Stocks rally anew Surprisingly strong housing report is one factor as U.S. markets rise for 5th time in 6 sessions. By Alexandra Twin, CNNMoney.com senior writer Last Updated: March 17, 2009: 6:10 PM ET
NEW YORK (CNNMoney.com) -- Stocks surged Tuesday, with the major stock gauges ending higher for the fifth out of six sessions, as investors continued to dig out from 12-year lows.
The Dow Jones industrial average (INDU) added 179 points, or 2.5%. The S&P 500 (SPX) index rose 24 points, or 3.2%. The Nasdaq composite (COMP) gained 24 points, or 3.2%.
A better-than-expected housing market report released Tuesday gave investors a reason to cheer. But the advance over the past week has been largely a rebound after all the selling, said John Merrill, chief investment officer at Tanglewood Wealth Management.
"The decline markets endured between the middle of January and the middle of March was like a rubber band pulled tighter and tighter with each new low," he said. "It was at such an extreme that it had to snap back at some point."
Between Jan. 6 and March 9, the S&P 500 slumped nearly 28%, ending at a 12-1/2 year low. Merrill said that level was "an important low, but probably not the final low." Nonetheless, he said stocks could ultimately rise 20% or more off those lows before hitting a wall.
Since March 9, stocks have gained in five of six sessions, with the S&P 500 rising 15% as of Tuesday's close.
In addition to the technical factors causing the advance, the rally was in reaction to a few pieces of better news, including Tuesday's housing report and last week's February retail sales report.
Citigroup and other banks said they were profitable in the first two months of the year, helping the financial sector. Banks also got a boost from talk about reinstating the "uptick rule" that limits short selling and changing mark-to-market accounting.
"It's not surprising that after selling off aggressively, the market is now looking for some signs of stability," said Alan Gayle, director of asset allocation at RidgeWorth Investments.
However, he said investors need to be cautious, as a few better-than-expected economic reports doesn't change the overall picture, which remains tough.
"This is very much a bear market rally and I think most people agree that at some point, we are going to need to retest those lows," said Drew Kanaly, chairman and CEO of Kanaly Trust Company.
"At some point we are going to have to start looking at the earnings and that's probably the next turning point," he said.
First-quarter earnings reports - which will start trickling out next month - are expected to be weak across the board. He said that the earnings will probably cause the markets to retest those recent lows. However, that should give Wall Street a better sense of where the market is likely to find a floor, paving the way for a bigger stock advance.
Company news: Financial stocks gained, including Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500). The KBW Bank (BKX) sector index added 6%.
Tech shares gained as well, lifting the Nasdaq. Cisco Systems (CSCO, Fortune 500) rose on an upbeat Goldman Sachs note, Reuters reported, with the brokerage adding it to its Conviction Buy list.
Dell (DELL, Fortune 500) announced a new line of laptops and Apple (AAPL, Fortune 500) introduced a new version of software for its iPhone.
Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Google (GOOG, Fortune 500) and Yahoo! (YHOO, Fortune 500) were among the other big tech gainers.
Alcoa (AA, Fortune 500) shares slumped 8.7% after the company announced late Monday that it will cut its dividend, issue stock and convertible notes worth about $1.1 billion and cut its spending in 2010.
Caterpillar (CAT, Fortune 500) said it is laying off over 2,400 more employees at five plants in Illinois, Indiana and Georgia so as to save costs amid the economic slowdown. Shares of the Dow component ended 1.5% higher.
AIG (AIG, Fortune 500) remained in focus amid growing fury that the company paid millions in bonuses to executives, even as the company received $170 billion in federal bailout money. President Obama has said he will try to block the bonuses. AIG's CEO Edward Liddy will go before a House panel Wednesday that is probing the government's involvement in the troubled insurer.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by almost four to one on volume of 1.49 billion shares. On the Nasdaq, advancers beat decliners by over three to one on volume of 2.13 billion shares.
Economy: Construction of U.S. homes jumped in February, surprising economists who were expecting a decline.
