Market Snapshot August 18, 2009, 4:30PM EST

Stocks Rebound on Retail Results

Indexes recovered some of their losses from the previous session, paced by better than expected profits from Home Depot and Target

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U.S. stocks closed higher Tuesday as price drops in the preceding session and better-than-expected earnings reports from retailers Home Depot (HD) and Target (TGT), and Saks (SKS) led to bargain hunting on Wall Street.

Tuesday's rebound actually began overseas, where news of a rise in German investor confidence supported buying.

Financial, basic materials, and industrial stocks were strong. Healthcare issues were soft on political uncertainties.

On Tuesday, the 30-stock Dow Jones industrial average finished with a gain of 82.60 points, or 0.90%, at 9,217.94. The broad Standard & Poor's 500-stock index added 9.94 points, or 1.01%, to 989.67. The tech-heavy Nasdaq composite index climbed 25.08 points, or 1.30%, to 1,955.92.

Treasuries and the dollar index retreated as stocks rose. Gold and oil futures climbed.

The global recession seems to have bottomed, but the pace of recovery remains uncertain, according to Standard & Poor's MarketScope. Traders have bet on a strong recovery.

Home Depot posted second-quarter earnings per share (EPS) of $0.66, vs. $0.71 one year earlier, on an 8.5% same-store sales drop and a 9.1% total sales drop. Wall Street analysts were expecting EPS of $0.59. Home Depot raised its fiscal 2010 EPS guidance; it now sees EPS from continuing operations to be flat to up 7% from last year; on an adjusted basis, it now sees EPS from continuing operations down 15%-20%.

Target reported better-than-expected second-quarter EPS of $0.79, vs. $0.82, on 6.2% lower same-store sales and 2.7% lower total sales, partially offset by the contribution from new store expansion. Wall Street was looking for EPS of $0.66.

Saks posted a narrower-than-expected $0.39 second-quarter loss per share, vs. a $0.24 loss, on 16% lower same-store sales and 15% lower net sales. Wall Street was looking for a $0.52 loss.

Agilent Technologies (A) posted third-quarter non-GAAP EPS of $0.15, vs. $0.53, on a 27% revenue decline. Wall Street was looking for EPS of $0.11. Agilent sees fourth-quarter non-GAAP EPS of $0.20-$0.25.

Cardinal Health (CAH) posts $0.86 vs. $0.96 Q4 non-GAAP EPS from continuing operations as weaker-than-expected results from its Clinical and Medical Products segment offset a 10% revenue rise. Wall Street was looking for EPS of $0.85-$0.86.

Pali Research upgraded its rating on shares of Goldman Sachs Group (GS) to buy from neutral and set a $210 target price.

The Federal Reserve dropped Pacific Investment Management and Goldman Sachs Group (GS) from the list of firms helping the central bank purchase as much as $1.25 trillion of mortgage securities this year, according to a Bloomberg News report. The move was disclosed in a statement posted on the New York Fed's Web page. Wellington Management and BlackRock, the other two managers hired as part of the unprecedented program that started in January, are being retained, according to the statement. The change comes amid concern that the Fed's asset managers may use inside information garnered from their roles in their other businesses. Representative Patrick Murphy, a Pennsylvania Democrat, sought reports to Congress on the potential conflicts earlier this year.