Markets & Finance

Stocks Rally Amid Overseas Gains


Major indexes built on the global equity rebound for their biggest one-day gain of 2007, despite weak productivity data and a plunge in factory orders

A return to volatility was good news for Wall Street on Tuesday. Stocks finished broadly higher, bouncing back from a weeklong correction amid a rebound in global markets and a recovery in the dollar against the yen. Treasury Secretary Henry Paulson and Japanese officials declared the global economy solid, though investors were also digesting some disappointing economic reports. Investors were apparently hunting for bargains, says Standard & Poor's Equity Research.

On Tuesday, the Dow Jones industrial average rose 157.18 points, or 1.3%, to 12,207.59. The broader Standard & Poor's 500 index added 21.29 points, or 1.55%, to 1,395.41. Both benchmarks posted their biggest one-day gain performance since July, 2006. The tech-heavy Nasdaq composite climbed 44.46 points, or 1.9%, to 2,385.14, its strongest day since October, 2006.

NYSE breadth was decidedly positive, with 28 issues advancing for every 6 declining. Nasdaq breadth was 25-6 positive.

The bull market may still have legs despite the recent slump, some analysts say. "There is insufficient evidence to declare the market has entered a bear phase," says Richard Dickson, senior market strategist at Lowry's Reports. "The best chance for a clarification of the market's status could be in a rebound rally and test of the current lows."

In economic news Tuesday, Treasury's Paulson said the global economy is as strong as he's ever seen it, according to the AP. Paulson, in Tokyo on the first leg of a three-nation Asian tour, reportedly said reforms in China would help reduce the the type of volatility that has recently shaken world markets.

Meanwhile, former Federal Reserve Chairman Alan Greenspan said there's a "one-third probability" of a U.S. recession this year, Bloomberg reports. "We are in the sixth year of a recovery," Greenspan reportedly said. "Imbalances can emerge as a result."

U.S. fourth-quarter nonfarm productivity was revised down to 1.6%, from a 3% rate in an earlier reading and -0.1% in the third quarter. Unit labor costs were revised up to a 6.6% rate, from an initial 1.7% print and a 3.2% pace in the third quarter.

Separately, U.S. factory orders fell 5.6% in January, more than expected after a revised 2.6% increase in December.

The National Association of Realtors' index of pending home sales fell 4.1% to 108.7 in January, after jumping to 113.3 in December.

However, focus this week will likely be on Friday's February nonfarm payrolls report, preceded by ADP's employment survey on Wednesday. The calendar Wendesday also holds data on January consumer credit.

Among Tuesday's stocks in the news, CBS (CBS) announced plans to buy back about 47 million shares of its Class B stock for $1.4 billion.

ADC Telecom (ADCT) was higher as the telecom equipment maker's fiscal first-quarter results topped analyst expectations.

Xilinx (XLNX) was higher after the chipmaker raised the bottom end of its forecast for fourth-quarter sales.

On the M&A front, Citigroup (C) announced a bid of up to $10.8 billion for full control of Japanese brokerage Nikko Cordial, of which the banking giant already holds a 4.9% stake.

K&F Industries (KFI) agreed to be acquired by a unit of London-based military aerospace company Meggitt for $1.1 billion in cash.

In analyst calls, Texas Instruments (TXN) was higher after Bear Stearns raised its rating on the chipmaker from peer perform to outperform.

Altria (MO) was higher after Deutsche Bank upgraded the cigarette maker from hold to buy.

In the energy markets, April West Texas Intermediate crude oil futures rose 62 cents to $60.69 a barrel amid cold weather in the Northeast, rebounding from their recent slide on worries about a slowing global economy.

European markets finished higher. The FTSE-100 index in London rose 79.8 points, or 1.32%, to 6,138.5. Germany's DAX index added 60.43 points, or 0.92%, to 6,595. In Paris, the CAC 40 index was up 52.1 points, or 0.97%, to 5,437.13.

Asian markets ended sharply higher. In Japan, the Nikkei 225 index rebounded 202.25 points, or 1.22%, to 16,844.5. In Hong Kong, the Hang Seng index climbed 393.68 points, or 2.11%, to 19,058.56. Korea's Kospi index advanced 26.78 points, or 1.95%, to 1,402.93.

Treasury Market

Treasury prices moved lower as assets flowed back into stocks. The 10-year note fell in price 09/32 to 100-25/32 for a yield of 4.52%, while 30-year bonds dropped 12/32 to 101-17/32 for a yield of 4.65%.

Hogan is a reporter for BusinessWeek.com in New York.

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