Housing starts rose to a seasonally adjusted annual rate of 583,000 in the month, up 22% from a revised 477,000 in January. Housing starts haven't risen month-over-month since last June. Economists surveyed by Briefing.com expected starts to have fallen to a 453,000 annual unit rate.
Building permits, a measure of builder confidence, rose 3% to a seasonally adjusted rate of 547,000 versus forecasts for a drop to 500,000.
Another government report, the Producer Price Index (PPI), showed a smaller-than-expected rise. PPI, a measure of wholesale inflation, rose 0.1% in February after rising 0.8% in January. Economists thought it would rise 0.4%.
The so-called core PPI, which strips out volatile food and energy prices, rose 0.2% after climbing 0.4% in the previous month. Economists thought it would increase 0.1%.
In other news, the Federal Reserve holds its latest policy meeting Tuesday and Wednesday. The central bank is expected to hold the fed funds rate, its key short-term interest rate, essentially at zero. But the bank could declare it will start buying long-term U.S. Treasurys after saying it was prepared to do so at its last few meetings.
New legislation was introduced Monday night to reinstate the "uptick rule," adding to pressure on the Securities and Exchange Commission. The SEC meets April 8 to discuss restoring the rule. Critics have claimed that the rule's absence has exacerbated stock selling in the financial sector.
Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.01% from 2.95% Monday. Treasury prices and yields move in opposite directions.
Lending rates were improved. The 3-month Libor rate fell to 1.3% from 1.31% Monday, while the overnight Libor rate dipped to 0.31% from 0.33%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.
Other markets: In global trading, Asian markets ended mixed and European markets declined.
In currency trading, the dollar fell versus the euro and gained against the yen.
U.S. light crude oil for April delivery rose $1.81 to settle at $49.16 a barrel on Monday.
COMEX gold for April delivery fell $5.20 to settle at $916.80 an ounce.
Yahoo! Finance
4:15 pm : A rebound in financial stocks provided leadership to the broader market, helping stocks climb steadily and close at session highs.
Stocks began the session in mixed fashion. Trading was choppy in the absence of a clear leader. Given the weak close to the prior session, it appeared stocks would extend their losses as financials fell to a 2.5% loss in the first few minutes of trading.
The downturn was short-lived, though, as financials rebounded to spend the rest of the session staging an advance. As has been the case in recent weeks, financials have been a key determinant in the direction of the broader market. Financials closed with a 6.6% gain at session this. All three major indices also closed at session highs.
The Nasdaq logged the best performance of the headline indices. Its gain was underpinned by strength in large-cap tech shares. However, the strength in large cap tech didn't preclude small-cap stocks from putting together a solid advance; the Russell 2000 Small-Cap Index outperformed all the broader indices with an 4.5% advance.
Nonetheless, gains were widespread. Every major sector in the S&P 500 closed the session higher. Even materials stocks (+0.4%) logged a gain after spending all but the last 10 minutes of the session in the red. Materials had been down more than 2% at their session low.
The sector's relative weakness followed news Nucor (NUE 33.55, -3.40) and Dow component Alcoa (AA 5.59, -0.53) expect to post losses for the first quarter. Alcoa also stated it will slash its quarterly dividend to $0.03 per share from $0.17 per share. Diversified metals company Rio Tinto (RTP 112.58, -3.82) issued pessimistic comments of its own, citing continued weakness in commodities.
Despite the pickup in the materials sector, steel stocks still closed with a 7.4% loss.
Economic data had little impact on trading. The Producer Price Index (PPI) for February increased 0.1% after a 0.8% increase the month before. The PPI was expected to increase 0.4% in February. Core PPI increased 0.2% after a 0.4% increase in the prior reading. The consensus called for a 0.1% increase in February.
