.58 on the day.

Later, however, MBIA suspended its dividend and said it would not insure "structured" finance deals, such as securities backed by sub-prime mortgages, for six months while it works on retaining and building its capital.

Shares were off 1.7% in after-hours trading at $14.33.

S&P also held its AAA rating of MBIA rival Ambac Financial Group (ABK, news, msgs). But the rating agency left Ambac on its "creditwatch negative" list, although that designation could be removed. Ambac was up 16% to $12.41 but fell back 1.7% to $12.20 in after-hours trading.

• Video: What's ahead for markets?

Biotechnology shares and energy stocks had been among the market leaders today. Genentech (DNA, news, msgs) was up 8.9% to $77.96. On Friday, the company won an accelerated approval from the Food and Drug Administration to use its cancer-fighting drug Avastin to treat certain forms of breast cancer.

Energy shares were higher after crude oil rallied back over $99 today. Crude in New York closed at $99.23, up 42 cents from Friday. Heating oil was the catalyst, hitting an intraday record of $2.80 a gallon before dropping back to $2.7853.

There weren't a lot of losers on the day. One was Google (GOOG, news, msgs), which fell 4.2% to $486.44 and was off an additional 0.3% to $485.01 in after-hours trading. The stock is down 30% this year.

The decline appeared to be related to the attempts of Pakistan's government to block local YouTube access domestically. That shut down YouTube around much of the world for two hours on Sunday. Google owns YouTube.

The rally should give investors a shot of confidence. The market had risen sharply on Friday on news that a rescue for Ambac was coming soon and could be announced this week.

Even in a year of big swings, today offered more than its share. The Dow had risen for most of the morning until it was up about 112 points. Then, the rally sold off on weakness among financial and technology stocks.

The market turned around starting about 2:20 p.m. ET, when the bond-insurer news hit.

The market had opened strongly in part because of Visa's announcement that it could raise perhaps as much as $19 billion in an initial public offering. The shares might be sold at the end of March.

At the end of the day, 29 of the 30 Dow stocks finished with gains; the one loser: Citigroup (C, news, msgs), which fell 1.5% to $24.74 after Goldman Sachs and Oppenheimer suggested the banking giant still faces billions of dollar in write-downs this quarter.

In addition, 445 S&P 500 stocks were higher on the day, along with 79 Nasdaq-100 ($NDX.X) stocks. The index, which tracks the biggest Nasdaq stocks, closed up 12 points, or 0.7%, to 1,785.

• Get free, real-time stock quotes on MSN Money

Nordstrom results better than expected

After today's close, upscale clothing retailer Nordstrom (JWN, news, msgs) said fiscal fourth-quarter net income fell 8.6%, reflecting weaker-than-expected same-store sales in a "challenging" retail environment and an extra week of sales in the year-earlier period.

But the results weren't as bad as Wall Street had feared, and shares were up 0.6% to $37.19. In regular trading, the shares had risen 2.7% to $36.98.

The clothing retailer reported net income of $212 million, or 92 cents a share, for the quarter ended Feb. 2, which includes the crucial holiday shopping season.

In the year-earlier period, the retailer earned $232 million, or 89 cents a share.

In November, Nordstrom said it expected fourth-quarter net income of 88 cents to 92 cents a share on flat same-store sales. Two weeks ago, the company said fourth-quarter sales dropped 4.4% to $2.51 billion, and same-store sales fell 0.7%. Excluding an extra week of sales in the prior-year period, total fourth-quarter sales were flat, Nordstrom said.

Nordstrom said it expects fiscal 2008 earnings of $2.75 to $2.90 a share. Wall Street was looking for $2.77 a share. Same-store sales are expected to range from flat to a 2% decrease.

Visa could be the biggest IPO ever

The Visa news is easily the most exciting thing to hit the market in a while. The offering could raise almost $19 billion, making it the largest IPO in U.S. history.

The credit card company will offer 406 million shares at $37 to $42 per share, it said in a Securities and Exchange Commission filing. There will be an option for its underwriters to buy an extra 40.6 million shares to cover any excess demand.

