Stocks Surge On Strength Within Financials And Tech - US Commentary
With financial and technology stocks leading the way, stocks rose sharply on Tuesday, ending four straight sessions of losses on positive news out of Wal-Mart (WMT) and Goldman Sachs (GS). Wal-Mart posted its largest advance since 2002 after the world's largest retailer reported an 8 percent rise in third-quarter profits despite heavy discounts during the quarter. The results gave a boost to the retail sector. Financial stocks also saw buying interest after Goldman Sachs' (GS) CEO said that the company has no plans to announce significant write-downs in the upcoming quarter. The news sent brokerage and banking stocks considerably higher. The major averages spent the day rising steadily, moving more significantly to the upside in afternoon trading to end at their intraday highs. The Dow and S&P 500 saw their greatest point increases since Sept. 18th, with the Dow rising 319.54 points, or 2.46 percent, to end at 13,307.09, while the S&P 500 rose 41.87 points, or 2.91 percent, to end at 1,481.05. The tech-heavy Nasdaq posted its largest percentage gains since 2003, gaining 3.46 percent, or 89.52 points, to close at 2,673.65. Dow Components Nearly all of the Dow's thirty components traded higher on Wednesday, sending the Dow up over 300 points and reversing four straight sessions of losses. Wal-Mart saw the greatest strength on the day, rising 6.1 percent after the company released better than expected third-quarter results this morning. Profits at Wal-Mart rose 8 percent in the quarter to 70 cents per share from 63 cents per share in the same quarter a year ago. On average, analysts expected the company to earn 67 cents per share. Financial stocks also turned in strong performances within the Dow, bouncing back from sharp losses earlier in the month.
Shares of JP Morgan (JPM) rose 6.3 percent and American Express (AXP) posted a 5.4 percent gain. Additionally, Citigroup (C) experienced strength after the company announced plans to shake up its investment banking business in the wake of billions of dollars of credit losses. Shares of the financial service giant closed up 6.9 percent. Home Depot (HD) also traded higher despite reporting a 26 percent decline in third-quarter profits. The company earned 59 cents per share, which fell a penny shy of expectations. However, many believed that the results could have been much worse, accounting for the 2.3 percent rise in the company's shares. Technology stocks also gave a boost to the Dow, led by strength in IBM (IBM). The strength came as tech stocks rebounded after posting sharp losses throughout the past week. Other Dow components that traded to the upside include Hewlett Packard (HPQ), General Motors (GM), Intel (INTC), Alcoa (AA), and AT&T (T). On the downside, DuPont (DD) saw the greatest weakness, with its shares falling to their lowest level in a year with a 1.5 percent decline. The loss came after the company announced plans to further invest in biofuel technology. Sector News Financial stocks led the markets on their sharp upward move today, with brokerage stocks posting the largest gains after Goldman Sachs' positive comments. The Amex Securities Brokerage/Dealer Index rose 5.8 percent on the day, rising off its worst closing level in over a year. Within the sector, E-Trade Financial (ETFC) saw the greatest strength on speculation of a possible buyout. Banking stocks also outperformed the market, with the S&P Bank Index gaining 5.2 percent on the day. The banking sector benefited from Goldman's comments and renewed optimism that the worst is over within the credit markets. Technology stocks also turned in strong performances, led by the computer hardware sector. Within the hardware sector, Apple (AAPL) led the sector higher after the company announced its plans to enter the Chinese phone market with its highly successful iPhone. Other tech sectors that saw notable strength include the internet, networking, disk drive, and semiconductor sectors. The airline sector was another strong performer, as the price of oil fell sharply after the International Energy Agency reduced its forecast for oil demand in the fourth quarter and said supplies are growing. The Amex Airline Index closed up 5.1 percent. Retail stocks also helped lead the markets to substantial gains, driving the S&P Retail Index to a 3.8 percent gain. The sector was driven by Wal-Mart's strength, on hopes that its strong performance is a sign for the sector as a whole. Other sectors that ended the day with sharp gains include the steel, telecommunications, oil services, defense, natural gas, and chemical sectors. Other Markets In overseas trading, volatile trading characterized the Asian markets, with stocks finishing the day mixed. Japan's Nikkei 225 Index ended the day lower for the eight straight session, closing down 0.5 percent. In Europe, the majority of indexes were able to move off of early morning lows, largely on strength in telecom and banking stocks. England's FTSE 100 closed up 0.4 percent. Gold dropped again Tuesday in U.S. trading, adding to sharp losses from its previous session. December gold closed at $799.00 an ounce, down $8.70 on the session. Crude oil continued to drop sharply on Tuesday and approached the $90 a barrel mark. Light sweet crude oil finished at $91.67 a barrel, down $3.45 on the day. Treasuries closed weaker Tuesday, slipping deeper into negative territory late in the session. For Tuesday, the yield on the benchmark 10-year note closed up 4.5 basis points at 4.256 percent. Looking Ahead Retail stocks will continue to be in focus on Wednesday,
with retail sales data for October set to be released. The data is expected to show 0.2 percent growth in October following a 0.6 percent increase in September. Other notable economic reports due out include the Producer Price Index for October and Crude Inventories for last week. On the earnings front, the companies of significance reporting quarterly results on Wednesday include Metro PCS (PCS), Macy's (M), Arcelor Mittal (MT), and Daktronics (DAKT).
November 13, 2007 4:41 PM
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