Dow up 83 as financials rally, oil falls

By Charley Blaine and Elizabeth Strott

The Dow Jones industrials rallied more than 185 points this afternoon -- until a rebound in oil prices late in the day trimmed their gains.

Still, the Dow still finished up 83 points, or 0.7%, to 11,616. The Standard & Poor's 500 Index added 7 points, or 0.6%, to 1,293, and the Nasdaq Composite Index rose 25 points, or 1%, to 2,454.

The gain for stocks cheered bulls because it came despite the biggest rise for the Consumer Prices Index in 17 years and cautious guidance for Wal-Mart Stores (WMT, news, msgs).

With today's gain, the Dow recovered 76% of the 110 points that blue chips had lost on Wednesday when crude oil jumped to $116 a barrel. Crude finished today down $1 to $115.01 after falling to as low as $112.59 early in the session.

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Crude fell on fears that fuel-consumption declines in the U.S. will spread to other countries as their economies slow.

Gasoline demand was down 2.1% through July as record prices and slower economic growth cut consumer spending, an American Petroleum Institute report showed Wednesday. Europe's economy contracted for the first time since the introduction of the euro almost a decade ago, a report showed today.

Retailers rallied after better-than-expected results from Wal-Mart, Urban Outfitters (URBN, news, msgs) and Estee Lauder (EL, news, msgs). The Standard & Poor's Retail Index ($RLX.X, news, msgs) was up 2.1% to 393.

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The dollar was higher against the British pound, euro and the Japanese yen.

The dollar is up nearly 7% against the pound and euro this month. The U.S. Dollar Index, which measures the greenback against a basket of 12 currencies, was at 76.80, up 0.415, or 0.5%.

The Dow is down 1% this week but up 2.15% this month. The S&P 500 is off 0.3% on the week and 2% on the month. the Nasdaq is 1.6% for the week and 5.5% on the month.

Since their highs in October, the Dow is down 18%, the S&P 500 17.4% and the Nasdaq 14.2%.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$115.01	$116.00	-$0.99	-7.31%	19.83%
Heating oil (per gallon)	$3.0991	$3.1317	-$0.0326	-9.88%	16.97%
Natural gas (per million BTU)	$8.1360	$8.4560	-$0.3200	-10.78%	8.73%
Unleaded gasoline (per gallon)	$2.9120	$2.9323	-$0.0203	-4.46%	16.91%

Nordstrom says profit falls, trims earnings guidance

Late today, Nordstrom (JWN, news, msgs), the upscale retailer, pared its estimate for full-year 2008-2009 earnings after quarterly sales fell 7% and profit dropped 21%.

The stock dipped 2.7% in after-hours trading to $29.40. Its regular close of $30.22 was up 1.8% from Wednesday.

Consumers at Nordstrom stores are spending less because of the economy, although they have not moved downscale, the company said. The toughest business conditions are in California, and women's clothing is seeing the most pressure.

Nordstrom cut its full-year guidance to $2.55 to $2.65 a share. It had been $2.65 to $2.80.

The company earned $143 million, or 65 cents a share, in the second quarter, which ended on July 31, down from $180 million, or 71 cents a share, a year ago. Revenue was $2.29 billion.

Reuters said the consensus estimate was earnings of 64 cents on revenue of $2.3 billion.

The profit squeeze is similar to what rival Macy's (M, news, msgs) said it was seeing when it reported a decline in second-quarter results on Wednesday.

Upscale retailers have been pressured by shoppers taking their business to stores like Target (TGT, news, msgs) or even Wal-Mart.

Kohl's profit beats Street estimates

Like Nordstrom, Kohl's (KSS, news, msgs) reported lower second-quarter profits, but its shares moved higher when it boosted its fiscal year outlook.

Kohl's shares were up 4% to $50.20 in after-hours trading after rising 1.4% to $48.27 in regular trading.

The company cited strong expense controls, especially inventory controls, for its decent performance.

The company said it earned $236 million, or 77 cents a share, in the quarter on sales of $3.7 billion. That was down from $269.2 million, or 83 cents a share, a year ago when sales were $3.84 billion. Same-store sales, however, were down 4.6%.

For the year, Kohl's expects earnings of $3.02 to $3.18 a share, up from prior guidance of $2.95 to $3.15. Analysts have been looking for $3.07 a share.

