advertisement
Article Tools
| Currency | US Dollar |
|---|---|
| British Pound to US Dollar | 1.633720 |
| Euro to US Dollar | 1.398406 |
| Japanese Yen to US Dollar | 0.010414 |
| Canadian Dollar to US Dollar | 0.861846 |
Stocks surged strongly higher today as crude oil dropped to $136 a barrel and a big rally erupted in financial stocks.
The betting was that the rally may be short-lived because of weakness in the overall economy. But after days of losses or small gains at best -- and the major averages falling into bear market territory -- a big rally was welcome.
The Dow Jones industrials closed up 152 points, or 1.4%, to 11,384 and the Standard & Poor's 500 Index rose 21 points, or 1.6%, to 1,274. The Nasdaq Composite Index jumped 2.1% to 2,294, buoyed by gains in such key stocks as Apple (AAPL, news, msgs), Qualcomm (QCOM, news, msgs), Research In Motion (RIMM, news, msgs) and Google (GOOG, news, msgs)
It was a big bully rally that saw airline stocks soar and the Dow Jones Transportation Average ($DJT.X) jump 236 points, or 5%, to 4,921, its third-best day this year. Continental Airlines (CAL, news, msgs) was up 15.6% to $10.24.
General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) were up 5.3% to $10.78 and 9.6% to $4.90, respectively.
The rally was set off by that big break in crude oil, which closed at $136.04, down $5.33, or 3.8%, and was continuing to fall in after-hours trading.
Crude is off more than $9 a barrel, or 6.4%, since hitting a record close of $145.29 on Thursday. All energy futures were lower today; natural gas was off 4.6% to $12.386 per million British thermal units.
Whether today's rally is just a one-day wonder will get a big test Wednesday after the Energy Department releases its weekly report on domestic oil and gasoline supplies. Analysts expect a 1.5-million-barrel decline in crude stocks, a rise of 200,000 barrels in gasoline supplies and an increase of 1.8 million barrels in distillates, Reuters said.
If the report shows larger-than-expected supplies, look for oil prices to fall and the stock market rally to continue.
A two-pronged rally
The energy break came on profit-taking, efforts to push the dollar higher against the British pound, the euro and the Japanese yen and increasing evidence that demand for gasoline is falling because of higher prices. MasterCard Advisors said their weekly SpendingPulse survey showed Americans pumped 200,000 fewer barrels of gasoline last week than a year ago.Then, the financials took over after both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Hank Paulson discussed measures to improve investor confidence in the nation's mortgage markets.
Stock Charts (Year)
Fannie Mae
Freddie Mac
Still, Bernanke's and Paulson's words -- as well as endorsement of the government's strategy in righting the credit markets from JPMorgan Chase (JPM, news, msgs) CEO Jamie Dimon -- gave financial stocks a huge boost.
Fannie Mae (FNM, news, msgs), which had fallen 16% on Monday, jumped 12% to $17.62 today. Freddie Mac (FRE, news, msgs) rebounded from an 18% loss on Monday to a 13% gain to $13.46 today. Both stocks were higher in after-hours trading.
What set off the rally for those companies was Paulson's comment that the two companies, which provide capital to mortgage lenders, are key to the ultimate housing recovery.
The Amex Securities Broker/Dealer Dealer Index ($XBD.X) was up 5.4% to 148. The Standard & Poor's Banking Index ($BIX.X) was up 8% to 173. Homebuilders also moved higher, with the Philadelphia Housing Sector Index ($HGX.X) up 6% to 108.
The Dow's leaders were all financial stocks: Bank of America (BAC, news, msgs), up 9.3% to $23.54; Citigroup (C, news, msgs), up 6% to $17.39, and American International Group (AIG, news, msgs), up 5.3% to $10.78.
The gains for the Dow and S&P would be higher, were it not for sharp declines in shares of energy and materials stocks.
Alcoa (AA, news, msgs) was down 3.2% to $32.33, but the shares rebounded in after-hours trading because its second-quarter results were better than expected. Chevron (CVX, news, msgs) was down 1.1% to $95.79, and ExxonMobil (XOM, news, msgs) was off 1.2% to $85.94. Construction machinery maker Caterpillar (CAT, news, msgs) was off 1.8% to $69.51. The declines for the four stocks alone subtracted more than 36 points from the Dow.
The Dow Jones U.S. Steel Index ($DJUSST) fell 3.7% to 451, the worst performer among the 43 indexes that Market Dispatches tracks. U.S. Steel (X, news, msgs) fell 4.6% to $150.55. Since June 30, the index is down 17.5%. U.S. Steel is off 18.5%.
