Stocks Finish with Strong Gains
After a stock-market plunge Tuesday on the day of Barack Obama's inauguration as the 44th U.S. President, U.S. stocks staged a rebound Wednesday. Major indexes closed sharply higher, led by gains in energy, technology, and financial shares.
On Wednesday, the 30-stock Dow Jones industrial average finished higher by 279.01 points, or 3.51%, at 8,066.73. The broader S&P 500 index gained 35.02 points, or 4.35%, to 840.24. The tech-heavy Nasdaq composite index added 66.21 points, or 4.60%, to 1,507.07.
On the New York Stock Exchange, 25 stocks were higher in price for every six that declined. Nasdaq breadth was 20-7 positive.
Treasuries were lower Wednesday as the U.S. government is faced with borrowing heavily to stimulate the economy. The yield on the 10-year note climbed to 2.54%. The dollar index was lower. Gold futures were lower at on profit taking.
Energy stocks rose as crude oil futures jumped above $43 per barrel.
Financials rebounded after taking a big beating on Tuesday; Bank of New York (BK), PNC Financial (PNC), and Northern Trust (NTRS) each rallied on earnings news.
Earlier in the session, indexes seesawed during the confirmation testimony of Timothy Geithner, President Barack Obama's nominee for Treasury secretary, who pledged to act aggressively to combat the U.S. recession -- and apologized for not paying his taxes on time.
Wall Street was also looking forward to reports Thursday on December U.S. housing starts, which were expected to fall to 600,000 from 625,000 in November; and weekly initial jobless claims, which were seen rising 16,000 to 540,000.
In economic news Wednesday, the International Council of Shopping Centers and Goldman Sachs. chain store sales index rose 1.1% in the week ended July 17 after falling 2.3% the week before. However, sales on a year-over-year basis declined by 1.8% after falling 2.2% the week before.
The ABC News/Washington Post consumer comfort index fell 4 points to -53 in the week ended Jan. 19, putting it a point away from its record low of -54 reached on Dec. 1, 2008. The index had held steady at -49 for the three previous weeks. According to the survey, a record-low 5% of respondents expressed confidence in the economy, down from 6% the week before. Also, 42% of those polled said their own finances were in good standing, down from 44% in the prior week.
Meanwhile, lawmakers returned to work Wednesday after the inauguration festivities.
Timothy Geithner, President Barack Obama's nominee for Treasury secretary, told Congress forceful action was needed to combat the U.S. recession and he vowed to overhaul the government's $700 billion financial rescue program. He also apologized to the Senate Finance Committee for his failure to pay certain taxes, "Our test is to act with the strength, speed and care necessary to get our economy back on track," Geithner said. Geithner told lawmakers, many of whom are upset at how the Treasury-administered financial rescue program has been run, that the Obama administration would require banks receiving government money to document increased lending. "We have to fundamentally reform this program to ensure that there is enough credit available to support recovery," he said.
Geithner, currently president of the New York Federal Reserve Bank, pledged measures to ensure credit flows to consumers and businesses, but he stopped short of offering specifics on how that might be done. While Geithner made the case for an aggressive fiscal stimulus to help lift the recession-mired economy, he said the government would have to turn its attention to getting its finances in order once the crisis passed.
Congressional Republicans plan to seek a meeting as early as Thursday with Obama to discuss ideas for boosting the ailing economy as lawmakers begin work on a $825 billion Democratic stimulus package, according to Reuters dispatch. House Republicans were drafting a letter, expected to be sent to the White House later today that could ask for meeting Thursday, according to a Republican aide in the U.S. House of Representatives.
"Congress will act swiftly on fiscal stimulus, with enactment by the February 13 beginning of the Presidents' Day recess a realistic possibility; and there is clear scope for progress in other areas, notably the standards to be applied for the second $350 billion of TARP," wrote Goldman Sachs economist Alec Phillips in a note Wednesday.
Obama announced on his first day in office he is freezing the pay of the about a hundred White House employees who make over $100,000 a year. The freeze would hold salaries at their current levels. It is part of a presidential memorandum being issued when Obama attended a swearing-in for staff at the White House. Aides making above $100,00 include the high-profile jobs of White House chief of staff, national security adviser and press secretary.
On Wednesday, European Central Bank president Jean-Claude Trichet backed government loans to banks in England, France, and Spain.
After a meeting with France's top lenders, President Nicolas Sarkozy agreed to provide them with a further capital injection of 10.5 billion euros, the same amount as was shared between the top banks in October, 2008.
IBM posted fourth-quarter EPS from continuing operations of $3.28, vs. $2.80 one year earlier, as a widened gross margin and a lower tax rate offset a 6% revenue decline (-1% adjusting for currency). Wall Street was looking for current-quarter EPS of $3.03. The company sees 2009 EPS of at least $9.20.
Abbott Laboratories (ABT) posted fourth-quarter GAAP EPS of 98 cents, vs. 77 cents one year earlier, on a 10% sales rise. The company confirmed its previously issued 2009 EPS guidance of $3.65-$3.70 under both GAAP and non-GAAP bases.
United Technologies (UTX) posted fourth-quarter EPS of $1.23 (including 6 cents net benefit from one-time gains in excess of restructuring costs), vs. $1.08 one year earlier, despite a 1.8% revenue decline. Wall Street was looking for current-quarter EPS of $1.22. The company reaffirmed its 2009 EPS guidance of $4.65-$5.15 (excluding the impact of any acquisition related costs resulting from adoption of SFAS 141).
CSX Corp. (CSX) posted fourth-quarter EPS from continuing operations (excluding items) of 90 cents, vs. 85 cents one year earlier, on a 4% revenue rise. The gains were driven by higher yields and fuel recovery, which more than offset the impact of significantly lower volumes.
Bank of New York Mellon Corp. (BK) posted fourth-quarter EPS from continuing operations of 5 cents, vs. 61 cents one year earlier, on a 5.6% decline in total fee revenue. At Dec. 31. the company's Tier I capital ratio was 13.1%, vs. 9.3% at Sept. 30.
PNC Financial said it expects to report a fourth-quarter loss due to integration costs, and that the additional provision for credit losses related to National City Corp. is substantially below previously disclosed estimates. Additionally, PNC expects to report a significantly strengthened capital position, and doesn't expect that it will need additional capital beyond the $7.6 billion obtained through the government's TARP program.
Northern Trust posted fourth quarter operating EPS of $1.39, vs. 97 cents one year earlier, on 18% higher consolidated revenue, driven by record foreign exchange trading income and record net interest income.
BlackRock Inc. (BLK) posted fourth quarter EPS of 40 cents, vs. $2.43 one year earlier, on a 26% revenue decline. Although assets under management closed the quarter up $48.6 billion, the company said it suffered an $80.5 billion decline in asset values due to adverse markets and foreign exchange movements.
Coach Inc. (COH) posted second-quarter EPS of 67 cents, vs. 69 cents one year earlier, on 1.8% lower total sales (excluding foreign currency translation). The company withdrew guidance for the balance of fiscal 2009. Coach has revisited its domestic store opening goals for fiscal 2010 with an eye toward reducing the number of new stores from its current run rate of 40 North American retail locations per year to about 20, while also suspending retail store expansions.
Air Products & Chemicals (APD) posted first-quarter EPS from continuing operations of 42 cents, vs. $1.18 one year earlier, on an 8.8% sales drop. The company sees second-quarter EPS from continuing operations of 80 cents-90 cents, and fiscal 2009 EPS from continuing operations of $4.00-$4.30.