February housing starts hit an annualized rate of 583,000, up from record lows and above the rate of 450,000 starts that was expected. Meanwhile, February building permits hit an annualized rate of 547,000, which is above the 500,000 that was expected. The prior reading showed 531,000 permits. Given the glut of unsold homes on the market, there is concern an increase in starts and permits could retard inventory reduction, which would prolong a recovery in the housing market.DJ30 +178.73 NASDAQ +58.09 NQ100 +4.1% R2K +4.5% SP400 +3.7% SP500 +24.23 NASDAQ Adv/Vol/Dec 2069/2.10 bln/598 NYSE Adv/Vol/Dec 2415/1.49 bln/643
3:30 pm : The equity markets recently pushed to fresh session highs. The broadest market indicator, the S&P 500, is now up 2.2%.
On the other hand, commodites are trading with mixed results.
April crude oil enjoyed a strong session as it attempted to push the $50 level. The futures contracts finished up 3.8% to $49.14 per barrel.
April natural gas traded in the red for almost the entire pit session. After hitting lows of $3.76; natural gas closed at $3.82 per contract, down less than 1%.
Gold futures traded a relatively quiet session today. The April futures contracts closed at $916.80 per ounce, down less than 1%.
Silver prices also saw a modest decline. The May silver contracts closed at $12.67 per ounce, down 1.7%, just above the session low of $12.63 per ounce.DJ30 +119.39 NASDAQ +39.75 SP500 +16.59 NASDAQ Adv/Vol/Dec 1881/1.7 bln/759 NYSE Adv/Vol/Dec 2233/1.0 bln/803
3:00 pm : Stocks have come bouncing back after paring earlier gains. The recent bounce has taken the Nasdaq to fresh session highs, while the S&P 500 and Dow have come in line with earlier session highs.
The Nasdaq's outperformance comes largely as a result of strength in large-cap tech stocks. In turn, the Nasdaq 100, which is rich in large-cap tech holdings, is up 2.4%. DJ30 +87.93 NASDAQ +33.08 SP500 +12.84 NASDAQ Adv/Vol/Dec 1785/1.44 bln/845 NYSE Adv/Vol/Dec 2127/933 mln/899
2:30 pm : Crude oil prices are up 4.3% to $49.40 per barrel. The rise in crude oil futures prices has pushed the energy sector to a 2.2% gain. Energy is currently the best performing sector of the session.
Several of energy's primary industry groups are responsible for the sector's gains. Oil and gas exploration and production companies are up 3.0%, oil and gas drillers are up 2.3%, integrated oil and gas companies are up 1.9%. Integrated oil and gas companies carry the most weight in the sector; the industry includes such heavyweights as Exxon Mobil (XOM 68.06, +1.09) and Chevron (CVX 64.30, +1.36). DJ30 +54.24 NASDAQ +22.95 SP500 +8.64 NASDAQ Adv/Vol/Dec 1696/1.31 bln/901 NYSE Adv/Vol/Dec 2005/858 mln/1020
2:00 pm : The major indices trade with solid gains, though they have dipped a bit from session highs. The advance is mostly broad-based, with nine of the ten sectors posting a gain.
The materials sector (-0.7%) remains in the red, but is well off its worst levels.DJ30 +79.33 NASDAQ +28.65 SP500 +11.95 NASDAQ Adv/Vol/Dec 1744/1.16 bln/832 NYSE Adv/Vol/Dec 2096/769 mln/894
1:30 pm : Stocks have clicked another notch higher. All three major indices are now at fresh session highs.
Eight of the 10 major sectors in the S&P 500 are up by at least 1.0%. Health care is up 0.8% and materials are down 0.4%.
Financial stocks are sporting the best gain of any sector. Financials are up 3.0% with particular strength in multiline insurers (+6.5%), specialized finance (+4.5%), and life and health insurers (+3.4%).DJ30 +91.91 NASDAQ +31.29 SP500 +14.43 NASDAQ Adv/Vol/Dec 1721/1.06 bln/828 NYSE Adv/Vol/Dec 2117/707 mln/862
1:00 pm : Despite a rather slow, choppy start, stocks are putting together some solid gains as financial stocks rebound to lift the broader market to fresh session highs.
Stocks stalled in the first few minutes of trading. The lack of direction followed profit taking in the prior session, which put an end to four straight sessions of gains.
