Stocks rallied strongly today, gaining back roughly 80% of Tuesday's losses, thanks to a big gain for IBM (IBM, news, msgs) and a bigger rebound by beaten-down bank stocks.
The market may move higher Thursday because of decent guidance from Apple (AAPL, news, msgs). The stock was sharply higher in after-hours trading. Tech shares were strong all day. Energy stocks also were among the day's top performers.
Bank stocks may get an additional boost Thursday from Bank of America (BAC, news, msgs) and JPMorgan Chase (JPM, news, msgs).
Bank of America CEO Ken Lewis bought 200,000 shares in the company on Tuesday, and four other executives bought more than 300,000 shares. Meanwhile, JPMorgan Chase CEO Jamie Dimon bought 500,000 shares on Friday for $11.5 million.
Bank of America was up 30.98% to $6.68 in regular trading and an additional 3% to $6.88 in after-hours trading. JPMorgan Chase, up 25.1% to $22.63, added 3.9% after hours to $23.51.
The moves helped the Dow Jones Industrial Average jump 279 points, or 3.5%, to 8,228, a day after suffering its worst loss on the first day of a presidential administration ever.
The Standard & Poor's 500 Index was up 35 points, or 4.4%, to 840, and the Nasdaq Composite Index was up 66 points, or 4.6%, to 1,507.
Thursday will bring earnings reports from at least 149 companies including Google (GOOG, news, msgs), Microsoft (MSFT, news, msgs), United Pacific (UNP, news, msgs) and Lockheed Martin (LMT, news, msgs). (Microsoft is the publisher of MSN Money.)
Apple shares jump on earnings
Apple shares jumped 9.5% to $90.26 after hours thanks to its relatively bullish outlook. The shares had finished up 5.9% to $82.83 in regular trading.The company expects earnings of 90 cents to $1 in the second fiscal quarter and revenue of $7.6 billion to $8 billion. Wall Street has been expecting $1.12 a share and revenue of $8.1. billion. The stock was higher because Apple's guidance was relatively close to analyst estimates. Historically, the company has offered very conservative guidance compared with estimates.
- Top Stocks blog: Time to buy Apple
Meanwhile, fiscal first quarter earnings grew only modestly from a year ago.
Apple said it earned $1.78 a share, up from $1.76 a share in the a year ago. Revenue was $10.2 billion, up 6.3% from a year earlier's $9.6 billion. Analysts had expected earnings of $1.40 and revenue of $9.74 billion for the quarter.
The company sold 2.5 million Macintosh computers, up 9% from 2.3 million a year ago and 4.4 million iPhones, up from 2.3 million a year ago. It also sold 22.7 million iPod music players, up from 22.1 million a year ago. Analysts had expected sales of 5 million iPhones, 18.6 million iPods and 2.4 million Macs.
"They sell a premium product, and, if this is one of worst economic backdrops since the Great Depression, this is a huge triumph," analyst Jim Grossman of Thrivent Asset Management in Appleton, Wis., told Bloomberg News.
The company made no mention of CEO Steve Jobs' health problems. Jobs, who is quoted in the earnings release, is taking a six-month medical leave of absence.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $43.55 | $40.84 | $2.71 | -2.35% | -2.35% |
| Heating oil (per gallon) | $1.3860 | $1.3758 | $0.0102 | -1.40% | -1.40% |
| Natural gas (per million BTU) | $4.6210 | $4.6420 | -$0.0210 | -17.81% | -17.81% |
| Unleaded gasoline (per gallon) | $1.1738 | $1.1431 | $0.0307 | 16.43% | 16.43% |
A huge relief rally
Today's rally was a huge relief to many who feared the market might collapse past its lows on Nov. 20 and 21. But it looked as if it was fueled by short-covering by short-sellers booking profits.It also may reflect increasing confidence that Tim Geithner, President Barack Obama's nominee for Treasury secretary, will win Senate confirmation despite an embarrassing tax problem.
IBM was the star of the day, rising 11.5% to $91.42, after Big Blue said it expected to earn at least $9.20 per share -- ahead of the consensus estimate of $8.75 per share. The gain was responsible for 66 points, or 39%, of the Dow's gain.
IBM earned $4.4 billion, or $3.28 per share, in its fiscal fourth quarter -- a 12% increase from the $2.8 billion, or $2.80 per share, it earned a year ago. Analysts had estimated the company would earn $3.03 a share.
