In theory, this should have been a miserable day for stocks, with banks especially volatile because of all the worries about government stress tests.
Didn't happen. It turns out that the stress test results look fairly good, if all the leaks being reported are to be believed, and stocks were mostly higher on the day.
The Dow Jones industrials ($INDU) closed up 102 points, or 1.2%, to 8,512, their first close above 8,500 for the first time since Jan. 9. The Dow is now up 30% from its March 9 low.
The Standard & Poor's 500 Index ($INX) was up 16 points, or 1.7%, to 920, its best finish since Jan. 6. It's up nearly 36% from March 9.
And the Nasdaq Composite Index ($COMPX), down most of the day, finally popped into the black in the late afternoon, finishing up 5 points, or 0.3%, to 1,759, its best close since Nov. 4. Its performance since March 9 is the best of the three major indexes, up 38.7%.
The rally sets Thursday as a potentially dramatic day.
Better-than-expected earnings from Cisco Systems (CSCO, news, msgs) could give tech shares a boost. Cisco was up 2.5% to $20.10 after hours.
At the same time, some 586 companies report quarterly results, including Sara Lee (SLE, news, msgs), California Pizza Kitchen (CPKI, news, msgs) and CBS Corp. (CBS, news, msgs)
And the government will release the bank stress test results after the close.
Futures trading suggests a flat open for stocks on Thursday.
The market was helped by a better-than-expected report on private-sector payrolls, higher energy stocks (powered by higher oil prices) and even some strength in tech stocks.
Crude oil closed up $2.50, or 4.6%, to $56.34 a barrel in New York, its highest close since Nov. 14.
And there was excitement in the auto world. General Motors (GM, news, msgs) was discussing selling its Saturn division to French automaker Renault (RNSDF, news, msgs) or possibly Nissan (NSANY, news, msgs). There was talk GM might sell its Opel business in Germany to the Chinese automaker Geely Automotive Holdings.
All stress test, all the time
Bank stocks were easily the biggest reason for today's rally. The Philadelphia KBW Bank Index ($BKX) closed up 11.5% to 40.4 today, tops among 42 indexes that Market Dispatches regularly tracks. The index is up more than 120% from its March 6 low.The S&P 500 financial-sector exchange-traded fund -- technically the Select Sector SPDR-Financial (XLF, news, msgs) ETF -- was up 8% to $12.48, the best performer among the 10 ETFs that track the S&P 500. It's doubled since March 6.
Bank of America (BAC, news, msgs), whose shares tanked in pre-market trading, looks to be in better shape than thought. Early results suggested it needed to raise a whopping $34 billion in new capital. Apparently, some of it can be taken care of by converting the government's $45 billion investment into common equity.
Result: Bank of America was the best performer among the 30 Dow stocks, up 17.1% to $12.69, ahead of Citigroup (C, news, msgs), which may need to raise some $10 billion. Citigroup was up 16.6% to $3.86.
- Top Stocks blog: Check out this Stress Guide
Better, Goldman Sachs (GS, news, msgs), JPMorgan Chase (JPM, news, msgs), Morgan Stanley (MS, news, msgs), MetLife (MET, news, msgs) and American Express (AXP, news, msgs) have been told that they don't need to raise new capital.
And all of the publicly traded stocks of companies that have undergone stress tests were higher today.
| Company | Today | Chg. | Chg. from March* | Chg. YTD |
|---|---|---|---|---|
| Bank of America | $12.69 | 17.07% | 304.14% | -9.87% |
| MetLife | $32.35 | 16.74% | 167.36% | -7.20% |
| KeyCorp | $7.69 | 16.69% | 43.47% | -9.74% |
| Citigroup | $3.86 | 16.62% | 278.43% | -42.47% |
| Wells Fargo | $26.84 | 15.59% | 230.54% | -8.96% |
| Fifth Third Bancorp | $5.28 | 15.49% | 309.15% | -36.10% |
| Capital One Financial | $22.39 | 15.00% | 169.43% | -29.79% |
| SunTrust Banks | $19.49 | 14.99% | 108.45% | -34.02% |
| BB&T Corp. | $27.70 | 12.56% | 107.96% | 0.87% |
| PNC Financial Services | $47.46 | 11.93% | 156.40% | -3.14% |
| State Street | $39.13 | 11.13% | 122.20% | -0.51% |
| Bank of New York Mellon | $30.46 | 11.13% | 69.03% | 7.52% |
| JPMorgan Chase | $37.22 | 6.89% | 134.09% | 18.05% |
| Regions Financial | $5.83 | 6.19% | 98.30% | -26.76% |
| US Bancorp | $21.29 | 5.82% | 141.38% | -14.87% |
| Morgan Stanley | $28.51 | 4.78% | 73.00% | 77.74% |
| Goldman Sachs | $139.22 | 2.97% | 88.26% | 64.97% |
| American Express | $27.14 | 2.15% | 164.52% | 46.31% |
*March change is from that month's lows. Nineteen institutions are involved in the stress tests; GMAC is owned by Cerberus Capital and General Motors.