The Visa IPO, even at its midpoint price, would surpass the $10.6 billion AT&T Wireless raised in 2000. It would be almost as big as the two largest past deals combined -- AT&T's offering and Kraft Foods' $8.7 billion offer in 2001.

The company hasn't said when it plans to make the offering, but today's release implies it could come soon.

Visa would follow MasterCard (MA, news, msgs) in moving from being a privately held interest to a publicly traded company. MasterCard raised $2.39 billion in its IPO nearly two years ago. The shares have risen nearly 400% since then.

Master Card was down 2.5% to $198.45 today and is down 4.1% this month.

In the fourth quarter of 2007, Visa posted net income of $424 million on revenue of $1.49 billion, according to the SEC filing. MasterCard posted net income of $304.2 million on revenue of $1.07 billion.

Visa is controlled by about 13,300 member banks and finance companies. Many of these are struggling with mounting credit losses -- and some with capital shortfalls.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$99.23	$98.81	$0.42	8.15%	3.39%
Heating oil (per gallon)	$2.7853	$2.7630	$0.0223	9.90%	5.13%
Natural gas (per million BTU)	$9.1860	$9.1460	$0.0400	13.77%	22.76%
Unleaded gasoline (per gallon)	$2.5419	$2.5337	$0.0082	10.08%	2.05%

Crude oil moves higher

Crude oil hit $99.09 this morning, up 28 cents from Friday, on worries about tensions in the Middle East.

On Sunday, Iran, the Organization of Petroleum Exporting Countries' second-largest producer, threatened reprisals against any nation supporting new sanctions over its alleged nuclear-weapons program, Agence France-Presse reported. In another sign of unrest in the region, Turkey pressed an assault against Kurdish rebels in northern Iraq, killing 112 militants since Feb. 21, the military said Sunday.

ExxonMobil (XOM, news, msgs) was up 2.3% to $89.13 today. ConocoPhillips (COP, news, msgs) was up 2.1% to $81.26.

Existing-home sales: Could have been worse

The existing-home-sales report cheered Wall Street because it wasn't quite as bad as expected. The National Association of Realtors said January sales ran at a seasonally adjusted rate of 4.89 million units. That was off slightly from December's rate of 4.91 million units and ahead of the 4.8-million-unit consensus estimate.

But the fact is, the numbers are still pretty awful: Sales were down 23.4% from a year ago. Worse, the supply of homes for sales grew 5.6% to 4.19 million units, representing a 10.3-month supply. That was up from December's 9.7-month supply.

• Video: Even the very rich can lose a house to a foreclosure

The median sale price was $201,100, down 4.6% from a year ago.

Sales were weakest in the West region, which is dominated by California, where sales fell 28.5% from a year ago to 930,000 units. The median price of $300,100 was down 6.7% from a year ago.

If there was any good news in the report, it came in part from the Midwest, where sales were up 3.4% from December to 1.2 million units -- although down 20% from a year ago. The median sale price was $154,000, down 4% from a year ago.

The other bit of good news: The sales rate for single-family homes was actually up very slightly from December -- 0.5% -- to a rate of 4.3 million units. The trade group took that gain as a signal the housing market may be starting to bottom. Single-family sales were down 22% from a year ago.

Condominiums sold at a rate of 550,000 units, down 6.5% from December and 30% from a year ago.

Home-building stocks rallied despite the lousy news, although the cause was more likely the MBIA rating.

Pulte (PHM, news, msgs) was up 0.3% to $14.75. D.R. Horton (DHI, news, msgs) was up 1.8% to $15.50. Lennar (LEN, news, msgs) was up 2.7% to $18.78. The Philadelphia Housing Sector Index ($HGX.X) was up nearly 0.9% to 139.

Lowe's cuts guidance, but shares rise

The housing blues aren't just for home builders. Home-improvement retailer Lowe's (LOW, news, msgs) reported lower quarterly profits on Monday and forecast full-year earnings below Wall Street estimates, citing "challenging" days to come as the slumping housing market hurts sales.The second-largest home-improvement retailer (behind Home Depot) also pared its store-growth plans for the year. Its shares were down 2.5 percent to $23 in trading before the opening bell.

