Stocks Soar on Citi News
U.S. stocks closed sharply higher Tuesday, with a bank-led rally driving the Dow industrials, S&P 500, and Nasdaq composite indexes up 5.8%, 6.4%, and 7.1%, respectively, on the day. The rally came after Citigroup (C) said it was profitable in the first two months of 2009, and as reports surfaced that U.S. regulators are considering reinstating the uptick rule to slow the pace of short selling.
Traders were also encouraged that January wholesale inventories fell by a less-than-expected 0.7%.
The rally lifted the market out of recent doldrums tied to economic worriessays S&P MarketScope.
On Tuesday, the 30-stock Dow Jones industrial average finished higher by 379.44 points, or 5.80%, at 6,926.49. The broad S&P 500 index was up 43.07 points, or 6.37%, at 719.60. The tech-heavy Nasdaq composite index added 89.64 points, or 7.07%, to 1,358.28. NYSE breadth was 29-2 positive, while Nasdaq breadth was 22-5 positive. Trading was heavy.
Energy, building material, and industrial stocks were among the biggest gainers Tuesday.
Treasuries, the dollar index, gold futures and crude oil futures fell as stocks rose.
Federal Reserve Chairman Ben Bernanke told the Council on Foreign Relations in Washington Tuesday that the financial crisis is global and requires coordinated effort to resolve. Bernanke said he's most worried about the broad economy and said the Fed is committed to price stability. Bernanke said he favors tweaking mark-to-market accounting rules
IMF Managing Director Dominique Strauss-Kahn said the world economic growth is likely to shrink to "below zero" this year.
Citigroup shares gained Tuesday as a memo from CEO Vikram Pandit said the company was profitable during the first two months of this year. Pandit said he was "most encouraged with the strength of our business so far in 2009. In fact, we are profitable through the first two months of 2009 and are having our best quarter-to-date performance since the third quarter of 2007." The bank had $19 billion of revenue in January and February before disclosed writedowns, he added.
Citigroup has logged five quarters of losses totaling more than $37.5 billion since it posted a $2.2 billion profit in the third quarter of 2007. Once the world's biggest bank by market value, the bank fell below $1 in New York trading last week for the first time as investors lost confidence that the shares can recover after losses and a government rescue.
In economic news Tuesday, U.S. wholesale inventories declined 0.7% in January, though not as much as the 1.0% drop that markets expected. December's 1.4% drop in inventories was revised down to -1.5%. Wholesale sales fell 2.9%, after a 3.7% decline in December sales (revised from -3.6%). Durable goods sales fell 6.5%, while nondurables rose 0.3%. Not surprisingly, petroleum sales fell 5.2%. Excluding petroleum, sales fell 2.8%. Durable inventories fell, 1.8% in January, with the 4.8% drop in auto inventories explaining much of the weakness. Nondurable inventories rose 0.2% in January, with petroleum inventories surging 12.4%. The inventory-to-sales ratio rose to 1.30 from 1.27.
Executive Board member Lorenzo Bini Smaghi said the European Central Bank is prepared to cut interest rates to zero if the economic situation worsens and deflation threatens, Germany's trade surplus narrowed to its lowest level in over seven years in January as exports fell sharply, suggesting Europe's largest economy will suffer another large contraction in the first quarter of 2009. France's industrial output slumped in January while its trade and budget deficits widened, data showed on Tuesday, crushing hopes that the economy had hit the bottom and pointing to further misery ahead.
British industrial output fell more than twice as fast as expected in January, shrinking at its fastest annual pace since January 1981, official data showed. British retail sales fell in February, when snowy weather and the end of the January sales kept shoppers away from stores, a survey by the British Retail Consortium showed.
European Union finance ministers are asking countries with large financial reserves to help double International Monetary Fund resources to $500 billion, and will seek a stronger IMF role in economic surveillance. The WSJ said the draft document, which the EU will present to finance ministers and central bankers from the Group of 20 countries at a meeting near London this weekend, doesn't name the countries to contribute. China and Saudi Arabia appear likely candidates. Japan has already offered $100 billion.
Wachovia reportedly said its merger analysis indicates Johnson & Johnson (JNJ) could try to acquire all of Schering-Plough (SGP) at a 10% premium over Merck's (MRK) original $23.61 per share offer for Schering. Wachovia also notes that a J&J-Schering deal would be accretive for J&J in the first year whether or not Merck exercised its right to buy out its cholesterol joint venture with Schering.
Citigroup reportedly downgraded Wal-Mart (WMT) to hold from buy.
Bank of America-Merrill reportedly upgraded Kohl's Corp. (KSS) to buy from neutral.
Texas Instruments (TXN) adjusted its first-quarter view to an $0.08 loss per share to breakeven on revenue of $1.79 billion-$2.05 billion. Previous guidance called for an $0.11 loss to $0.03 EPS on revenue of $1.62 billion-$2.12 billion. The EPS estimate includes $0.04 per share impact resulting from about $80 million of estimated restructuring charges. Previously, Texas Instruments had estimated restructuring charges of about $50 million, or $0.03 per share.
Dick's Sporting Goods (DKS) posted $0.55 vs. $0.62 fourth-quarter non-GAAP EPS on 8.6% lower same-store sales and 0.4% lower total sales. Wall Street was looking for $0.53. The company sees first-quarter same-store sales down 9%-12%, EPS of $0.03-$0.08 (excluding items); it also sees an 8%-12% fiscal 2009 same-store sales drop, with $0.80-$1.00 EPS (excluding items).
Rambus Inc. (RMBS) agreed in principle to terms for a compulsory license with Hynix Semiconductor for SDR SDRAM and DDR SDRAM memory products. In addition, a proposed final judgment of $349M in damages, plus pre-judgment interest of about $48M, to be paid by Hynix to RMBS, has been submitted to the U.S. District Court for the Northern District of California.
Oshkosh Corp. (OSK) announced that it has reached an agreement with its lenders for an amendment of its credit agreement. The amended $3.1 billion credit facility is effective March 9, 2009, and includes revised financial covenant ratios through the remaining life of the credit agreement.