DJ US Stocks Rally; Bond Insurer, Banks, Transports Help (DowJonesNewswires, dd/23.01.2008, godz. 21:58)
Strong late-day moves for banks, consumer discretionary, and transportation stocks drove the Dow Jones Industrial Average up as much as 275 points late Wednesday.
As the strongest stocks of 2007 fall, the weakest are taking their place for now.
"Home builders and small regional banks that have suffered quite a bit are getting parts of this rally," said Vivienne Hsu, senior portfolio manager for Charles Schwab Investment Management.
Ambac Financial Group Inc. (ABK) and MBIA Inc. (MBI) also buoyed the market after Bloomberg News reported New York State's insurance regulators met with bank to discus raising new capital for the downtrodden bond insurers. Ambac was recently trading up 79%, while MBIA climbed 36%.
Earlier in the session, and through most of the afternoon, bounces from the Federal Reserve's big intermeeting rate cut failed to last amid a disappointing outlook from Apple Inc. (AAPL), one of the last stalwarts of the bull market.
However, as the session moved into its latter stages, the continued decline in the price of oil buoyed transports, while a ratings upgrade from Bear Stearns helped strengthen the case for financials.
Commercial-banking stocks were a major stalwart among financials, rallying for the second consecutive session on continued benefit from hopes the Federal Reserve's rate cut will help profits.
Buyers are betting the widening difference between the short-term interest rates at which banks borrow and the long-term interest rates at which they lend will boost profits and give banks a bigger cushion against credit problems that still lurk. The so-called net interest margin is a key measure of banks' profitability.
Two notable banking stocks jumping Wednesday afternoon were Citigroup (C), up 9%, at $26.61, and JPMorgan Chase (JPM), rising 12% to $45.96.
After falling more than 300 points, the Dow Jones Industrial Average was recently up 276 at 12247. The tech-heavy Nasdaq rose 26, or 1.1%, to 2317, as it remained weighed down by Apple.
The reversal of long-standing sectoral market trends - with builders such as Toll Brothers recently up 15% and WCI Communities climbing 20%, while previously strong materials and energy sectors are sliding - may be a "sign of forced liquidation," said Lorenzo Di Mattia, manager of hedge fund Sibilla Global Fund. In other words, people are selling stocks that had been strong performers in order to buy back those they had borrowed in the hopes of a fall.
"Some fund might be in trouble, and might be selling the good stuff and buying the bad stuff," said Di Mattia. A similar unwinding of quantitative fund positions exacerbated market volatility - particularly late in sessions - during the summer.
Echoing Tuesday's trade, some of the most beaten-down stocks in recent months - such as financials, home builders, transports and retailers - were the strongest, which some traders said indicates a short-term move.
Market watchers said the movement for transports, which are typically sensitive to swings in the economy, stems from a drop in oil prices and is part of a sector rotation into beaten-down areas.
"This pullback recession has dragged down the price of oil, so you've seen a bit of a rally for transports," said Larry Peruzzi, senior equity trader for Boston Co.
The Dow Jones Transportation Average was recently up 7.1% at 4468. If the average holds, it would be the biggest point gain ever for the DJ transportation average and its largest percentage gain since Oct. 15, 2002, when it rose 6.9%.
Among other gainers, Home Depot (HD), pummeled throughout the housing downturn, was up 6% to $29.89.
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