The prior session's afternoon sell off was focused on financial stocks, which had surged nearly 40% in a week's time. It appeared the selling effort would continue as financial stocks faltered in the early going and fell to a 2.5% loss.
Financial stocks have since rebounded to trade with a 2.6% gain. That has helped drive higher many of the other major sectors in the S&P 500.
Only materials remains in the red. The sector is currently trading with a 0.6% loss, though it was down as much as 2.3%.
The weakness in materials stocks followed disappointing announcements from Nucor (NUE 31.95, -5.00) and Dow component Alcoa (AA 5.60, -0.52). Both companies announced they expect to post losses for the first quarter, but Alcoa added to the offense by stating that it will slash its quarterly dividend to $0.03 per share from $0.17 per share. Alcoa said the dividend cut, combined with lower capital expenditures, is expected to help improve liquidity.
Meanwhile, diversified metals company Rio Tinto (RTP 110.96, -5.44) warned that the slump in commodities will continue to have a material adverse impact on business and financial results.
In contrast to the prior session, large-cap tech is helping the Nasdaq outperform its counterparts. The Nasdaq is currently up nearly 2%, while the Nasdaq 100 is up 2.1%.
In economic data, the Producer Price Index (PPI) for February showed a 0.1% increase month-over-month. It was expected to increase 0.4%. The prior reading was showed a 0.8% increase. Excluding food and energy, producer prices increased 0.2% month-over-month, which is slightly more than the 0.1% increase that was widely expected. The price increases come in the face of what remains to be relatively weak demand.
Participants had a muted reaction to an upturn in housing starts and building permits. Housing starts climbed up from record lows to 583,000 in February from 477,000 in January. February housing starts were expected to total 450,000.
February building permits, which are typically regarded as a predictor of future activity, totaled an annualized 547,000. That is above the 500,000 permits that were expected. The prior reading showed 531,000 permits.
Though the numbers were better than expected, an increase in starts and permits in the face of a glut of unsold homes could get in the way of clearing the excess supply of homes. DJ30 +75.27 NASDAQ +27.43 SP500 +11.80 NASDAQ Adv/Vol/Dec 1691/923 mln/831 NYSE Adv/Vol/Dec 2030/646 mln/928
12:30 pm : Financial stocks have emerged to trade with relative strength. The sector stumbled at the beginning of the session and even fell to an early loss, but has since recovered and is now trading with a 1.9% gain.
The rebound by financials has helped drive the broader market higher. Even decliners have pared their losses; health care is now down 0.1%, while materials are down 0.7%. Every other sector is in the green as all three major indices are now at session highs.DJ30 +47.87 NASDAQ +23.69 SP500 +8.80 NASDAQ Adv/Vol/Dec 1620/810 mln/867 NYSE Adv/Vol/Dec 1902/578 mln/1033
12:00 pm : Action has been rather listless thus far, but stocks are holding on to solid gains. The gains are generally broad-based as seven of the 10 major sectors in the S&P 500 are in the green.
Utilities (-0.3%), health care (-0.3%), and materials (-1.2%) are the session's weakest performing sectors.
Materials have been under pressure since the start of trading. Alcoa (AA 5.62, -0.50) and Nucor (NUE 32.14, -4.81) both announced they expect to post losses for the first quarter. Alcoa went one step further by stating that it will slash its dividend.DJ30 +32.02 NASDAQ +19.69 SP500 +5.85 NASDAQ Adv/Vol/Dec 1517/710 mln/898 NYSE Adv/Vol/Dec 1732/518 mln/1159
11:30 am : Trading remains choppy as the Dow Jones Industrial Average dips back into the red. Laggards in the blue chip index include Johnson & Johnson (JNJ 49.63, -1.10), United Technologies (UTX 40.53, -0.59), and Alcoa (AA 5.58, -0.54).
