A late burst of buying helped major indexes erase earlier losses in a see-saw session Wednesday
U.S. stocks finished a see-saw session higher Wednesday thanks to a late flurry of buying. Surprisingly strong reports on U.S. home sales and durable goods orders helped offset worries about weak demand shown at a five-year Treasury note auction and news of layoffs at IBM Corp. (IBM).
Major indexes began the day higher, turned lower and then charged higher into the close. On Wednesday, the 30-stock Dow Jones industrial average finished higher by 89.84 points, or 1.17%, at 7,749.81. The broad S&P 500 index added 7.76 points, or 0.96%, to 813.88 after slipping below the 800 level in the afternoon. The tech-heavy Nasdaq composite index gained 12.43 points, or 0.82%, to 1,528.95. NYSE breadth was 21-9 positive, while Nasdaq breadth was 17-10 positive.
Bonds and the dollar index fell. Gold futures rose. Crude oil futures declined after the release of the weekly U.S. inventory report showed a greater than expected build in crude stockpiles.
Traders will be keeping a watchful eye on Thursday's final revision of fourth-quarter gross domestic products and and weekly initial jobless claims data.
U.S. Treasury Secretary Timothy Geithner said Wednesday the U.S. dollar is still the world's reserve currency and will remain so for a long time, though he also expressed openess to expanded use of an IMF currency basket.
Reuters reported Geithner, when asked during an audience question-and-answer period following a speech in New York, whether he foresaw a change in the dollar's global role, he said, "No, I do not." He also said, "as a country, we will do what's necessary to make sure we're sustaining confidence in our financial markets and in this economy's long-term fundamentals."
The comments came shortly after Geithner, in response to another question, said he was "quite open" to a recent Chinese suggestion to move toward greater use of a IMF-created global currency basket comprising dollar, euros, sterling
and yen. Zhou Xiaochuan, China's central bank governor, earlier this month said the world should consider the IMF's Special Drawing Rights basket as a super-sovereign reserve currency. Geithner said he hadn't read Zhou's proposal, but added, "as I understand it, it's a proposal designed to increase the use of the IMF's Special Drawing Rights. I am actually quite open to that suggestion."
President Obama used a prime-time news conference Tuesday night to defend his $3.6 trillion budget plan, digging in on his ambitious spending and tax proposals one day before the plan begins to move in Congress. Ahead of next week's global economic summit, Obama also took a subtle swipe at European leaders who have questioned his administration's calls for their countries to offer up more economic stimulus. "We don't want a situation in which some countries are making extraordinary efforts and other countries aren't, with the hope that somehow the countries that are making those important steps lift everybody up," he said.
Obama will meet with about a dozen top U.S. bank chief executives on Friday.
In a speech Wednesday, San Francisco Fed President Yellen voiced concern about considerable downside risks for the economy and highly uncertain forecasts, amid the need to use "all available tools" to fight off significant contractionary forces. She warned that the negative feedback loop between the financial sector and economy has shown little let-up, though there is hope that Fed and Treasury programs will normalize the financial sector this year. Yellen warned of greater risk of disinflation or even deflation than core inflation, which could remain below 1% for several years.
The Los Angeles Times reports that Bank of America (BAC)Chief Executive Kenneth D. Lewis said Tuesday that he wanted to start repaying $45 billion in federal bailout funds next month, after the government's "stress test" of his bank, and to give back the remainder as soon as the nation's wobbly financial system is stabilized.
Separately, The New York Post reports that BofA and Citigroup (C) have been aggressively scooping up AAA-rated mortgage backed securities in the secondary market.
In economic news Wednesday, U.S. new home sales rose 4.7% to a 337,000 unit annual rate in February, from an upwardly revised 322,000 pace in January (was 309,000). December's 344,000 was revised up to 371,000. This is another upside surprise in data, notes Action Economics. Regionally, strength was seen in the South and West, with declines in the Northeaset and Midwest. The months' supply of homes fell to 12.2 from a revised 12.9 in January (was 13.3). There were 330,000 homes for sale, vs. 340,000 in January (revised from 342,000). The median price fell to $200,900 from $206,800. That's down 18.1% yar-over-year, vs. -11.0% in January.
U.S. durable goods orders jumped 3.4% in February, and much stronger than the 2.0% drop that markets had expected. The rebound breaks a string of four consecutive monthly declines in orders. However, January's 5.2% drop was downwardly revised to a 7.3% decline, taking away some of the good news. Transportation orders rose 2.0%; excluding transportation, orders climbed 3.9%. Nondefense capital goods orders excluding aircraft were up 6.6%. Shipments fell 0.5% and inventories were down 0.9%, edging the inventory-shipment ratio down to 1.88 from 1.89 in January (revised from 1.86). While the headline data surprised on the upside, durables are a volatile report, and together with the sharp downward revision in January, the report may have a modest impact on the markets.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, increased 32.2% to 1,159.4 for the week ended March 20. Refinancing accounted for 78.5% of all applications. The MBA's seasonally adjusted purchase index rose 4.2% to 267.8. The index, however, was 33.7% below its year-ago level of 403.7.
Among companies in the news Wednesday, Jabil Circuit (JBL)
posted better-than-expected $0.13 vs. $0.20 second-quarter core EPS on a 5.6% revenue decline. Wall Street was looking for EPS of $0.12. Jabil said it produced cash flow from operations of $343 million for the second quarter, resulting in free cash flow that exceeded its expectation. Jabil sees third-quarter revenue of $2.5 billion-$2.7 billion, with core bottom line results ranging from a loss of $0.08 per share to EPS of $0.08.
Constellation Brands (STZ) lowered its $1.68-$1.72 fiscal 2009 EPS (excluding charges) target to $1.60-$1.62, citing an increasingly challenging global economic environment, particularly in the company's U.K. and Australian business during the fourth quarter. Constellation will cut 5% of its workforce. The company expects to take about $430 million of after-tax charges, primarily related to non-cash impairments of certain goodwill, intangible assets and equity method investments associated with its international business; including these charges, Constellation now sees on a reported basis a fiscal 2009 loss per share of $1.26-$1.28.
Altria Group (MO) said a Pinellas County jury ruled in favor of Philip Morris USA in one of the first tobacco lawsuits following a 2006 Florida Supreme Court decision that decertified a class action but allowed former class members to file individual lawsuits. The jury determined the plaintiff failed to meet the criteria established by this particular court to prevail at trial, the company noted.
CB Richard Ellis Group (CBG) and its lenders under its credit agreement agreed to amend certain of its terms. The company said the changes will give it "considerably increased financial flexibility to navigate through a weaker market environment."