Cisco sees some stabilization
Cisco Systems said it earned 30 cents a share in the fiscal-fourth quarter after one-time items, down from 38 cents a share a year ago. Revenue of $8.2 billion was off 16.6% from a year ago.Analysts had expected 27 cents a share in earnings before items.
Including the one-time items, Cisco earned $1.3 billion, down 24% from a year ago.
The results were due in part to progress on a plan to cut at least $1 billion in costs by July. The company froze hiring and merged offices to cope with slumping network spending by phone companies and corporate customers.
Stock Chart (Year)
Cisco Systems
Investors view Cisco as a technology-industry bellwether because it’s the dominant seller of routers and switches, products that direct and control the flow of data.
The stock was up as much as 5% as soon as the earnings came out, but faded somewhat when Cisco said fiscal-fourth quarter revenue would range from $7.6 billion to $8.6 billion, less than the Wall Street estimate.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $53.84 | $54.47 | -$0.63 | 5.32% | 20.72% |
| Heating oil (per gallon) | $1.4262 | $1.4345 | -$0.0083 | 8.48% | 1.46% |
| Natural gas (per million BTU) | $3.6150 | $3.7250 | -$0.1100 | 7.17% | -35.70% |
| Unleaded gasoline (per gallon) | $1.5722 | $1.5860 | -$0.0138 | 6.65% | 55.94% |
News Corp. operating profit slumps
Late today, Rupert Murdoch's News Corp. (NWSA, news, msgs) posted a 47% drop in operating income to $755 million because of falling advertising revenue at its television stations, newspapers and other businesses.But Murdoch said it was clear that some of the worst declines were over, echoing the comments of executives at other media conglomerates such as Walt Disney (DIS, news, msgs) and Viacom (VIA, news, msgs).
News Corp. maintained its forecast that fiscal 2009 operating income will fall 30%.
Stock Chart (Year)
News Corp.
Revenue fell 15.7% to $7.37 billion, short of the Reuters forecast of $7.72 billion. News Corp. shares were flat at $9.45 in after-hours trading.
Lower ad sales and higher programming costs cut operating income at News Corp.'s television business 99% to $4 million. The ad slump cut operating income at News Corp.'s newspapers, including The Wall Street Journal and the New York Post.
Since their February 2007 peak, News Corp. shares have fallen 61%, more than other big media conglomerates.
A surprisingly good report on jobs
The ADP National Employment Report showed that private-sector employment fell by 491,000 in April, which was less than economists had expected.The March number was revised to a decline of 708,000, also lower than the originally reported loss of 742,000 jobs.
Economists had been expecting a dismal loss of 580,000 private-sector jobs last month.
ADP compiles data taken from the 500,000 payrolls that the company processes from businesses throughout the U.S.
Other indicators of job losses also show signs of stability. Weekly jobless claims have leveled off at a four-week moving average of 637,250, and have remained between 600,000 and 650,000 for the past six weeks.
- Tell us: When do you foresee a recovery?
Meanwhile, planned job cuts fell 12% to 132,590 in April, according to a report from outsourcing firm Challenger, Gray & Christmas. It was the lowest number of planned cuts since October.
On Friday, the Labor Department will release its April jobs report, and economists are looking for the jobless rate to rise to 8.9% in April, up from 8.5% in March. They predict a loss of 600,000 jobs last month, which would bring the total number of jobs lost since the recession officially began in December 2007 to 5.7 million -- the most of any economic slump since World War II.
1 in 5 homeowners 'underwater'
More than 20% of Americans owe more on their mortgage debt than the value of their homes, according to a report today from real-estate site Zillow.com.In fact, nearly 22% of all U.S. homes, which totals about 20 million residences, were in "negative equity" or "underwater," the site said, slammed by a 14% drop in home prices as of March 31.
Las Vegas, where a whopping 67.2% of homeowners would have to bring cash to the table if they sold their homes, was worst. Other bad markets are Stockton, Calif., where 51.1% of homes are underwater, and Modesto, Calif., where 50.8% of homes are in that position.
"Homeowners in negative equity have fewer options if they take financial shocks such as divorce, job loss or medical bills, making foreclosure more likely," Stan Humphries, Zillow's vice president in charge of data and analytics, said in a press release.
Not everyone thinks things are quite that bad.
"Zillow's negative equity estimates strike me as a little high," Richard DeKaser, a real-estate analyst and founder of Woodley Park Research in Washington D.C., told CNNMoney. The most recent CoreLogic report was for data through the end of 2008 and it estimated that 8.3 million homes were underwater. Mark Zandi, chief economist at Moodys.com, estimated that 14.8 million homes were underwater.
TARP exit plans set
The hundreds of banks that have received Troubled Asset Relief Program funds will now have some guidance to get themselves out of the government's hands.Federal regulators outlined a plan today in which banks must first show that they do not need to rely on a Federal Deposit Insurance Corp. program before they can repay TARP funds, The Wall Street Journal reported late Tuesday. The FDIC program, a guarantee of debt issuance, allows companies to borrow money cheaply, according to the report.
