Wall Street shrugged off a $2 jump in oil prices as the blue chips ended in the green for the fifth day out of the past six thanks to a surprisingly positive durable goods report and a solid day for the financials.
Today's Market
The Dow Jones Industrial Average rose 89.64 points, or 0.79% to 11502.51, the Standard & Poor’s 500 gained 10.15 points, or 0.80%, to 1281.66 and the Nasdaq Composite picked up 20.49 points, or 0.87%, to 2382.46. The FOX 50 added 6.87 points, or 0.76%, to 916.12.
While the blue chips have been on a good run over the past week, it's worth noting that the benchmark index has only picked up some 150 points over that span and most of it has been on incredibly low volume ahead of the holiday weekend.
The Dow was led on Wednesday by telecom AT&T (T) and Bank of America(BAC), each of which enjoyed gains of about 2%. Drug giant Pfizer (PFE) was one of the only blue-chip components failing to join in the day's broad rally.
Wall Street reacted positively to a surprising durable goods reports, which showed orders rose by 1.3% in July. Economists had been expecting orders for these big-ticket items like refrigerators and air conditioners to have declined by 0.4%.
Excluding transportation orders, the Commerce Department said durable goods orders unexpectedly rose 0.7% in July, compared to an expected decline. Excluding defense, durable goods rose by 2.8% -- the largest one-month rise of the year.
“I think those numbers were surprising to a lot of people this morning," Eric Thorne, portfolio manager at Bryn Mawr Trust, told FOXBusiness. “The economy may not be quite as weak as everyone is saying and that could be a catalyst to spark the stock markets here in the second half.”
Financial stocks jumped by nearly 2% on the day with names like Wachovia (WB) and LehmanBrothers (LEH)enjoying even stronger gains.
“The financials have been the key to this market, both on the plus side and on the downside," said Paul Nolte, director of investments at Hinsdale Associates.
As has been the case for much of this week, trading volume on the New York StockExchange was very low, coming in at just over 800 million shares. NYSE volume hasn't crossed 1 billion shares yet this week, compared to a typical day's volume of more than 1.3 billion.
“The volume is telling us there is absolutely zero conviction [in this rally]. The fact is, everyone is on vacation and nobody is putting money to work," NYSE trader Jason Weisberg of Seaport Securities told FOXBusiness. “I’m not going to make a bet when I'm the only one on the playing field."
The stock market managed to make headway Wednesday even as oil prices nearly eclipsed $120 a barrel. Crude closed $1.88 higher to $118.55 a barrel. Oil futures were lifted by the looming threat of Tropical Storm Gustav, which was downgraded overnight from a hurricane but remains a potentially serious threat to the Gulf of Mexico's oil rigs.
According to the National Oceanic and Atmospheric Administration, Gustav is on track to hit Louisiana early Monday as a Category 4 hurricane. "Based on projected track, size and strength of Gustav over the Gulf, the entirety of the Gulf energy production region remains 'under the gun,' and I expect somewhere near 85% of the Gulf energy infrastructure will be shut in along with a significant increase in damage potential," Jim Rouiller, a senior energy meteorologist with weather forecasting firm Planalytics, told Dow Jones Newswires.
Crude stayed hot after the Energy Department reported that crude stockpiles unexpectedly declined by 177,000 barrels last week while gasoline stocks declined by 1.2 million barrels. Energy analysts had been expecting a 1 million barrel increase in crude stockpiles.
Meanwhile, theFederal Deposit Insurance Corp. stayed in the headlines a day after federal regulators revealed their list of "troubled" banks increased last quarter to 117. The FDIC is considering borrowing money from the Treasury to ensure it has enough cash to guide the nation through an expected series of bank failures, The WallStreet Journal reported.
The funds used by the FDIC to reimburse depositors in a bank failure have decreased to $45.2 billion last quarter, an historically low percentage. So far this year, 11 banks have failed, headlined by IndyMac Bank, which squeezed the FDIC out of $8.9 billion.
Corporate Movers
Lehman Brothers (LEH) has reportedly narrowed its list of potential suitors for its asset management business to a trio of private equity firms: Kohlberg Kravis Roberts, Hellman & Friedman and Bain Capital. According to the Financial Times, the embattled investment bank has eliminated Blackstone (BX) and Carlyle from the running. Lehman has sought to raise money by selling its asset management unit, which includes fund manger Neuberger Berman, ahead of more expected quarterly losses.
Fannie Mae (FNM) and Freddie Mac (FRE) extended their win streak to three as Wall Street appears to be less spooked by the specter of a government bailout. Analyst reports from Merrill Lynch and Citigroup in recent days have helped stop the bleeding in the mortgage giants' shares and raise hope that the government won’t be nationalizing the controversial companies anytime soon.
Amylin Pharmaceuticals (AMLN) saw its shares tank after the drug maker reported four deaths tied to Byetta, a diabetes drug it makes with Eli Lilly (LLY). The disclosure comes on top of a pair of deaths that were reported by the FDA last week. Amylin pointed out that the four patients had complicating conditions, which they said were likely the primary causes of death.
Borders (BGP) enjoyed a big day following a better-than-expected earnings report for the second quarter. The bookseller’s adjusted-loss of 31 cents per share topped estimates by two cents.
Talbots (TLB) surged by nearly 30% after the women’s apparel retailer posted in-line second-quarter results and reaffirmed its 2008 outlook. The company lost 34 cents per share from ongoing operations as sales slumped 7.7% to $528 million. For the full-year, Talbots sees earnings excluding items of 47 cents to 52 cents per share.
ConocoPhillips (COP) plans to sell 600 gasoline stations to PetroSun West LLC for $800 million, The Wall Street Journal reported. The move would allow ConocoPhillips to join ExxonMobil (XOM) and other energy companies that have exited the retail gas business. ConocoPhillips is expected to continue refining oil into gas and selling fuel on a wholesale basis to stations, the paper reported. PetroSunWest reportedly intends to add services such as dry cleaning and bill-paying to the existing gas stations.
Chrysler LLC is looking at "strategic options" for its Dodge Viper business after being approached by several third parties interested in the business. Chrysler CEO Bob Nardelli said in a statement that the auto maker would prefer to offer "strong operational and financial support during any potential transaction" to ensure Viper's future and perpetuate its legacy. It's not clear what companies have contacted Chrysler over Viper.
World Markets
The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 1.73 points, or 0.05%, to a reading of 3299.15. London's FTSE 100 Index, added 57.40 points, or 1.05%, to 5528.10.
On the European continent, the CAC 40 Index in Paris closed up 4.53 points, or 0.10%, to 4373.08 while Germany's DAX lost 19.49, or 0.31%, to 6321.03.
In Asia, Tokyo's Nikkei 225 benchmark index fell 25.75 points, or 0.20% to 12752.96. The Hong Kong's Hang Seng Index gained 408.06 points, or 1.94%, to 21464.72.
