Stocks Climb on GM, Bear Stearns News

The automaker's labor agreement -- and reports that Buffett and others may buy a stake in the investment bank -- outweighed a decline in durable good orders

Major stock indexes posted solid gains Wednesday as market sentiment was lifted by news the United Auto Workers and General Motors (GM) had reached a tentative contract agreement, ending a two-day strike. A news report that Warren Buffet and other parties were engaged in talks to buy a stake in Bear Stearns (BSC) also cheered investors. Meanwhile, a plunge in August durable goods orders gave some ammunition to market players arguing for further rate cuts by the Federal Reserve.

On Wednesday, the Dow Jones industrial average climbed 99.5 points, or 0.72%, to 13,878.15. The broader S&P 500 index added 8.21 points, or 0.54%, to 1,525.42. The tech-heavy Nasdaq composite index rose 15.58 points, or 0.44%, to 2,695.34.

The broader market was strong as well. On the NYSE, 22 stocks rose in price for each 11 that fell. Nasdaq breadth was 18-12 positive.

GM shares gained over 9% Wednesday after the company and the UAW announced that they reached a tentative agreement on a new national labor contract, covering about 74,000 employees. The agreement is subject to UAW member ratification. The parties also agreed to create an independent retiree health care trust.

The strength in GM, along with a 6% rise in shares of Ford Motor Co. (F), helped send the S&P Autos index higher by 8%. Auto parts and equipment stocks gained as well. In addition, Ford was supported by news that S&P Ratings Services placed its credit ratings on CreditWatch with positive implications.

The S&P investment banking & brokerage index gained 2.8% Wednesday, led by a 7.7% jump in Bear Stearns after a New York Times report of the possible sale if an equity stake in the firm.

In economic news Wednesday, a government report showed that durable goods orders fell 4.9% in August after rising 6.1% in July, which was revised from a 6.0% increase. Transportation orders fell 11.2% in August, but after a cumulative gain of 21% two months prior. A drop in Boeing (BA) orders explain the August decline, with civilian aircraft down 41%. Excluding transportation, orders dipped 1.8%.

Market players were monitoring speeches by Federal Reserve officials. Philadelphia Fed President Charles Plosser said Tuesday night that last week's interest-rate cut could cause inflation to accelerate and policy makers must be ready to reverse course if needed.

According to Roger Volz, chief technical strategist for Swiss American Securities in New York, the Street continues to look for more rate cuts, reinforcing thoughts of a consumer-led slowdown, and Fed funds futures are pricing in 25 basis-point reductions at the October and December Fed meetings. "Bad economic news is good news for rate cut hawks" wrote Volz in a note Wednesday.

Crude oil prices tumbled and then moved higher in a volatile session Wednesday. Prices initially moved lower on news of a build in supplies, only to shoot higher late in the session on forecasts of storm threat in Gulf of Mexico. November West Texas Intermediate crude oil rose 77 cents to $80.30 per barrel.

An Energy Dept. report showed crude oil stocks rose 1.8 million barrels to 320.6 million. Inventories are above the upper end of the average range for this time of year. Crude oil refinery inputs fell 339,000 barrels a day from the previous week's average. (

Among stocks in the news Wednesday, Qualcomm (QCOM) said it anticipates fourth quarter pro forma revenues to be at or slightly above the high end of the prior guidance of approximately $2.15-$2.25 billion, with pro forma EPS to be approximately 52-53 cents, compared with 42 cents in the year-ago quarter.

Red Hat (RHT) posted second quarter EPS (GAAP basis) of 9 cents, vs. 5 cents in the year-earlier quarter, on a 28% revenue rise.

Amgen (AMGN) says data from a Phase 2 study suggests extended dosing of Aranesp, paired with chemotherapy treatment (every two or every three weeks, depending on the chemotherapy regimen) appeared to be efficacious with respect to changes in hemoglobin, with no unexpected adverse events observed when compared to weekly dosing.

Timberland (TBL) said it expects third-quarter sales to decline in the low double-digit percentage range and says it will close most of its specialty retail shops. The company says the shop closures will result in a $17 million charge, $7 million of which will be incurred in the third quarter.

European indexes moved solidly higher Wednesday, though gains ebbed late in the session. In London, the FTSE 100 index rose 0.56% to 6,433. Germany's DAX index added 0.45% to 7,804.15. In Paris, the CAC 40 index climbed 0.87% to 5,690.77.

Asian indexes were mixed Wednesday. Japan's Nikkei 225 index rose 0.21% to 16,435.74, while Shanghai's benchmark index slumped 1.61%. Markets in Hong Kong were closed for a holiday.

Treasury Market

Treasuries finished little changed Wednesday, recovering from early weakness on back of firm demand for a two-year note auction. The 10-year note edged down 01/32 in price to 100-30/32 for a yield of 4.63%. The 30-year bond firmed 01/32 to 101-18/32 for a yield of 4.90%.

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