Stocks Holding to Large Gains - TheStreet

Stocks Holding to Large Gains

A fresh round of earnings, better-than-expected consumer confidence data and a drop in oil prices help lift the major averages.
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Updated from 2:10 p.m. EDT

Stocks on Wall Street were floating toward the close in a sea of green Tuesday afternoon as traders processed a stack of fresh earnings statements, watched oil prices continue to decline and greeted with optimism the sale of mortgage-backed bonds by

Merrill Lynch

(MER)

.

The

Dow Jones Industrial Average

was climbing 182 points to 11,314, and the

S&P 500

was adding 19 points to 1254. The

Nasdaq

tacked on 46 points to 2308.

Tuesday's rally allowed the three major indices to essentially recapture the ground they lost in a harsh selloff Monday, when a series of mediocre earnings statements failed to counteract continuing fears about the health of the financial sector.

Helping the rebound was another drop in crude oil, which was continuing its recent slump. Lately, futures were dropping $2.54 to close at $122.19 a barrel after earlier reaching $121.10, their lowest level since May. Gold lost $11.20 to close at $916.50.

As oil makes its way downward, "$120 might be a little bit of a tougher area to get through," said Bill Frejlich, commodities broker with Fox Investments. He said he expects oil's downtrend to continue and that speculation had been fueling its rise. "I think an appropriate place for crude might have been somewhere around $75, $80."

Frejlich, said traders are now selling into oil's rallies, whereas before they had been buying dips. "We're looking at a market coming back to earth. It always happens. Everything has cycles," he said.

"I would fully expect to see it at best in the high $70s, low $80s in the next year." In the short term, Frejlich said that oil would have a hard time breaking out past the $125 to $125.50 level, and "If we break that $120

level, we could see it near $110 within weeks." He said that geopolitical concerns could spur more buying in oil, but that buying would be based on psychological factors.

On the other hand, Tom Kloza, chief oil analyst for Oil Price Information Service, wrote in an email, "The much more compelling Maginot line for technicians is probably around $116.50 bbl

a barrel or so, which if broken, would probably break the back of many of the oil bulls." He said that although oil could test the $117 level by tomorrow, such a retracement would not be especially noteworthy. "

The global driven inflation scares are not behind us," he said.

Following the end of previous session, Merrill Lynch announced that it would be

selling to an affiliate

$30.6 billion in collateralized-debt obligations for $6.7 billion. The company, which has in recent quarters been troubled by the tough-to-value assets, also said it will raise $8.5 billion in capital through a stock offering and take a $4.4 billion pretax charge-off in the third quarter.

Jeff Saut, managing director at Raymond James, said that Merrill's sale of those securities at a discount wasn't a surprise. "What was a surprise was that they got as much as 22 cents

on the dollar for the portfolio. Nobody knows how to value it." He predicted more sales of esoteric securities by other financial firm as the end to the fiscal and calendar year approaches.

Saut also said he's observed that the recent pullback in banking stocks has been on lower volume, indicating that equity prices in the sector may have put in a near-term trading low.

Meanwhile, biotech company

Amgen

(AMGN) - Get Report

delivered

earnings that beat expectations

, as did agricultural chemicals concern

Mosaic

(MOS) - Get Report

.

When the new trading day arrived, investors received financial results from another series of companies, including steel producer

U.S. Steel

(X) - Get Report

, which announced that its second-quarter profit more than doubled thanks to its ability to pass increasing raw-material costs on to clients.

Also benefiting from the steel boom was coal company

Alpha Natural Resources

(ANR)

. Alpha Natural saw second-quarter earnings rise to record levels. Management attributed the success to persistent demand for metallurgic coal among steel producers.

Energy company

BP

(BP) - Get Report

announced a 28% year-over-year increase in profit thanks to rising oil prices.

Among technology names, struggling telecommunications firm

Alcatel-Lucent

(ALU)

reported a quarterly loss and announced the

departure

of CEO Patricia Russo and Chairman Serge Tchuruk. Shares were rising on news of the shakeup.

Electronics manufacturer

Sony

(SNE) - Get Report

also reported financial results, saying its profit was cut in half from a year ago and lowering its 2008 forecast.

After a long regulatory wait,

Sirius

and

XM Satellite Radio

completed their merger Tuesday

. Though investors had long been awaiting the deal's close, word that the new company would raise capital sent the shares lower by roughly 20%.

Fruit-and-vegetables purveyor

Fresh Del Monte Produce

(FDP) - Get Report

reported a 34% decline in second-quarter profit thanks to weather-related damage to its products.

Elsewhere, defense firm

Northrop Grumman

(NOC) - Get Report

said profits increased 8% year over year. Athletic underwear company

Under Armour

(UA) - Get Report

saw profits decline, as did disposal business

Waste Management

(WMI)

.

On a day that was rather light in terms of economic data, the S&P Case-Shiller 20-city housing index showed home prices falling 15.8% year over year for May, the largest decline since the index's debut in 2000. However, rising consumer confidence was a bright spot. The Conference Board announced that its July consumer confidence number came in at 51.9, ahead of the consensus estimate of 50 and up from 51 in June.

Long-dated U.S. bonds were falling. The 10-year Treasury note was off 12/32 to yield 4.05%, and the 30-year was down 15/32, yielding 4.63%. The dollar was rising sharply against the euro, the yen and the pound.

Across the seas, markets were mixed. In Europe, Frankfurt's DAX and London's FTSE were getting stronger, while in Asia Japan's Nikkei and Hong Kong's Hang Seng were showing weakness.

For a quick take on more of today's earnings, please click here.