Financials lead the market

Financial stocks fueled today's rally, with Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs), the largest sources of financing for U.S. home loans, each surging after the Securities Industry and Financial Markets Association said larger loans financed by the two companies will be allowed in the main market for mortgage bonds.

Fannie Mae was up 7.7% to $8.23; Freddie Mac was up 7% to $5.94. Bank of America (BAC, news, msgs) was up 4.6% to $30.18, and JPMorgan Chase (JPM, news, msgs), which had been battered Tuesday and Wednesday after disclosing a $1.5 billion write-down, was up 2.4% to $37.81.

General Motors (GM, news, msgs) was the top performer of the 30 Dow stocks, rising 10.6% to $11.35 on news that it plans to accelerate its restructuring program.

Airlines also made gains today as oil fell. AMR (AMR, news, msgs) rose 3.9% to $11.28, and UAL (UAUA, news, msgs) was up 5.1% to $12.68 this afternoon. The Amex Airline Index ($XAL.X) rose 1.8% to 25.62.

Tech stocks were strong thanks to gains for Research In Motion (RIMM, news, msgs), Qualcomm (QCOM, news, msgs), Genzyme (GENZ, news, msgs) , Cisco Systems (CSCO, news, msgs) and Apple (AAPL, news, msgs).

Wal-Mart delivers decent earnings, cautious outlook

Wal-Mart offered a mixed picture for investors this morning: The retail giant reported a 17% increase in second-quarter profit as price cuts lured customers into its stores, but the company forecast weak earnings for the current quarter.

Wal-Mart earned $3.45 billion, or 87 cents per share, up from $2.95 billion, or 72 cents per share, last year. Earnings from continuing operations were 86 cents per share, topping the Street's consensus estimate by 2 cents. Revenue rose 10% in the quarter.

Wal-Mart shares, up as much as 1.8% early in the day, finished up 0.4% to $58.10. The stock, up 22% in 2008, is the year's best performer among the 30 Dow stocks.

The retailer said that third-quarter earnings will be between 73 and 76 cents per share; analysts have been looking for 76 cents per share.

For the full year, things look a bit better: Wal-Mart said it expects to earn between $3.43 and $3.50, up from a previous forecast of $3.30 to $3.43 per share. The Street's estimate is for $3.49 per share.

"They have a strong competitive position," Matt Finn, money manager at Thrivent Investment Management, told MarketWatch.com. "Their apparel is doing better than they've been for years. They've gone back to their roots."

News from Wal-Mart weighed on the markets last week, when the company reported a 3% increase in same-store sales, lower than the 3.4% increase analysts had expected. The company also forecast a slower August, with sales up 1% or 2%, suggesting that consumers had used the last of the cash from government stimulus checks.

Consumer prices rise

Consumer prices soared in July, as prices of oil and food prices soared.

The Consumer Price Index rose 0.8% last month, the Labor Department reported this morning -- twice what economists had expected -- and was up 5.6% over the past year, the highest annual inflation rate in 17 years.

Excluding volatile food and energy prices, core consumer prices rose 0.3% in July, also higher than economists' expectations; the consensus estimate was for a 0.2% rise. Core prices have risen 2.5% since last year.

Energy prices rose 4% in July from June and soared 29.3% from a year ago.

"We're seeing persistent price pressures," Julia Coronado, senior economist at Barclays Capital in New York, said to Bloomberg News. "This has been with us for so long there's a risk it's worked its way into the minds of consumers and businesses. It limits the Fed's sensibility to cut rates further."

Separately, the Labor Department reported that initial jobless claims fell by 10,000 last week to 450,000. Economists had expected claims to have fallen more, to 436,000.

Foreclosures jump, home prices sink

The number of foreclosure filings nationwide jumped to 272,171 in July -- an 8% increase from June's figure and a whopping 55% surge from July 2007, according to RealtyTrac.

The total number of filings includes delinquency notices, auction sale notices and bank repossessions. Even more nasty: Bank seizures soared 184% from a year ago, to 77,295.

"Bank repossessions, or REOs, continued to be the fastest-growing segment of foreclosure activity," RealtyTrac's chief executive officer, James Saccacio, said in a statement. "The sharp rise in REOs, combined with slow sales, has resulted in a bloated inventory of bank-owned properties for sale."

Nevada, California and Florida had the highest foreclosure levels. In Nevada, one out of every 106 households filed for foreclosure.