Freeport-McMoRan Copper & Gold (FCX, news, msgs) was off 4% to $105.21.
Twenty-three of the 30 Dow stocks were higher today. In addition, 406 S&P 500 stocks had gains, along with 21 Nasdaq-100 stocks.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $136.04 | $141.37 | -$5.33 | -2.83% | 41.74% |
| Heating oil (per gallon) | $3.8202 | $3.9696 | -$0.1494 | -2.12% | 44.19% |
| Natural gas (per million BTU) | $12.3860 | $12.9770 | -$0.5910 | -7.24% | 65.52% |
| Unleaded gasoline (per gallon) | $3.3631 | $3.4827 | -$0.1196 | -3.95% | 35.02% |
Despite lower earnings, Alcoa shares rise
After the bell, aluminum giant Alcoa said higher costs hurt second-quarter profits, but the stock traded higher because results beat expectations.A Dow component, Alcoa said it earned $546 million, or 66 cents a share, down from $715 million, or 81 cents a share. Analysts had been expecting earnings of 64 cents.
The stock was up 3.5% in after-hours trading to $33.46. The stock had fallen 3.2% to $32.33 in regular trading as traders sold off metals, energy and commodity stocks.
Revenue was $7.6 billion, up 12% from $6.8 billion a year ago. Revenue in the 2007 second quarter excluded $1.3 billion in revenue from divested businesses. Alcoa said it was able to raise costs in all business segments thanks to strong global demand.
The problem going forward is how much of the company's business will be affected by the slumping auto and aerospace industries, analysts have said. The company already cited weakness in North American and European markets.
There's an additional issue: how much results will be affected by higher energy costs. The company cited energy as a problem in several of its business segments because aluminum production requires huge amounts of energy.
Major indexes climb above bear market levels
So, where does the bear market stand? For today, anyway, it's over -- but barely over.The Dow, S&P 500 and the Nasdaq Composite ended the day down 19.6%, 18.6%, and 19.75%, respectively, from their October 2007.
At the end of the day, only indexes were in bear market levels: the Standard & Poor's 100 Index ($OEX.X), which tracks big cap stocks, and the Russell 2000 Index ($RUT.X), which tracks small-capitalization stocks. Here's a look at where the markets stand. And we should note that the Dow Transports really did hit their all-time high just a month ago.
| Tuesday | Change from closing high | Date of high | |
|---|---|---|---|
| Dow Jones Industrial Average | 11,384.21 | -19.63% | Oct. 9, 2007 |
| S&P 500 Index | 1,273.70 | -18.62% | Oct. 9, 2007 |
| S&P 100 Index | 582.75 | -20.15% | Oct. 9, 2007 |
| Nasdaq Composite Index | 2,294.44 | -19.75% | Oct. 31, 2007 |
| Nasdaq-100 Index | 1,871.28 | -16.42% | Oct. 31, 2007 |
| S&P Midcap 400 Index | 798.07 | -12.99% | Oct. 9, 2007 |
| Russell 2000 Index | 682.72 | -20.22% | July 13, 2007 |
| Dow Jones Utilities Average | 513.45 | -7.11% | Dec. 10, 2007 |
| Dow Jones Transportation Average | 4,921.18 | -10.41% | June 5, 2008 |
| Nikkei 225 Index (Japan) | 13,033.10 | -25.35% | Oct. 11, 2007 |
| FTSE 100 Index (Britain) | 5,440.50 | -19.17% | Oct. 12, 2007 |
| Dax Index (Germany) | 6,304.41 | -21.60% | Oct. 12, 2007 |
Bernanke helps the dollar
The big worry on Monday was how more write-offs and other issues might cause big problems for financial companies.Today, that worry eased, in part because Bernanke said that the Fed may continue its emergency lending to Wall Street firms through 2009. Put in place to prevent a Bear Stearns-like collapse from happening at other firms, the program was originally set to run through mid-September.
That helped the dollar firm up against major currencies and pressured commodity prices as well.
In addition, there was a sense that participants at the G-8 summit of industrialized nations in Japan wanted the dollar to move higher to ease inflationary pressures. In a closing statement, the G-8 leaders said, "We express our strong concern about elevated commodity prices, especially of oil and food, since they pose a serious challenge to stable growth worldwide, have serious implications for the most vulnerable, and increase global inflationary pressure."
Pending-home sales fall
Shares of homebuilders rose despite new evidence that the housing slump isn't getting better yet.The National Association of Realtors' index of pending-home sales came in at 84.7 in May, a decline of 4.7% from April. Economists were looking for a 2.8% drop in May.
"The overall decline in contract signings suggests we are not out of the woods by any means," said NAR chief economist Lawrence Yun in a press release.
