Stock Market Update...AKA...What the heck happened Tuesday...
16:25 ET Dow +151.17 at 8424.75, Nasdaq +1.22 at 1483.27, S&P +8.37 at 859.12
[BRIEFING.COM] Stocks rose 1.0% in a volatile session as traders digested testimony from the heads of the Federal Reserve, Treasury and FDIC, upside earnings guidance from Hewlett-Packard and speculation regarding the future of U.S. automakers.
The S&P 500 climbed to a 1.8% gain at mid-day, and then dropped to a loss of 2.8% in the final hour of trade before a surge in buying interest sent the S&P 500 back into positive territory at the closing bell.
Seven of the ten economic sectors posted a gain. Small- and mid-cap stocks underperformed, with the Russell 2000 (-0.8%) and S&P 400 (-0.3%) both declining.
Fed Chairman Bernanke, Treasury Secretary Paulson and FDIC Chairman Bair were called to testify about the $700 billion financial relief package before the House Financial Services Committee.
Bernanke said there are some signs that credit markets are improving, although they remain strained. Treasury Secretary Paulson defended scrapping the original plan to buy troubled assets, saying that direct capital injections were more effective given the sharp deterioration in financial markets. Paulson believes the economy will not recover as fast as anyone would like, but will recover at a quicker pace because of the relief package.
On a related note, the Treasury bought $33.6 billion in preferred stock from 21 banks, including $6.6 billion in US Bancorp (USB 25.73, -0.07) and $3.6 billion in Capital One Financial (COF 29.25, -0.62). This brings the totaled preferred stock purchases in banks up to $158.6 billion. The financial sector fell 0.8%.
In corporate news, Hewlett-Packard (HPQ 33.58, +4.24) announced preliminary fourth quarter earnings that topped estimates and issued fiscal year 2009 earnings guidance that was above expectations.
Yahoo! (YHOO 11.48, +0.85) gained after announcing that co-founder Jerry Yang will step down as CEO as soon as a replacement is found, raising speculation that Microsoft (MSFT 19.62, +0.43) could show renewed takeover interest.
The 14.5% gain in HPQ and 8.0% increase in YHOO helped the tech sector (+1.9%) outperform. More than half of tech stocks posted a loss, however, as investors were aware that the upside guidance from HP was largely a company specific story, and not an indication of overall strength.
In earnings news, Saks (SKS 3.27, -0.58) tumbled after missing third quarter earnings expectations, while Home Depot (HD 20.71, +0.71) rose after topping estimates. Both retailers were cautions about the near-term outlook. Retailers as a whole fell 0.2%.
Shares of General Motors (GM 3.09, -0.09) and Ford (F 1.68, -0.04) fell to multi-decade lows. The automakers, along with Chrysler and the United Auto Workers, are scheduled to testify today before the Senate Banking Committee regarding possible aid for the struggling U.S. auto industry.
In economic news, domestic producer prices in October dropped by a larger-than-expected amount due to the sharp decline in energy prices. Specifically, October PPI dropped 2.8% month over month, compared to the expected decline of 1.9%. Core PPI, which excludes food and energy, rose 0.4%, which was larger than the expected increase of 0.1%.
..Nasdaq 100 +0.3%. ..S&P Midcap 400 -0.3%. ..Russell 2000 -0.8%. ..NYSE Adv/Dec 1153/1975. ..NASDAQ Adv/Dec 1088/1719.
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