Earnings came to $408 million, or 28 cents a share, for the fourth quarter ending Feb. 1, down 33 percent from $613 million, or 40 cents a share, a year earlier.

Shares, however, jumped 3.9% to $24.50 because earnings were better than the 25 cents a share analysts had expected.

Rival Home Depot (HD, news, msgs) reports tomorrow. Its shares were up 3.8% to $28.82, second best among the 30 Dow stocks after Alcoa.

Take-Two to EA: Don't steal our company

Shares of Take-Two Interactive Software (TTWO, news, msgs), known for its "Grand Theft Auto" franchise, soared 55% to $26.89 today after the company rejected a hostile bid from video-game giant Electronic Arts (ERTS, news, msgs) on Sunday.

Take-Two called the EA offer a "highly opportunistic" attempt to take advantage of the game's upcoming release.

EA, best known for its Madden NFL games, said it was releasing details of the proposal -- an all-cash bid of $26 per share, or about $2 billion -- to get the attention of Take-Two shareholders after Take-Two's board turned down its second bid in two weeks.

The offer represents a 64% premium over Take-Two's $15.83 close on Feb. 15, the last trading day before EA made its proposal. Take-Two shares closed at $17.36 on Friday.

Electronic Arts shares fell 5.2% to $47.14.

"There can be no certainty that in the future EA or any other buyer would pay the same high premium we are offering today," EA Chief Executive John Riccitiello wrote in a letter to Take-Two, released Sunday.

Riccitiello added that Take-Two's quick acceptance of the offer would mean EA could put its marketing muscle behind the eagerly awaited release of "Grand Theft Auto IV," set for April 29.

More subprime losses for Citigroup

Citigroup shares fell after an analyst said the bank may post its second straight quarterly loss because of write-downs on home-equity loans and junk-grade corporate loans.

The bank may post a loss of $1.6 billion, or 28 cents a share, for the first quarter, compared with a profit of about $5 billion, or $1.01, a year earlier, Oppenheimer & Co.'s Meredith Whitney wrote today in a note to clients. That's well below the Wall Street consensus of 63 cents per share in profit, Bloomberg News said.

The rate of loan losses is "grossly underestimated by consensus estimates" at Citigroup and other U.S. banks, Whitney wrote. "Core fundamentals are rapidly deteriorating." She cut her per-share estimate for 2008 earnings by more than 70% to 75 cents. Citigroup's shares could fall 36% to less than $16, she wrote. Shares are already down about 15% this year.

Citigroup posted a $9.8 billion loss for the fourth quarter, the widest in its 196-year history, after writing down subprime-mortgage-backed collateralized debt obligations whose value plummeted last year as investors shunned securities linked to the least creditworthy borrowers. Vikram Pandit stepped in as chief executive officer in December, after Chuck Prince was forced to resign.

Whitney was among the first analysts to gauge the depth of Citigroup's losses, writing in a note in October that the bank may have to cut dividend payments to shareholders for the first time since the 1990s.

Separately, Goldman Sachs analysts cut estimates for the nation's top banks and brokers today and said these major institutions would likely report write-downs of between $1 billion and $12 billion for soured real-estate loans and related exposures.

Goldman's estimates of new write-downs ranged from $1.4 billion it expects for Bear Stearns (BSC, news, msgs) all the way up to $12 billion projected for Citigroup.

Goldman also cut estimates for Morgan Stanley (MS, news, msgs), Merrill Lynch (MER, news, msgs), Lehman Bros. (LEH, news, msgs) and JPMorgan Chase (JPM, news, msgs).

Despite the news, all the stocks finished strongly today.

Bear Stearns was up 1.8% to $86.72. Morgan Stanley rose 2.5% to $45.28. Lehman Bros. rose 2.5% to $55.57. JPMorgan was up 0.2% to $44.03. Merrill Lynch closed up 2.6% to $54.42.

Continued: Countrywide bows to pressure

 1 | 2 | next >