Primary support for the Dow is coming from Home Depot (HD 21.13, +0.99), Wal-Mart (WMT 49.55, +0.75), and Exxon Mobil (XOM 67.53, +0.56). Shares of HD and WMT are both trending toward their 50-day moving averages. DJ30 -3.30 NASDAQ +14.96 SP500 +2.98 NASDAQ Adv/Vol/Dec 1418/620 mln/979 NYSE Adv/Vol/Dec 1575/460 mln/1283
11:00 am : The major indices have ascended to their best levels of the morning. The Nasdaq is boasting the best gains of the three headline indices; it has been outperforming its counterparts since the opening bell.
The Nasdaq's performance this session contrasts that of the prior session. The Nasdaq fell victim to stiff selling pressure Monday as participants turned against large-cap tech stocks. Large-cap tech had been relatively resilient to much of the weakness in the broader market during recent weeks as investors picked up names with little debt and lots of cash. Interest in those stocks then waned Monday as investors grew more confident and increasingly willing to rotate into more beaten down holdings. DJ30 +16.25 NASDAQ +16.43 SP500 +5.51 NASDAQ Adv/Vol/Dec 1408/519 mln/910 NYSE Adv/Vol/Dec 1657/388 mln/1168
10:30 am : Financial stocks have rebounded from a fit of weakness to trade with a 0.4% gain. Despite the leadership financials have provided in recent sessions, the major indices are still trading in rather mixed fashion.
Meanwhile, consumer discretionary stocks are seeing some of the strongest gains this morning. The sector is up 1.5%, while retailers (+3.2%) make strong gains. Apparel and accessories outfit American Apparel (APP 2.66, +0.26) is seeing strong buying interest after reporting solid growth results for its latest quarter. Still, earnings results were shy of expectations.
Stocks have yet to set a clear direction for the session. Trading has been choppy since the opening bell.DJ30 -25.65 NASDAQ +9.89 SP500 +0.61 NASDAQ Adv/Vol/Dec 1178/381 mln/1064 NYSE Adv/Vol/Dec 1297/300 mln/1480
10:00 am : The major indices have turned upward to trade with solid gains. Commodities are seeing mixed interest, though, as the CRB Commodity Index is currently up just 0.1%.
Oil prices are pushing higher. Crude oil futures contracts recently quoted oil 1.7% higher at $48.20 per barrel. Though crude oil prices are actually up 7.5% year-to-date, they are still at just one-third of their record highs.
Natural gas prices are down fractionally. Natural gas for April delivery recently traded hands at $3.83 per contract.
Precious metals prices are under pressure. Contracts for gold were recently quoted 0.4% lower at $918.70 per ounce. Silver is down modestly to $12.83 per ounce.
09:40 am : Financial stocks have fallen into the red after a sluggish start. The sector is down 1.0%. Still, multiline insurers (+2.8%) are showing signs of strength for the second straight session. However, investment banks and brokerages (-1.3%) are down for the second straight session.
Materials stocks are under the most pressure, though. Thanks to weakness in Dow component Alcoa (AA 5.52, -0.60), the sector is off by 2.1%. Alcoa announced it will cut its quarterly dividend to $0.03 per share from $0.17 per share. The dividend cut, combined with lower capital expenditures, is expected to help improve liquidity.DJ30 -22.54 NASDAQ +4.92 SP500 -2.04 NASDAQ Adv/Vol/Dec 1039/98 mln/935 NYSE Adv/Vol/Dec 1000/111 mln/1558
09:20 am : S&P futures vs fair value: +1.00. Nasdaq futures vs fair value: +3.80. Stocks are leaning toward a flat start for the session. The moderate tone follows the prior session's afternoon sell off, which was largely rooted in profit taking after the stock market registered four straight sessions of gains. Sellers snapped that winning streak Monday by pushing stocks into the red. Corporate news flow has been slow. However, Dow compnonent Alcoa (AA) did announce that it will cut its dividend and lower capital expenditures as part of an effort to improve liquidity. Shares of AA are indicated almost 12% lower at $5.39 per share in premarket trading. In economic news, core February PPI increased 0.2% month-over-month, which was roughly in-line with expectations. The total PPI was up 0.1%, which is less than the 0.4% increase that was expected. February housing starts were higher-than-expected at an annualized rate of 583,000 units. The consensus estimate was 450,000. Building permits increased to an annualized rate of 547,000, which was more than the consensus estimate of 500,000. Though the numbers were better than expected, an increase in starts and permits in the face of a glut of unsold homes along with foreclosures that add to inventory could get in the way of clearing the excess supply of homes that are hampering prices.
