Stocks moved modestly higher today, and the Dow Jones Industrial Average ($INDU) briefly went positive for the year for the first time since January.
The rally came after a report on pending home sales was stronger than expected, and May auto sales for domestic automakers weren't as bad as feared.
The positive finish continued the big rally that erupted in March and has seen the Dow jump 33% since March 9.
The Dow closed up 19 points to 8,741, which is about 35 points below the blue chips' 2008 finish of 8,776.39. The Standard & Poor's 500 Index ($INX), which has been in the black for the year for much of the last month, finished up 2 points to 945. The Nasdaq Composite Index ($COMPX) added 8 points to 1,837, its best close of the year.
The Dow went into the black for the year briefly in midmorning and again in the afternoon before falling back again. On March 9, the index finished down 25.4% for the year and off 53.8% from its peak in October 2007. With today's close, the Dow is off just 0.4% for 2009.
As Madison Prop Trading's Chris Conefry, said, "That's one heck of a reversal."
Many traders believe the S&P 500 will soon reach the key technical level of 1,000. The S&P set a record high of 1,565.15 on Oct. 9, 2007, before plunging to 676.53 on March 9.
While today's rally was modest by any standard and certainly compared with Monday, when the Dow jumped 221 points, it continued the market's upward move since early winter.
The key was pending home sales for April. The National Association of Realtors said the indicator rose 6.7% from March and 3.2% from April 2008. The April gain follows a 3.2% increase in March. Economists had expected a gain of only 0.5% in April sales.
At the same time, Ford Motor (F, news, msgs), General Motors and Chrysler Group reported better-than-expected sales for May.
Crude oil closed the day at $68.55, down 3 cents from Monday's $68.55, its highest close since November. Crude had risen for seven straight days.
"We've gotten through the worst of the financial crisis and things have stabilized," Richard Sichel, chief investment officer at Philadelphia Trust, told Bloomberg News. "The market is looking at various economic indicators and seeing a few signs of light."
Home sales get a boost from tax credit
The Federal Housing Administration last week announced an $8,000 tax credit for first-time homebuyers, which can be used for a down payment. It can also be used to cover closing costs or to buy down interest rates."Since first-time buyers must finalize their purchase by Nov. 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers," said Lawrence Yun, NAR's chief economist.
A drop in home prices is also luring buyers into the market. The national median home price is down more than 30%, according to the S&P/Case-Shiller Home Price Index.
Shares of homebuilders were rising this afternoon. Pulte Homes (PHM, news, msgs) was up 3.5% to $8.97, Toll Bros. (TOL, news, msgs) closed up 3.9% to $19.53, and KB Home (KBH, news, msgs) added 2.7% to $15.51.
Pending home sales are based on the number of contracts signed for home purchases. These turn into actual sales about six to eight weeks later.
Foreclosure-driven declines in values and tax incentives may put more homes within reach of first-time buyers, helping to stabilize the market and stemming the biggest drag on economic growth, Bloomberg News said. But, with mortgage rates no longer dropping and unemployment climbing, the real-estate industry may hover near recent lows for some time before a sustained recovery takes hold.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Crude oil (NYMEX) (per barrel) | $68.55 | $68.58 | -$0.03 | 3.38% | 53.70% |
| Heating oil (per gallon) | $1.7979 | $1.7765 | $0.0214 | 9.83% | 27.90% |
| Natural gas (per million BTU) | $4.1200 | $4.2490 | -$0.1290 | 6.43% | -26.72% |
| Unleaded gasoline (per gallon) | $1.9252 | $1.9243 | $0.0009 | 0.05% | 90.95% |
Auto sales could show some improvement
With General Motors and Chrysler in bankruptcy court, the sales environment for U.S. automobile sales is, to be charitable, dicey.But light-vehicle annualized sales ran at a 9.9-million-unit rate in May from 9.3 million in April, partly because of a surge in sales from Chrysler dealerships that were going out of business. Analysts had projected a sales rate of 9.4 million units.
Deliveries overall were up 13% from April but down 34% from a year ago.
On a year-on-year basis, sales had been expected to drop 36% to 40% according to various surveys of economists.
Stock Charts (Year)
Ford Motor
General Motors
GM reported a 30% decline in sales from a year ago to 191,875, but analysts had expected a 37% decline. Chrysler sales were off 47%; analysts had projected a 54% decline. Ford said total U.S. sales fell 24.2% in May to 161,531 units. Sales for the Ford division fell 25.5% to 137,167 vehicles, while Lincoln sales rose 2.4% to 8,566 units. Mercury sales declined 24.8% to 10,221 units, and Volvo sales fell 22.9% 5,577 units.
Auto industry-specialist Web site Edmunds.com had forecast a year-over-year decline of 28.5% for Ford.