Revenue fell 6% to $27 billion in the quarter, but revenue in the company's software division rose 2.6% to $6.42 billion.
Financial stocks were rising on expectations that the Obama administration can twin a bank-rescue plan with the $825 billion stimulus package being negotiated with Congress to alleviate the deepening financial crisis.
Citigroup (C, news, msgs) was up 31% to $3.67, the top performer among the 30 Dow stocks. Right behind was Bank of America, with a gain of just under 31% to $6.68.
Wells Fargo (WFC, news, msgs) added 17% to $16.65.
Northern Trust (NTRS, news, msgs) jumped 31% to $57.36 after reporting a higher-than-expected fourth-quarter profit. Revenue increased due to higher foreign exchange trading income and total fee income.
Crude oil rose $2.71, or 6.6%, to $43.55 a barrel this afternoon. Exxon Mobil (XOM, news, msgs) was up 3.9% to $79.26. Offshore driller Transocean (RIG, news, msgs) was up 7.7% to $49.98.
EBay shares fall on weak guidance
While Apple shares were moving higher, eBay (EBAY, news, msgs) shares were not. Shares were down 5.2% after hours to $12.59 after eBay projected first-quarter profit and revenue that were below analyst estimates.EBay said it expects 32 cents to 34 cents in earnings per share in the first quarter. Analysts have been expecting 39 cents. Revenue will be $1.8 billion to $2.05 billion; Wall Street has been expecting $2.1 billion.
Fourth-quarter revenue fell 6.6% to $2 billion as sellers cut prices and eBay boosted promotions to lure more holiday shoppers online.
Net income fell 31% to $367.1 million, or 29 cents a share, from $530.9 million, or 39 cents a share, in the 2008 fourth quarter. Excluding one-time items, the company earned 41 cents a share, beating Wall Street estimates.
Revenue and earnings were also hit by a higher dollar, which cuts the value of sales and profits earned outside the United States. About 55% of eBay's revenue comes from outside the United States.
Revenue from eBay's Skype Internet phone business was up 26% to $145 million. Skype added 35 million users in the quarter, bringing total users to more than 405 million.
Toyota takes sales crown from GM
Toyota Motor (TM, news, msgs) has topped General Motors (GM, news, msgs) as the No. 1 automaker by sales, ending GM's 77-year reign.GM this morning said it had sold 8.35 million vehicles in all of 2008 -- about 616,000 vehicles shy of Toyota's 8.97 million in sales last year.
GM shares rose 0.9% to $3.53; Toyota was up 2.5% to $67.52 in New York.
GM reported an 11% decline in overall sales in 2008 from 2007, when it sold 9.37 million vehicles. Toyota's sales declined 4% in 2008.
Stock Charts (Year)
Toyota Motor
General Motors
Geithner testifies on Capitol Hill
President Barack Obama's nominee for Treasury secretary was pushing for a "forceful" stimulus plan to help revive the slumping economy.Tim Geithner, current head of the Federal Reserve Bank of New York, got peppered with questions during his Senate confirmation hearing this morning.
"Senators, the ultimate costs of this crisis will be greater if we do not act with sufficient strength now," Geithner said in prepared testimony. "In a crisis of this magnitude, the most prudent course is the most forceful course."
Geithner's nomination hit a speed bump over his failure to pay certain taxes, but he said he had corrected the error.
Obama's first task: Fixing financials
Financials were the dogs of the market Tuesday, as Bank of America, State Street (STT, news, msgs) and Wells Fargo plunged amid continued worries about their future health.Speculation grew that the British government might effectively have to nationalize the Royal Bank of Scotland (RBS, news, msgs); the British government already owns 70% of the bank.
The Obama team is already at work on a package to tackle the problems with U.S. financials, according to Bloomberg News.
The package, which could be sold in tandem with the new president's $825 billion economic stimulus package, would include a program of at least $50 billion designed to help stem foreclosures, inject fresh capital into the banks and deal with a heavy burden of toxic assets weighing on banks' balance sheets.
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One proposal is to create a sort of national "bad bank," which would pick up a large portion of the toxic assets. Then the government would guarantee those troubled assets that remain on the banks' books.
