After six days of brutal selloffs sent the markets to their weakest levels in twelve years, Wall Street finally received a reprieve on Tuesday as the Dow soared 236 points, its biggest one-day rally in more than a month.
Today’s Markets
The Dow Jones Industrial Average rose 236.16 points, or 3.32%, to 7350.94, the S&P 500 added 29.81 points, or 4.01%, to 773.14 and the Nasdaq Composite picked up 54.11 points, or 3.90%, to 1441.83. The consumer-friendly FOX 50 gained 20.51 points, or 3.69%, to 576.88.
Tuesday's rally wasn't driven by a single headline, rather market participants said it was long overdue because the markets were "severely oversold." The Dow had lost more than 800 points in just over a week and the S&P 500 was stuck in the midst of its longest losing streak since the darkest days of October.
“Despite the wobbly legs that the day started with, I think the bulls finally decided they had enough of the bears controlling the action for the last week and a half,” said Michael James, senior equity trader at Wedbush Morgan Securities. There weren’t any “specific points to justify the rally, which is often times when you get bear market rallies.”
Traders may have been less apprehensive to bargain hunt on Tuesday as there were several relatively positive pieces of news that offered a break from a seemingly never-ending flow of gloomy stories. For example, Federal Reserve Chairman BenBernanke said he sees the year-long recession ending in 2009 and no need to nationalize banks, JPMorgan Chase (JPM) said it sees earnings meeting expectations and Home Depot (HD), Nordstrom (JWN) and Macy’s (M) all reported better-than-expected quarterly results.
'Overdue' Rally
Tuesday's mini-rally does little to ease the pain on Wall Street as the Dow had plummeted 1,150 points since Feb 9. amid regulatory and economic uncertainty. The index's best session since Jan. 21 came a day after the Dow and S&P 500 plunged below their bear market lows to their worst levels since 1997.
“In general, this market is overdue for an up day and is finally getting one today,” said Art Hogan, chief market strategist at Jefferies & Co. “We’ve got a lot of ground to recover before we can call this a sustained rally. But sometimes one day in a row is a welcome change.”
The biggest winners on the Dow were General Motors (GM), Bank of America (BAC) and Citigroup (C) -- three of the index's worst performing stocks over the past year. Microsoft (MSFT) was the only blue-chip stock that didn't join in the rally.
The Nasdaq Composite rose even further than the Dow as tech stock rallied nearly 3%. Yahoo! (YHOO) and Research in Motion (RIMM) were two of the biggest percentage gainers on the Nasdaq 100, canceling out steep losses for Foster Wheeler (FWLT).
Bernanke in Focus
Bernanke appeared to soothe the rattled financial sector as the Fed chief said he doesn’t see the need to formally nationalize banks. He also said banks won’t be wholly or majority-owned by the government and said 2010 could be a turnaround year for the U.S. economy.
"If actions taken by the administration, the Congress and the Federal Reserve are successful in restoring some measure of financial stability -- and only if that is the case, in my view -- there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," Bernanke said.
Wall Street will keep its attention squarely on Washington as many traders hope for a more optimistic message from President Barack Obama when he addresses a joint session of Congress Tuesday evening.
“I watched Bernanke on TV and we finally had a Washington official with a smile on his face. He seemed sort of relaxed,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business. “I don’t know if that’s the reason why the market is doing better but perhaps the positive message will start to come out of Washington.”
Financials Bounce
Banking stocks were the biggest winners on Tuesday, surging 12% as a sector. Individual names like Goldman Sachs (GS) and State Street (STT) rose even further.
The rally for financials comes after the markets received rare positive news from JPMorgan, which said it sees first-quarter earnings in-line with expectations. Shareholders shrugged off the bank's decision to slash its dividend by 87% to 5 cents per share in an effort to save $5 billion annually and position itself for a steeper recession.
The markets didn't flinch at the Conference Board's latest bleak consumer confidence report, which showed Americans' confidence deteriorated in February. The group's confidence index fell to an all-time low of 25.0, well below the previous record low of 37.7 in December. Economists had been bracing for a more modest decline to 35.5.
In the commodity markets, crude oil futures enjoyed a late-day rally to reach the highest level in nearly three weeks. The price of a barrel of crude settled at $39.96, up $1.52 on the day. Gold prices continued to move away from record territory, ending at $969.50 per ounce, down $25.50 -- the biggest one-day loss since Jan. 12.
Corporate Movers
American International Group (AIG) is trying to revamp its $150 billion government rescue package by repaying a portion of the loan with a combination of debt, equity and businesses ahead of an expected fourth-quarter loss of $60 billion, The Wall Street Journal reported. The move, which would be the third version of the rescue for AIG, is aimed at safeguarding the insurer’s credit ratings.
Microsoft (MSFT) CEO Steve Ballmer said he still wants to team up with Yahoo! (YHOO) to take on Google (GOOG), though he said pooling resources does not mean another takeover attempt. Ballmer also said he sees the economy remaining relatively weak for a relatively long period of time.
Home Depot (HD) beat the Street with an adjusted-profit of 19 cents per share but the largest U.S. home improvement retailer posted weaker-than-expected revenue and warned earnings will decline by about 7% in the fiscal year.
Nordstrom (JWN) saw its shares surge a day after the upscale department store operator exceeded estimates with a profit of 31 cents per share. Nordstrom also sees 2009 earnings potentially exceeding the Street's view.
News Corp. (NWS) President and COO Peter Chernin is leaving the media giant in July after failing to reach a deal on a new contract and nearly two decades with the company. News Corp., which also owns the Journal and FOX Business, did not name a successor but said CEO Rupert Murdoch will take over some of Chernin’s duties.
Bank of America (BAC) former exec John Thain was ordered by a judge to give more testimony about $3.6 billion of bonuses given to Merrill Lynch execs last year while he was the bank’s CEO.
Macy's (M) topped estimates by reporting a fourth-quarter profit of $1.06 per share on $7.93 billion in sales. The retailer also backed its sales and earnings outlook but warned it sees same-store sales falling up to 8% in 2009.
Target (TGT) suffered a 41% plunge in profit to 81 cents per share, two cents shy of what analysts were looking for. The retailer’s sales fell 1.6% during the quarter to $19.56 billion.
Google's (GOOG) email service, Gmail, suffered an outage earlyTuesday that left users without access to their email accounts. Google said the problem has been resolved but did not know what caused the outage.
Office Depot (ODP) plunged to fresh 52-week lows after the office supplies retailer posted a weaker-than-expected fourth-quarter loss of 7 cents per share as sales tumbled 15% to $3.3 billion.
Heinz (HNZ) posted a better-than-expected fiscal third-quarter profit of 76 cents a share but the ketchup maker’s revenue fell 7.5% to $2.41 billion, missing estimates due to the climb in the U.S. dollar.
Data Dump
S&P/Case-Shiller said U.S. home prices fell by a record 18.2% in the fourth quarter and an all-time high 18.5% in December from the year before. For the year, home prices tumbled by 19%, the second straight year of declines.
Global Markets
European markets tumbled again as the Dow Jones Euro Stoxx 50 extended its losing streak to seven days, falling 0.71% to its lowest level since March 2003. London’s FTSE 100 sank 0.89% to 3816.44 and Germany’s DAX fell 1.03% to 3895.75, its lowest level since October 2004.
Asian markets sank overnight. Tokyo's Nikkei fell 1.46% to 7268.56, while Hong Kong's Hang Seng fell 2.86% to 12798.52 and Australia's ASX 200 fell 0.58% to 3331.60.
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