Stocks End Higher as Market Awaits Fed
Most observers are convinced the Fed won't change rates, but S&P MarketScope believes investors will be interested to see if policymakers will offer details on an exit strategy from the central bank's current program of ultra-low interest rates and massive purchases of government debt.
There was little reaction to a report that the Federal Housing Finance Agency's July house price index rose.
On Tuesday, the 30-stock Dow Jones industrial average finished higher by 51.01 points, or 0.52%, at 9,829.87. The broad Standard & Poor's 500-stock index was up 7.00 points, or 0.66%, at 1,071.66. The tech-heavy Nasdaq composite index gained 8.26 points, or 0.39%, to 2,146.30.
On the New York Stock Exchange, 21 stocks were higher in price for every eight that declined. Nasdaq breadth was 15-10 positive.
Treasuries rallied after a successful auction of $43 billion in two-year notes. Gold and oil futures were higher as the dollar sank against most currencies following report the U.S. will launch a new push in November to rebalance the world economy.
Many traders remained on the sidelines Tuesday as the policy-setting Federal Open Market Committee began a two-day meeting. Markets were looking for any comment from the central bank in its post-meeting statement, expected at 2:15 p.m. ET Wednesday, indicating that the Fed might wind down on its unconventional financial stimulus measures given the improving macroeconomic data.
Many officials, economists, and published studies suggest the recession has ended. But Martin Feldstein and other experts worry that the economy will slow once stimulus programs end, notes S&P MarketScope.
Home improvement chain Lowe's Companies (LOW) said on Tuesday it sees a 7%-9% fiscal 2010 same-store sales decline and a 3% total sales drop, with earnings per share (EPS) of $1.13-$1.21 EPS. For fiscal 2011, it sees a 1% same-store sales rise, a 3%-4% total sales rise, and EPS of $1.24-$1.34. Wall Street is looking for fiscal 2011 EPS of $1.34.
ConAgra Foods (CAG) reported first-quarter EPS from continuing operations of $0.37, vs. $0.23 one year earlier, on a 0.6% sales rise in its Consumer Foods segment. Wall Street was looking for EPS of $0.34. The food producer expects fiscal 2010 EPS from continuing operations (excluding items impacting comparability) to approach $1.70, reflecting strong performance of Consumer Foods segment in the first quarter and expectations for continued progress for this segment throughout the balance of the fiscal year.
Citigroup (C) shares rallied after the Singapore's GIC announced it had trimmed its stake in the bank by 4% to under 5%.
Cadbury said that shareholders would probably reject a deal with Kraft Foods (KFT), despite some synergies. Credit Suisse analysts downgraded Dell (DELL) to neutral, but boosted their views on Hewlett-Packard (HPQ), EMC (EMC) and Apple (AAPL).
FBR Capital raised its estimates and price target on Goldman Sachs Group (GS), and maintained its outperform rating on the Wall Street firm.
American Airlines parent AMR (AMR) sank 5% after announcing a $30 million share offering.
The Federal Housing Finance Agency reported that its home price index rose 0.3% in July, its third consecutive increase. However, the index remains down 4.2% from a year earlier and 10.5% from its April 2007 peak. The index covers new home sales financed through the government sponsored enterprises.
Bloomberg News reported Bank of America (BAC) said it will pay the government $425 million to cancel an unused guarantee of Merrill Lynch's assets and cut reliance on federal support after two bailouts. The payment would end a dispute over what the bank owes the U.S. for a promise to help absorb losses on $118 billion of holdings, mostly at Merrill Lynch. The federal guarantee helped seal Bank of America's takeover of the New York-based brokerage after fourth-quarter losses spiraled past $15 billion. While the accord was announced in January, an agreement was never signed and the bank resisted paying. Chief Executive Officer Kenneth D. Lewis has said he wants to shrink the U.S. role in company affairs. Paying the fee is part of a plan to reduce "reliance on government support and return to normal market funding," the company said yesterday in a statement.
Reuters reported the United States will urge world leaders this week to launch a new push in November to rebalance the world economy, but there are doubts national governments will bow to external advice. A document outlining the U.S. position ahead of the Sept. 24-25 Group of 20 summit in Pittsburgh said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States ought to boost savings.
U.S. Treasury Secretary Geithner said the G20 would aim for a more "balanced" recovery. Geithner says the aim is to create a more stable financial system and ensure the economic recovery is self-sustaining. He also said we're at the beginnings of the recovery amid tangible signs of progress and the consensus is that it's growing. Markets are assuming that the G20 negotiations are yielding some sort of behind the doors deal-making on the dollar to correct global imbalances, which may or may not be true.