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Big Bounce for Wall Street

Robert Holmes

Stocks in the U.S. were sharply higher Tuesday as an earnings beat by the world's largest retailer and reassurance from the financial sector prompted bargain-hunters to go to work.

The Dow Jones Industrial Average skyrocketed 319.54 points, or 2.46%, to 13,307.09, its second-best point gain of the year. The S&P 500 jumped 41.87 points, or 2.91%, at 1481.05. The Nasdaq Composite, the weakest of the three of late, was the best performer this time, soaring 89.52 points, or 3.46%, to 2673.65.

Leading the Dow was Wal-Mart (WMT Quote), which reported a third-quarter profit that rose 8% from a year ago to top Wall Street's estimates. The retailer also said quarterly revenue came in at $91.95 billion, exceeding forecasts.

Additionally, Wal-Mart lifted its profit forecast for the full year. Shares jumped $2.65, or 6.1%, to $45.97.

Home Depot (HD Quote) was also out with earnings, although its results were overshadowed by Wal-Mart's. The home-improvement retailer posted a third-quarter profit that dropped nearly 27% from a year ago because of the slowing housing market. Regardless, Home Depot gained 66 cents, or 2.3%, at $29.12.

Much like the previous session, the retail sector was one of the best performers. The S&P Retail Index added 3.9%. Among other subsector index winners, the Amex Airline Index jumped 5.2%, the Philadelphia Semiconductor Sector Index rose 2.2%, and the KBW Bank Index gained 4.9%.

Boosting financials was Goldman Sachs (GS Quote), which jumped 8.5% after CEO Lloyd Blankfein said the investment bank will not suffer writedowns from subprime mortgage exposure as many of its rivals have. The stock jumped $18.33 to end the day at $233.04, and the comments helped lift others in the sector.

Elsewhere, the Philadelphia Housing Sector Index ended 4.4% higher following positive data on the housing market. A late-afternoon report from the National Association of Realtors showed that pending home sales unexpectedly rose 0.2% in September, compared to expectations for a 2% drop.

Ian Shepherdson, chief economist with High Frequency Economics, said the September pending home sales data were a welcome pause following the hefty declines in August and July, but he warned against getting overly optimistic about housing.

"This does not change the trend, which is still sharply downwards," said Shepherdson. "Looking a bit further ahead, though, we expect the decline in sales to continue, because the inventory overhang continues to depress prices and people are reluctant to borrow to buy depreciating assets."

On the New York Stock Exchange, 3.95 billion shares changed hands, as advancers toppled decliners by a 9-to-2 margin. Volume on the Nasdaq reached 2.60 billion shares, with winners beating losers 7 to 3.

Last time out, the major averages fluctuated between positive and negative territory before weakening in the final hour of trading. At the close, the Dow had a loss of 55.44 points, or 0.43%, to 12,987.30, the first time the index has closed below the 13,000 level since mid-August.

The S&P fell 14.52 points, or 1%, to 1439.18, and the tech-heavy Nasdaq continued to see the steepest declines. On Monday, the index was lower by 43.81 points, or 1.67%, at 2584.13.

Elsewhere in corporate news, Corning (GLW Quote) closed 10% higher after the company hiked its guidance for the fourth quarter. Corning now expects earnings in a range of 38 cents to 40 cents a share, compared with the average estimate of 37 cents a share. Shares added $2.14 at $23.54.

Among ratings changes, CIBC World Markets upgraded Internet search giant Yahoo! (YHOO Quote) to sector outperform from sector perform. Elsewhere, UBS raised its rating for Yamana Gold (AUY Quote) to buy from neutral. Yahoo! rose $1.32, or 5.3%, to $26.10. Yamana advanced 63 cents, or 5%, to close at $13.25.

Meanwhile, most commodities continued to slide. Crude dropped $3.45 to $91.17 a barrel, and gold lost $8.70 to finish at $799 an ounce.

"The corporate news is definitely helping, but the market is getting a lot of help from the technicals," said Peter Cardillo, chief market economist with Avalon Partners. "Oil prices are now approaching $90 a barrel, and after a major selloff we were due for this technical rebound. Hopefully good forthcoming economic news will help us stabilization. We need to see the upward momentum continue."

U.S. Treasury bonds, which didn't trade Monday in observance of the Veteran's Day holiday, were lower. The 10-year note was down 11/32 in price, pushing the yield to 4.27%. The 30-year bond was off 6/32, yielding 4.62%.

Overseas markets were mixed. In Asia, Hong Kong's Hang Seng added 0.5%, and Japan's Nikkei 225 fell 0.5%. The split move came after the Bank of Japan said it would keep key interest rates unchanged. BOJ Governor Toshihiko Fukui said the global economy is at risk if the U.S. housing slump spreads internationally.

Among European bourses, London's FTSE 100 tacked on 0.4%, while Germany's Xetra Dax slipped 0.4%.