The index was down 14% from May 2007.
Still, homebuilder Lennar (LEN, news, msgs) was up 15.7% to $12.50, and Ryland (RYL, news, msgs) rose 8.9% to $23.65.
Office Depot slammed by slowing economy
Shares of Office Depot (ODP, news, msgs) plunged 31.6% to $7.12 today after the company said sales at stores open at least one year slumped nearly 10% in the second quarter.The company said that the weak economy has hurt its small-business customers, and cautioned that the economy will likely continue to be "difficult" the rest of the year.
Rivals Staples (SPLS, news, msgs) and OfficeMax (OMX, news, msgs) declined in sympathy. Staples fell 2.5% to $22.55; OfficeMax shares were down 11.9% to $12.18.
Video on MSN Money
Ford vs. GM: Which strategy will win?The two big US automakers are taking different approaches: GM is sacrificing profits to prop up market share, while Ford is maintaining margins but losing sales. Until we know how long the downturn is going to last, says Jim Jubak, it's hard to tell which is smarter.
Financials still a worry
Trouble in the financial sector is still a worry for the broader market."Some would argue that perhaps the sell-off in financials is overdone, but at the same time, there is just much uncertainty out there about write-offs, loan losses, and how bad the housing market is," Jim Herrick, a director of equity trading at Baird & Co., told The Associated Press. "For a period of time the pain was in the big money center banks, but now it's spreading."
Financial companies have lost more than $1 trillion in value so far this year, the AP reported.
"The decline in the Q2 2008 growth rate during the past week can be attributed to downward estimate revisions to companies in the financial sector," Thomson Reuters said.
This morning, Wachovia lowered its estimates for Merrill Lynch's (MER, news, msgs) second-quarter earnings to a loss of $2.16 per share, down from a previous estimate of a profit of 63 cents per share.
Merrill Lynch was up 7.9% to $32.77.
Others had a more optimistic outlook on the financials. Jim O'Shaughnessy of O'Shaughnessy Asset Management told CNBC that there are opportunities to buy in the financial sector now that they are so cheap.
Sir John Templeton dies
Sir John Templeton, who founded the Templeton family of mutual funds, died today in Nassau, the Bahamas. He was 95.Templeton was a successful money manager when he started the Templeton Growth Fund in 1954. The fund reported a 14.5% average annual return through 1992. By the time Templeton sold his company in 1992, the Templeton family of funds had $13 billion in assets.
Sir John started the Templeton Foundation, which is interested in the boundaries between science and spirituality. The foundation gives away $70 million a year and awards the Templeton prize to foster progress in religion. Winners have included Mother Theresa, Billy Graham and Aleksandr Solzhenitsyn.
In the 1960s, he became a British citizen and moved to Nassau and was later knighted for his philanthropic activities.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 1.820% | 1.775% | 0.045 | 6.74% | -42.04% |
| 5-year Treasury note yield | 3.171% | 3.219% | -0.048 | -5.09% | -8.22% |
| 10-year Treasury note yield | 3.880% | 3.930% | -0.050 | -2.49% | -3.84% |
| 30-year Treasury bond yield | 4.456% | 4.504% | -0.048 | -1.66% | -0.07% |
| Currencies | |||||
| U.S. Dollar Index | 73.315 | 72.970 | 0.345 | 0.71% | -4.41% |
| British pound in dollars | $1.9693 | $1.9704 | -0.0012 | -1.20% | -1.00% |
| Dollar in British pounds | £0.5078 | £0.5075 | 0.0003 | 1.22% | 1.01% |
| Euro in dollars | $1.5674 | $1.5676 | -0.0002 | -0.49% | 7.24% |
| Dollar in euros | € 0.6380 | € 0.6379 | 0.0001 | 0.49% | -6.75% |
| Dollar in yen | 107.43 | 107.40 | 0.03 | 1.17% | -3.95% |
| Canadian dollar in U.S. dollars | $0.982 | $0.982 | $0.0001 | 0.21% | -1.11% |
| U.S. dollar in Canadian dollars | $1.018 | $1.018 | -$0.0001 | -0.26% | 1.06% |
| Commodities | |||||
| Gold | $923.30 | $928.80 | -$5.50 | -0.54% | 10.18% |
| Copper | $3.6965 | $3.8490 | -$0.15 | -4.79% | 21.56% |
| Silver | $17.9550 | $17.9200 | $0.03 | 2.54% | 20.34% |
| Corn | $7.0450 | $7.2675 | -$0.22 | -2.79% | 54.67% |
| Crude oil (NYMEX) (per barrel) | $136.04 | $141.37 | -$5.33 | -2.83% | 41.74% |
Rate this Article
High