Cape Coral, Fla., was the hardest-hit metro area, RealtyTrac said. Roughly one out of every 64 households in that area received a filing -- seven times the national average.

Separately, the median price for single-family existing homes fell 7.6% in the second quarter to $206,500, according to the National Association of Realtors.

"In many areas with large concentrations of foreclosure sales, homes are being purchased below replacement cost values," said NAR president Richard Gaylord in a press release."Many buyers with long-term expectations are getting exceptional value in the current market."

Lehman likely to sell assets to BlackRock

Lehman Bros. (LEH, news, msgs) is turning to BlackRock (BLK, news, msgs) for help with its risky commercial real-estate assets.

Lehman is expected to sell $14 billion of its $40 billion portfolio of commercial property securities to BlackRock, Bloomberg News reported.

"BlackRock is a logical buyer," Jeffery Harte, an analyst at Sandler O'Neill, told Bloomberg. "They have experience in managing portfolios of assets like these. They also have experience leading groups of investors."

Talk about an asset sale by Lehman began to circulate last week. The speculation was linked to the recent decision by Merrill Lynch (MER, news, msgs) to sell a huge chunk of its riskiest securities to Tamasek Holdings, Singapore's sovereign wealth fund.

Lehman was one of the biggest underwriters of mortgage-backed securities and has been struggling to stay afloat amid the mortgage-market meltdown. The company accumulated a portfolio valued at $85 billion, Bloomberg News reported.

Lehman shares rose 4.1% to $16.20.

Skechers rolls in on Heelys

Skechers USA (SKX, news, msgs) is taking another stab at Heelys (HLYS, news, msgs). In a letter to Heelys' board members, Skechers late Wednesday said it would offer $5.25 per share for the maker of wheeled shoes. Heelys rejected a bid by Skechers in May, when Skechers offered between $4.75 and $5.10 per share.

Heelys shares finished up 9.5% to $5.33; Skechers stock fell 0.9% to $19.76 on the news.

Heelys went public in December 2006 at $21 per share and closed at $32.60 on its first day of trading. Heelys shares are down 85% from that debut price and down 49% over the past year.

Greenspan blasts mortgage plan

Former Federal Reserve Chairman Alan Greenspan minced no words when opining about the government's plan to backstop Fannie Mae and Freddie Mac. In an interview with The Wall Street Journal, Greenspan said the White House's moves to rescue the mortgage finance companies were "inevitable" but that the government's plan is "bad."

"They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted -- with necessary taxpayer support to make them financially viable -- as five or 10 individual privately held units," which the government would eventually auction off to private investors, Greenspan explained to the paper.

The government announced plans to rescue Fannie and Freddie in mid-July, after the companies' stocks were slammed amid worries about possible defaults and insolvency.

Short hits from the markets -- 4 p.m.

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	1.830%	1.815%	0.015	11.93%	-41.72%
5-year Treasury note yield	3.150%	3.208%	-0.058	-3.55%	-8.83%
10-year Treasury note yield	3.892%	3.947%	-0.055	-2.19%	-3.54%
30-year Treasury bond yield	4.519%	4.576%	-0.057	-1.82%	1.35%
Currencies
U.S. Dollar Index	76.835	76.385	0.450	4.65%	0.18%
British pound in dollars	$1.8706	$1.8695	0.0010	-5.67%	-5.97%
Dollar in British pounds	£0.5346	£0.5349	-0.0003	6.01%	6.35%
Euro in dollars	$1.4832	$1.4930	-0.0097	-4.92%	1.48%
Dollar in euros	€ 0.6742	€ 0.6698	0.0044	5.18%	-1.46%
Dollar in yen	109.69	109.47	0.22	1.68%	-1.93%
Canadian dollar in U.S. dollars	$0.941	$0.942	-$0.0012	-3.77%	-5.28%
U.S. dollar in Canadian dollars	$1.063	$1.062	$0.0013	3.92%	5.50%
Commodities
Gold	$814.50	$831.50	-$17.00	-11.73%	-2.80%
Copper	$3.3050	$3.3520	-$0.05	-9.74%	8.68%
Silver	$14.3600	$14.9780	-$0.62	-19.28%	-3.75%
Corn	$5.5775	$5.5775	$0.19	-5.06%	22.45%
Crude oil (NYMEX) (per barrel)	$115.01	$116.00	-$0.99	-7.31%	19.83%