"The American public is now paying attention to Ford," John Wolkonowicz, an analyst at IHS Global Insight, told Bloomberg. "People want a hero in all this, and Ford is becoming that hero. It's the American company that made it."
Daimler (DAI, news, msgs), the former parent of Chrysler, said May U.S. sales fell 33.4% to 16,303 vehicles from 24,480 last May. Nissan Motor (NSANY, news, msgs) reported a sales decline of 33% in May, to 67,489.
Toyota Motor (TM, news, msgs) sales fell 40.7% to 152,583 units, in line with the Edmunds.com estimate.
Honda Motor (HMC, news, msgs) sales fell 41.5% to 98,344, worse than Edmunds' estimate of a 39.3% decline.
Nissan's results were better than expected.
The plans for turning around GM and Chrysler are based on a U.S. auto market with annualized sales at 10 million vehicles. In 2005, sales were at an annualized 17 million.
Ford closed 4.6% to $6.41. GM fell 19% to 61 cents. GM shares have been delisted by the New York Stock Exchange and are now trading on pink sheets. The stock will be removed from the Dow next week and replaced by Cisco Systems (CSCO, news, msgs).
Toyota fell 0.9% to $80.99 in New York, while Honda dropped 0.4% to $29.66. Nissan was unchanged at $12.51, and Daimler added 0.7% $40.03 in New York.
| May | Chg. | YTD | chg. | |
|---|---|---|---|---|
| General Motors | 191,875 | -29.55% | 777,785 | -41.91% |
| Ford Motor | 161,531 | -24.25% | 620,303 | -36.78% |
| Chrysler | 79,010 | -46.88% | 402,900 | -46.31% |
| Honda | 98,344 | -41.46% | 430,358 | -34.38% |
| Toyota | 152,583 | -40.72% | 638,795 | -38.98% |
| Nissan | 67,489 | -33.10% | 356,935 | -34.79% |
| Mazda | 23,019 | -27.62% | 93,755 | -28.95% |
| Hyundai | 36,937 | -20.42% | 166,743 | -7.89% |
| Mercedes | 16,310 | -33.43% | 77,438 | -28.74% |
| Volkswagen | 27,251 | -12.65% | 108,991 | -16.72% |
| BMW | 23,019 | -27.62% | 93,755 | -28.95% |
Source: Autodata Corp.
GM has tentative deal to sell Hummer
GM is moving forward with its plans to sell its Hummer brand.GM this morning announced plans to sell the business, a day after the automaker filed for bankruptcy. GM did not release the buyer or the financial terms, but The New York Times reported that it was Chinese machinery company Sichuan Tengzhong Heavy Industrial Machinery Company, and the purchase would be its first foray into the automobile market. News reports put the sales price at about $500 million.
GM said the buyer is committed to developing the Hummer brand. GM will continue to produce Hummers through at least 2010.
Had GM not found a buyer for the brand, Hummer would likely have been killed in bankruptcy court, according to The Wall Street Journal. GM is still looking for buyers for its Saab and Saturn brands.
- Top Stocks blog:The impact of GM's bankruptcy: layoffs
GM on Monday won court approval to auction its assets, with the lead bidder being the U.S. government. "There's only one prospective purchaser," GM attorney Harvey Miller told Judge Robert Gerber, according to Bloomberg News. "There's no entity that has the wherewithal to bid in these cases."
The government intends to take a 60.5% stake in the new GM, with the Canadian government taking a 12% stake. The new GM has also won court approval to borrow $15 billion, part of the $50 billion that the U.S. government is to lend it.
GM plans to keep its Cadillac, Buick and GMC brands.
In its bankruptcy filing, GM listed top creditors as Wilmington Trust, representing bondholders who are owed $22.8 billion; United Auto Workers, owed $20.6 billion; and Deutsche Bank, representing bondholders owed $4.44 billion.
Banks prepare to pay back TARP funds
Morgan Stanley (MS, news, msgs) this morning said it has raised about $2.2 billion by selling 80.2 million shares at $27.44 each, which it hopes to use to repay $10 billion in Troubled Asset Relief Program funds it received from the government last fall. Morgan Stanley said it does not yet have approval from the Treasury Department to repay its TARP funds, but it hopes to pay a chunk of the loan back by the end of this month.Morgan Stanley rose 0.7% to $30.09.
Bank of America (BAC, news, msgs) this morning said it has raised $33 billion of the $33.9 billion the government said it needs as a cushion.
JPMorgan Chase (JPM, news, msgs) and American Express (AXP, news, msgs) late Monday also said they would sell shares to raise capital to pay back their TARP funds. JPMorgan said it sold 142 million shares at $35.25 each this morning, which is 2.4% less than its closing price Monday. JPMorgan raised $5 billion from the sale; it hopes to use the capital to repay some of the $25 billion in TARP funds it owes the government by the end of this month.