09:00 am : S&P futures vs fair value: +3.30. Nasdaq futures vs fair value: +6.80. European stock markets are showing broad-based weakness. Germany's DAX is down 1.1% as decliners outnumber advancing issues by more than 6-to1. Allianz (AZ), however, continues to trade with strength. France's CAC is off by 1.2%. Total (TOT) is a primary laggard, but Societe Generale is showing marked strength. Britain's FTSE is down 0.9%. Energy outfits BP PLC (BP) and Royal Dutch Shell (RDS.A) are among the session's primary laggards. Royal Dutch Shell indicated it will continue its upstream and downstream projects, while aiming to pay roughly $10 billion in annual dividends, which represents an increase of roughly 5%. Meanwhile, the MSCI Asia-Pacific Index gained 1.8% as financial stocks made additional gains. Japan's Nikkei added 3.2% as banks extended their recent advance. Sentiment was helped further by hopes for fresh steps from the U.S. and Japanese central banks, which are heading into policy meetings. A Bank of Japan Governor indicated the central bank may provide new subordinated loans to replenish bank capital. Shares Mitsubishi UFJ Financial (MTU) and Mizuho Financial (MFG) both jumped. In Hong Kong, the Hang Seng closed 0.8% lower, however. Heavyweight China Life (LFC) succumbed to profit taking. HSBC (HBC), however, bucked the negative trend by staging a gain. In mainland China, the Shanghai Composite closed 1.5% higher, led by cyclical stocks in heavy trading volume.
08:35 am : S&P futures vs fair value: +2.50. Nasdaq futures vs fair value: +6.80. Futures have improved from earlier levels, thanks to some better-than-expected economic data. The Producer Price Index (PPI) for February showed a 0.1% increase month-over-month. It was expected to increase 0.4%. The prior reading was showed a 0.8% increase. The PPI provides economists a gauge for prices before goods are sold to consumers. Excluding food and energy, producer prices increased 0.2% month-over-month, which is slightly more than the 0.1% increase that was widely expected. Housing starts climbed up from record lows to 583,000 in February. February housing starts were expected to total 450,000. January housing starts totaled 477,000, revised upward from 466,000. Meanwhile, February building permits, which are typically regarded as a predictor of future activity, totaled 547,000. That is above the 500,000 permits that were expected. The prior reading showed 531,000 permits.
08:00 am : S&P futures vs fair value: +1.80. Nasdaq futures vs fair value: +3.30. Futures currently indicate a rather tepid tone ahead of the opening bell. Corporate news flow has been relatively slow, though Alcoa (AA) announced after the prior session's closing bell that it expects to post a loss for its first fiscal quarter. As part of an effort to improve its cost structure and liquidity, Alcoa will reduce capital expenditures, issue a capital raise, and cut its dividend. The quarterly dividend for shares of AA will go to $0.03 per share from $0.17 per share. Meanwhile, diversified metal and mining outfit Rio Tinto (RTP) warned the slump in commodities will continue to have a material adverse impact on business and financial results, according to Dow Jones. There are several economic reports on today's calendar. The February Producer Price Index, February Housing starts, and February building permits are all due at the bottom of the hour. The ABC Consumer Confidence Survey for March is due late this afternoon (5:00 PM ET). The Fed's policy-setting Federal Open Market Committee begins its two-day meeting. It will make its latest policy statement tomorrow afternoon.
06:22 am : S&P futures vs fair value: +5.20. Nasdaq futures vs fair value: +9.50.
06:22 am : Nikkei...7949.13...+245.00...+3.20%. Hang Seng...12878.09...-98.60...-0.80%.
06:22 am : FTSE...3846.07...-17.90...-0.50%. DAX...4029.53...-15.00...-0.40%.
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