Obama and his team are sorting through their options, The Wall Street Journal reported this morning. While nationalization is likely the government's last resort, the mere mention of the possibility is enough to cause analysts to worry. Nationalization would wipe out stockholders.
"You don't want to wipe out the very guys who are going to fund this industry getting back to health," said Anton Schutz, president of Mendon Capital Advisors, a firm that invests in financial stocks.
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"The state of the economy calls for action, bold and swift. And we will act, not only to create new jobs but to lay a new foundation for growth," President Obama said in his inaugural address Tuesday.
More trouble for the housing market
The financial sector isn't the only struggling sector of the economy.This afternoon, the National Association of Home Builders said that its January forecast of builder sentiment hit another record low.
- Top Stocks blog: What if housing doesn't recover this year?
The index came in at a reading of 8, lower than the previous record low of 9 seen in November and December. The reading signals that about 1 out of every 12 builders believes the market is doing well.
The index, which stood at 72.5 as recently as December 2005, is based on surveys of housing industry professionals.
David Crowe, chief economist for the NAHB, told MarketWatch that housing starts are expected to fall about 30% in 2009, and that new-home sales could drop 14%. Crowe hopes for an upswing in 2010.
Homebuilding shares were lower. Ryland (RYL, news, msgs), down for much of the day, finished up 4.7% to $16.38. D.R. Horton (DHI, news, msgs) was up 4.1% to $6.32.
Warner Bros. to cut jobs
Time Warner's (TWX, news, msgs) Warner Bros. Entertainment business will cut 800 jobs in coming months, or about 10% of its work force, the media company announced late Tuesday.The film and television studio will start by laying off 300 people in the next few weeks.
"Jeff Bewkes is coming in and really trying to streamline things," Miller Tabak analyst David Joyce told Bloomberg News. Bewkes, the chief executive officer of Time Warner, took over the reins a year ago. "DVD sales have been weak and that's been a traditional profit center for the studios," Joyce added.
Warner Bros. movie studio released 20 films in 2008. Its "The Dark Knight" was the highest-grossing movie of the year, with $531 million in box office revenue, according to Box Office Mojo.
The company said that "shifting consumer demand and the overall state of the economy" are affecting companies across the globe. Time Warner was up 5.5% to $9.43.
Last month, General Electric's (GE, news, msgs) NBC Universal said it will cut 500 jobs. Viacom (VIA, news, msgs) recently announced plans to eliminate 850 jobs at its MTV Networks and Paramount Studios.
Andrew Rosenbaum contributed to this report.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.110% | 0.100% | 0.010 | -4.35% | -4.35% |
| 5-year Treasury note yield | 1.599% | 1.454% | 0.145 | 3.09% | 3.09% |
| 10-year Treasury note yield | 2.526% | 2.345% | 0.181 | 12.57% | 12.57% |
| 30-year Treasury bond yield | 3.138% | 2.947% | 0.191 | 16.61% | 16.61% |
| Currencies | |||||
| U.S. Dollar Index | 86.515 | 86.865 | -0.350 | 5.31% | 5.31% |
| British pound in dollars | $1.3947 | $1.3872 | 0.0075 | -5.34% | -5.34% |
| Dollar in British pounds | £0.7170 | £0.7209 | -0.0039 | 5.64% | 5.64% |
| Euro in dollars | $1.3024 | $1.2863 | 0.0161 | -7.03% | -7.03% |
| Dollar in euros | € 0.7678 | € 0.7774 | -0.0096 | 7.57% | 7.57% |
| Dollar in yen | 89.32 | 89.70 | -0.38 | -1.47% | -1.47% |
| Canadian dollar in U.S. dollars | $0.797 | $0.790 | $0.0069 | -2.53% | -2.53% |
| U.S. dollar in Canadian dollars | $1.255 | $1.265 | -$0.0101 | 2.60% | 2.60% |
| Commodities | |||||
| Gold | $850.10 | $855.20 | -$5.10 | -3.87% | -3.87% |
| Copper | $1.4335 | $1.5045 | -$0.07 | 1.67% | 1.67% |
| Silver | $11.3250 | $11.1750 | $0.15 | -1.06% | -1.06% |
| Corn | $3.9025 | $3.8350 | $0.07 | -4.12% | -4.12% |
| Crude oil (NYMEX) (per barrel) | $43.55 | $40.84 | $2.71 | -2.35% | -2.35% |