American Express sold 19.8 million shares at $25.25 each, raising $500 million to help pay back its $3.4 billion in TARP funds.
The financial services companies are selling shares as part of new requirements outlined late Monday by the Federal Reserve. The 19 biggest banks that underwent the stress tests "must successfully demonstrate access to public equity markets," the Fed said in a statement released today in Washington. They also have to be able to sell debt without a Federal Deposit Insurance Corp. guarantee and reduce reliance on "government capital" and the FDIC's program.
Shares of JPMorgan were down 4.5% to $34.50; AmEx shares fell 4.9% to $24.71. Bank of America added 1.8% to $11.41.
More from MSN Money
Rochdale Securities analyst Dick Bove believes that "banking is going to enter a Golden Age." Bove bases his belief on several factors, which he listed in a note to clients this morning: The industry's balance sheet is stronger than ever; revenue growth has reappeared; costs are under control; cash earnings are at an all-time record; and loan losses will plummet in a recovering economy.
Bove likened banks' positions to what happened in 1992, when they had excessive amounts of liquidity, reserves and capital. "When the economy turns, banks are ready to take advantage of the recovery," Bove wrote.
Goldman to sell stake in ICBC
Meanwhile, Goldman Sachs (GS, news, msgs) said late Monday that it, too, wants to pay back its TARP funds.Goldman said it will sell shares of Industrial and Commercial Bank of China (IDCBY, news, msgs), which represents about 0.9% of Goldman's stake in ICBC, nearly the entire stake Goldman is allowed to divest under a lockup agreement with the Chinese bank. The shares are being sold at about a 4% to 6% discount to their closing price Monday.
Goldman, which booked a $937 million gain on the value of its ICBC stake in 2006, followed by a $495 million gain in 2007 and a $446 million loss in 2008, expects to raise about $1.9 billion from the sale.
Goldman shares lost 0.8% to $143.13.
EMC to buy Data Domain
A bidding war is in place for disaster recovery systems company Data Domain (DDUP, news, msgs).Data storage company EMC (EMC, news, msgs) late Monday offered $1.8 billion, or $30 per share in cash, for Data Domain, throwing a wrench into NetApp's (NTAP, news, msgs) plans to buy the company. Two weeks ago, NetApp offered $25 for Data Domain in cash and stock.
"We didn't expect somebody to try to outbid NetApp," Jayson Noland, an analyst at Robert W. Baird, told Bloomberg News. "It's cash, and NetApp would have to use a lot more stock. That would be a fear. I think this will be the final outcome."
Shares of Data Domain surged 19.9% to $31.58. EMC shares were up 3.5% to $12.85. NetApp shares fell 6.5% to $19.65.
EMC made the offer to tap Data Domain's "fast-growing revenue base." The company's clients include the Defense Department and AT&T (T, news, msgs).
Andrew Rosenbaum contributed to this report.
| Tues. | Mon. | Chg. | Month chg. | YTD chg. | |
|---|---|---|---|---|---|
| Treasurys | |||||
| 13-week Treasury bill | 0.130% | 0.085% | 0.045 | 0.00% | 13.04% |
| 5-year Treasury note yield | 2.513% | 2.543% | -0.030 | 7.07% | 62.02% |
| 10-year Treasury note yield | 3.644% | 3.715% | -0.071 | 5.17% | 62.39% |
| 30-year Treasury bond yield | 4.489% | 4.575% | -0.086 | 3.48% | 66.82% |
| Currencies | |||||
| U.S. Dollar Index | 78.470 | 79.160 | -0.690 | -1.05% | -4.48% |
| British pound in dollars | $1.6589 | $1.6447 | 0.0142 | 2.44% | 12.59% |
| Dollar in British pounds | £0.6028 | £0.6080 | -0.0052 | -2.38% | -11.18% |
| Euro in dollars | $1.4320 | $1.4158 | 0.0162 | 1.12% | 2.22% |
| Dollar in euros | € 0.6983 | € 0.7063 | -0.0080 | -1.10% | -2.17% |
| Dollar in yen | 95.71 | 96.56 | -0.85 | 0.41% | 5.58% |
| Canadian dollar in U.S. dollars | $0.926 | $0.917 | $0.0094 | 1.04% | 13.21% |
| U.S. dollar in Canadian dollars | $1.081 | $1.091 | -$0.0103 | -1.02% | -11.66% |
| Commodities | |||||
| Gold | $984.40 | $980.00 | $4.40 | 0.42% | 11.32% |
| Copper | $2.2975 | $2.3190 | -$0.02 | 4.55% | 62.94% |
| Silver | $15.9550 | $15.7350 | $0.22 | 2.21% | 39.31% |
| Corn | $4.4950 | $4.4575 | $0.038 | 3.04% | 10.44% |
| Crude oil (NYMEX) (per barrel) | $68.55 | $68.58 | -$0.03 | 3.38% | 53.70% |
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