Nasdaq Slips Late, but Dow Climbs
02/12/08 - 04:50 PM EST
Robert Holmes
Updated from 4:12 p.m. EST
U.S. equities ralled early as traders cheered better-than-expected earnings and a Warren Buffett plan to aid the ailing bond insurers, but a late selloff in technology left the major averages mixed at the close Tuesday. The Dow Jones Industrial Average rose more than 220 points before settling up 133.40, or 1.09%, at 12,373.41. The S&P 500 ended ahead by 9.73 points, or 0.73%, at 1348.86. The Nasdaq Composite stumbled in the final hour due to losses in Apple (AAPL Quote - Cramer on AAPL - Stock Picks) and Research in Motion (RIMM Quote - Cramer on RIMM - Stock Picks) to finish 0.02 point lower at 2320.04. Bill Stone, chief investment strategist with PNC Wealth Management, said he remains "very positive on the valuation of stocks, but investors should be prepared for the volatility to continue. Mixed credit news and significant economic weakness -- in fact, any sort of 'big' news these days -- seems to throw the market into a surge or a dive." The gains in blue chips came after Buffett, the billionaire head of Berkshire Hathaway (BRK.A Quote - Cramer on BRK.A - Stock Picks), said he had offered to reinsure $800 billion of municipal bonds insured by Ambac (ABK Quote - Cramer on ABK - Stock Picks), MBIA (MBI Quote - Cramer on MBI - Stock Picks) and FGIC. In a televised interview, he said one of the insurers turned down the offer and the other two hadn't responded. Some observers believe the so-called monolines are unlikely to accept the bid, because it covers only the best part of their portfolios while leaving them stuck with the more troubled portions. However, the fact that one of the most respected financial minds in the world was indicating his willingness to step in and help stabilize the struggling insurers' situation inspired traders to do some buying. "The big story of the day is the Warren Buffett offer to the bond insurers," said Peter Cardillo, chief market economist with Avalon Partners. "Any positive news from that front is something the market will embrace. That's one of the major hurdles traders are facing, and this gives hopes that the problems for the bond insurers is peaking. Now we're going to price in a recovery." Despite the pitch, MBIA's stock tumbled 15.3% to $11.50, and Ambac ended down 15.1% to $8.90. Still, the financial sector benefited from the news. The NYSE Financial Sector Index rose 1.6%, and the Nasdaq Financial 100 advanced 1%. "Traders should be skeptical if [the bounce] lasts," said Robert Pavlik, chief investment officer with Oaktree Asset Management. "It's hard to attribute the entire rally to the Warren Buffett bid. People are trying to bargain-hunt here." Elsewhere, traders were treated to news that the government has worked out a deal, titled Project Lifeline, that will suspend foreclosures for 30 days while lenders and homeowners reach new loan terms. Another headliner was General Motors (GM Quote - Cramer on GM - Stock Picks), which posted a $772 million loss for the fourth quarter amid weakness in the U.S. The biggest domestic automaker also said it would offer buyouts to 74,000 hourly workers who are represented by the United Auto Workers union. Shares of GM surrendered gains late in the session to finish down 52 cents, or 1.9%, at $26.60. In other earnings, Qwest Communications (Q Quote - Cramer on Q - Stock Picks) handily beat estimates for the fourth quarter, nearly doubling year-ago results. Additionally, Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks) reported a fourth-quarter loss of $3.36 billion, but exceeded the analyst consensus on an adjusted basis. Qwest added 2.9% to $5.28, and Schering-Plough was up 5.9% to close at $21.83. Following the closing bell, Applied Materials (AMAT Quote - Cramer on AMAT - Stock Picks), Wynn Resorts (WYNN Quote - Cramer on WYNN - Stock Picks) and Buffalo Wild Wings (BWLD Quote - Cramer on BWLD - Stock Picks) were reporting quarterly results. Among analyst actions, UBS upgraded Time Warner (TWX Quote - Cramer on TWX - Stock Picks) to buy from neutral, and Bear Stearns raised its rating for Schlumberger (SLB Quote - Cramer on SLB - Stock Picks) to outperform from peer perform. Time Warner rose 3.8% to $16.22, and Schlumberger climbed 1.2% to $81.49.
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