Stocks rally, Day 2Dow and S&P lead the advance as Wall Street stages a late-session rally. A rise in durable-goods orders and anticipation about the Fed lift equities. Video
NEW YORK (CNNMoney.com) -- Stocks rallied Tuesday, gaining for the second session in a row as investors welcomed a strong read on durable-goods orders and some upbeat earnings, on the first day of the Federal Reserve policy meeting. The Dow Jones industrial average (INDU) added almost 100 points or 0.8%. The broader Standard & Poor's 500 (SPX) index gained 0.6%. The Nasdaq composite (COMP) rose nearly 0.4%. Stocks also rallied Monday, with investors picking up shares hit in the recent selloff on bets that the Federal Reserve will keep cutting interest rates at the conclusion of its meeting Wednesday. A decision is due at around 2:15 p.m. ET. Investors struggled to extend the stock advance Tuesday, with blue chips finally sparking a bigger rally late in the session. The advance was broad based, with 2 out of 3 Dow components rising, led by AIG (AIG, Fortune 500), Alcoa (AA, Fortune 500), Boeing (BA, Fortune 500), AT&T (T, Fortune 500) and JP Morgan (JPM, Fortune 500). After the close of trade Tuesday, Yahoo (YHOO, Fortune 500) reported higher earnings that topped estimates on higher revenue that met estimates. However, the search engine behemoth also said that it faces headwinds in 2008, that revenue could miss the high end of analysts' current forecasts and that it will announce layoffs by mid-February. Shares plunged 10% in extended-hours trading. (Full story). Earnings are due before the bell Wednesday from Dow components Altria (MO, Fortune 500), Boeing (BA, Fortune 500) and Merck (MRK, Fortune 500). Ahead of the Fed decision Thursday, the ADP survey of private sector employment in January is due. The fourth-quarter GDP growth report is also on tap before the start of trade. The weekly oil inventory report is due in mid-morning. All eyes on the Fed. The central bank announced an emergency interest rate cut last week, lowering the fed funds rate, a key short-term bank lending rate, by three-quarters of a percentage point to 3.5 %, following a series of U.S. and global market declines on recession fears. It was the biggest cut since 1984 and helped the stock market stabilize last week, along with the government's fiscal stimulus plan. But now investors are betting that the central bank, meeting Tuesday and Wednesday, will cut the fed funds rate by an additional half-percentage point, to 3%. Failure to do so would likely spark a big stock selloff, said Dean Barber, president at Barber Financial Group. Yet, the mood is such that even if the Fed does cut by a half-percentage point, stocks will likely sell off, he said, with some investors wanting another three-quarters of a percentage point cut. "I think that the Fed will end up disappointing investors tomorrow with the size of the cut and the language in the statement," Barber said. "There's still so much uncertainty out there that I can't see the Fed decision lifting stocks." U.S. stocks have tanked for most of January on fears that the credit and housing market crises will send the economy into a recession, if it isn't there already. While the lower rates and the Fed's series of auctions have helped the banks, that hasn't had an impact on consumers since the banks are still not increasing their lending to individuals. On Tuesday, the Fed announced the results from the latest $30 billion auction. Economic news. Tuesday brought a mix of news on the economic front. Durable-goods orders to factories jumped by 5.2% in December, the government reported, more than doubling analysts' forecasts. (Full story). The January consumer confidence index fell less than expected, slipping to 87.9 against forecasts for a reading of 87. The confidence index stood at a revised 90.6 in the previous month. A separate government report showed the biggest annual drop in home ownership in four decades. And in other housing market news, foreclosures surged 75% in 2007, according to an industry report released Tuesday. In his final State of the Union address Monday night, President Bush called for the swift passage of the proposed approximately $146 billion fiscal stimulus package. The House of Representatives voted to approve the bill Tuesday, but it is expected to face an uphill battle in the Senate. Earnings news. After the close Monday, American Express (AXP, Fortune 500) reported lower earnings that met estimates on higher revenue that missed estimates. AmEx stock initially dipped Tuesday morning, before rebounding. Fellow Dow component 3M (MMM, Fortune 500) released results Tuesday morning. 3M reported weaker earnings and higher revenue, both of which topped expectations. Shares ended higher. Mortgage lender Countrywide Financial (CFC, Fortune 500) said it swung to a quarterly loss, versus a profit a year ago, due to rising costs stemming from more borrowers defaulting on their loans. However, shares rose as investors mulled comments from merger partner Bank of America (BAC, Fortune 500) that it is still planning to go ahead with the deal to buy the troubled company. VMWare (VMW), which makes visualization software, reported quarterly profit that missed expectations, sending shares 34% lower. EMC (EMC, Fortune 500), which is a majority owner of VMWare, tumbled almost 6%, despite reporting earnings that topped estimates. In other corporate news, Wal-Mart Stores (WMT, Fortune 500) said it will offer discounts of up to 30% on groceries and other items to keep shoppers spending despite the economic slowdown. (Full story). Walt Disney (DIS, Fortune 500) slipped more than 2% after Citigroup downgraded it to "sell" from "hold," saying that the weak economy could limit attendance at its theme parks. Market breadth was positive. On the New York Stock Exchange, winners beat losers by nearly 2 to 1 on volume of 1.56 billion shares. On the Nasdaq, advancers topped decliners 4 to 3 on volume of 2.19 billion shares. Other markets. Treasury prices slumped, raising the yield on the 10-year note to 3.67% from 3.58% late Monday. Bond prices and yields move in opposite directions. In currency trading, the dollar inched higher versus the yen and the euro. U.S. light crude oil for March delivery rose 65 cents to settle at $91.64 a barrel on the New York Mercantile Exchange. COMEX gold for April delivery fell $2 to settle at $930.80 an ounce, after touching an all-time trading high of $933.50. |
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