The move comes as a handful of smaller banks have refunded their TARP funds and several big ones have expressed their desire to do so.
Stock Charts (Year)
Bank of America
Wells Fargo
Several major banks have already taken steps to show they don't need the assistance. JPMorgan Chase recently sold $3 billion without the FDIC guarantee. Goldman Sachs sold $2 billion, BB&T (BBT, news, msgs) issued $800 million, and Northern Trust (NTRS, news, msgs) issued $500 million.
On the other hand, Citigroup issued $7 billion in debt backed by the FDIC last week. The stress test is expected to show that Citigroup and Wells Fargo (WFC, news, msgs) need to raise additional capital.
A hint of magic at Walt Disney
Lost in the excitement about the bank stress tests: Walt Disney (DIS, news, msgs) shares jumped 11.8% to $25.87 after the media giant late Tuesday reported better-than-expected earnings for its fiscal second quarter.Net income fell to $613 million, or 33 cents per share, a 46% plunge from the $1.13 billion, or 58 cents per share, it earned in the same quarter a year ago. Excluding charges, Disney earned 43 cents per share, topping Wall Street's estimate by 3 cents.
Stock Charts (Year)
Walt Disney
Disney discounted vacation prices at its theme parks, making attendance in the quarter essentially flat with a year ago.
"Yes it's bad out there, but people are still going on vacation," David Bank, an analyst at RBC Capital Markets, told Bloomberg News. "And they are enticed by these deals Disney is offering." But profit slumped 50% to $171 million and revenue at the division fell 12% to $2.41 billion as a result of those discounts.
Revenue at Disney's film studio fell 22% to $1.44 billion, while sales at its media networks, which include ABC and ESPN, rose 2% to $3.62 billion.
Chrysler wins right to sell assets
Chrysler has won a court ruling allowing it to sell its best assets to a new company and start over, working with Italy's Fiat (FIATY, news, msgs).- Top Stocks blog: Starbucks vs. McDonald's -- now it's war
New York Bankruptcy Court Judge Arthur Gonzalez ruled that a bidding procedure and schedule for the government-orchestrated sale of the company was "fair."
Chrysler's creditors, who hold $6.9 billion of its debt, had tried to block the move.
Bidders for Chrysler's assets, which will include the new company backed by government funds, have until May 20 to make offers. The court will rule on the offers on May 26.
But creditors will, of course, have the right to appeal the ruling. They have not announced plans to appeal as of yet.
Meanwhile, a move by General Motors to issue 60 billion new common stock shares would effectively wipe out the value of most shareholders' holdings, Thomson Reuters reported this morning.
The purpose of the rights issue would be to use the stock to pay back loans from the government.
The new shares would be used to convert part of GM's $15.5 billion in debt to the Treasury into stock, a move that would reduce current shareholders to owning just a 1% stake in the company. GM's stock would be reduced to about a penny per share.
Andrew Rosenbaum contributed to this report.
| Wed. | Tues. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.175% | 0.175% | 0.000 | 40.00% | 52.17% |
| 5-year Treasury note yield | 2.044% | 2.031% | 0.013 | 1.34% | 31.79% |
| 10-year Treasury note yield | 3.157% | 3.157% | 0.000 | 1.06% | 40.69% |
| 30-year Treasury bond yield | 4.053% | 4.065% | -0.012 | 0.22% | 50.61% |
| Currencies | |||||
| U.S. Dollar Index | 83.940 | 84.295 | -0.355 | -0.98% | 2.18% |
| British pound in dollars | $1.5024 | $1.5067 | -0.0043 | 1.59% | 1.97% |
| Dollar in British pounds | £0.6656 | £0.6637 | 0.0019 | -1.57% | -1.93% |
| Euro in dollars | $1.3268 | $1.3316 | -0.0048 | 0.28% | -5.29% |
| Dollar in euros | € 0.7537 | € 0.7510 | 0.0027 | -0.28% | 5.59% |
| Dollar in yen | 98.12 | 98.91 | -0.79 | -0.42% | 8.24% |
| Canadian dollar in U.S. dollars | $0.852 | $0.850 | $0.0012 | 1.66% | 4.13% |
| U.S. dollar in Canadian dollars | $1.175 | $1.176 | -$0.0007 | -1.56% | -3.96% |
| Commodities | |||||
| Gold | $904.30 | $902.20 | $2.10 | 1.47% | 2.26% |
| Copper | $2.0825 | $2.1440 | -$0.06 | 1.71% | 47.70% |
| Silver | $13.4200 | $13.1130 | $0.31 | 8.88% | 16.10% |
| Corn | $4.0525 | $3.9800 | $0.07 | 2.27% | -0.43% |
| Crude oil (NYMEX) (per barrel) | $53.84 | $54.47 | -$0.63 | 5.32% | 20.72% |
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Chrysler's creditors are killing themselves!!!!!!