Stocks Stage a Late Afternoon Comeback - TheStreet

Stocks Stage a Late Afternoon Comeback

After losing ground midday, the major indices are rallying as tech stocks lead the way and oil drops lower.
Author:
Publish date:

Updated from 1:54 p.m. EDT

Stocks in the U.S. were uniformly rising late in the session Tuesday as investors kept a close eye on retreating oil prices and dealt with mixed economic and corporate news.

The

Dow Jones Industrial Average

, which was up as much as 76 points this morning, dipped into the red at midday before clambering up 48 points at 12,528. The

S&P 500

was adding 7 points at 1383. Both blue-chip indices were up 0.4%.

The

Nasdaq Composite

performed best, recently jumping 27 points, or 1.1%, at 2471, thanks in part to strengthening technology stocks such as

Apple

(AAPL) - Get Report

,

Amazon.com

(AMZN) - Get Report

and

Google

(GOOG) - Get Report

.

Ryan Detrick, senior technical strategist with Schaeffer's Investment Research, pointed out that trading volume remained fairly thin throughout. "It seems like traders are still getting back from the three-day weekend hangover," he said. "It's a nice break, though, from the aggressive selling last week."

Early on, the Commerce Department said sales of one-family homes in April jumped 3.3% -- from the prior month's downwardly revised figure -- to a seasonally adjusted annual rate of 526,000. That also represents an 42% drop from last year, but it's a bit better than the economists' consensus of 520,000. Also, the amount of time needed to clear through the current inventory is now estimated at 10.6 months, based on the current sales pace, down from 11 months in March.

On the other hand, prior to that, Standard & Poor's/Case-Shiller indicated that prices of U.S. homes tumbled 14.1% nationwide last quarter, a record decline for the 20-year-old index.

"I would say that the Case-Shiller tends to overstate it to some extent," said Brian Bethune, chief financial economist with Global Insight. He pointed out that the index covers only big metropolitan areas with more of the higher-end homes, whereas other surveys -- such as the Census Bureau's Constant Quality Index, which was down only around 7% -- gather other sorts of housing data, as well.

Still, he remains concerned about the extraordinarily weak housing demand which, he noted, has been further exacerbated by rising foreclosure rates as more and more homes are thrown back onto the market. "It would be nice if we could get the foreclosure rate to peak," he said. "It's probably not going to happen in the first half of 2008, but if it does happen in the next one or two quarters, then the market has some hope of getting into a better equilibrium."

The Conference Board also said its consumer-confidence survey showed another decline to 57.2 in May from 62.8 in April -- worse than the measure of 60.0 sought by economists.

Traders were furthermore digesting a

Financial Times

report that former

Federal Reserve

chairman Alan Greenspan believes the probability of a severe recession has "come down markedly," though he still thinks there's a greater than 50% chance the U.S. will fall into some level of recession.

Also, San Francisco Fed President Janet Yellen said the central bank's interest-rate cuts over the past few months have been deep enough, and that the actions should be sufficient to encourage "moderate economic growth" later in the year. The Fed has brought down the benchmark lending rate by 325 basis points since September in an effort to stymie the U.S. economic slowdown.

But Robert Pavlik, chief investment officer with Oaktree Asset Management, contends that the market continues to be primarily oil-driven. Crude continued to lose ground today, shedding $3.45 to $128.74 a barrel; and that, incidentally, seemed to weigh on the Dow's oil-and-gas components,

Exxon Mobil

(XOM) - Get Report

and

Chevron

(CVX) - Get Report

. Shares were off 0.8% and 1.2%, respectively.

With oil still hovering near $130 a barrel, however, Pavlik believes this will continue to be a thorn in the side of traders for the foreseeable future.

"I think the reality is, the market's going to have a hard time moving up to test those 200-day moving averages and move higher from there without oil pulling back," he said. "Unless oil pulls back, people are going to be very concerned. This will stay with us until something else comes to the top of the hit parade."

Gold futures lost $17.90 to $907.90 an ounce. The U.S. dollar firmed by 0.4% against the euro at $1.5702 and tacked on 0.8% against the yen to 104.24.

Back on the companies side,

UBS

(UBS) - Get Report

was among the big decliners, losing 6% after officially filing for its previously announced discounted

$15.3 billion rights offering

on Friday. In the prospectus for the deal, the Swiss bank said that it could incur further losses on positions it continues to hold in the mortgage and real estate markets, both in and out of the U.S., having already taken hits on such positions in the past.

Fellow Swiss bank

Credit Suisse

(CS) - Get Report

was off 2.8% to $50.70.

Elsewhere, a Belgian business paper reported that

InBev

, a beer giant based in Belgium, could start merger negotiations with Budweiser purveyor

Anheuser-Busch

(BUD) - Get Report

as early as today. On Friday, the

Financial Times

said it was preparing a bid worth $46 billion, or $65 a share. Anheuser shares were hugging the flat line following Friday's sizable gains.

Media reports also said

Blackstone

(BX) - Get Report

and Apollo Management are in early-stage talks to take out

Chemtura

(CEM) - Get Report

. Blackstone shares rose 2.4% as Chemtura leaped 8.7%.

At the same time,

Infineon Technologies

(IFX)

fell 4.3% after announcing that CEO Wolfgang Ziebart

has resigned

"due to different opinions on the future strategic orientation of the company." The chip company said Peter Bauer, a member of the management board, will assume the role of spokesman for that body.

Also departing will be the chief of Britain-based

Vodafone

(VOD) - Get Report

, which announced preliminary full-year adjusted operating profit that showed a 5.7% to $19.9 billion on a 14.1% jump in sales. CEO Arun Sarin will step down in July and be replaced by Vittorio Colao. The stock gave up 1%.

In the retail sector,

Borders Group

(BGP)

is due to report after the closing bell Tuesday.

As for analyst actions, Bank of America and Bernstein each slashed second-quarter bottom-line estimates for

Lehman Brothers

(LEH)

,

Morgan Stanley

(MS) - Get Report

and

Goldman Sachs

(GS) - Get Report

, with both analysts citing concerns about more writedowns. BofA cut Lehman's target, in particular, to a loss from a prior profit expectation.

Still, Lehman shares shook off early losses to lift by 2.3%, and Morgan stock was up 1.1%. Goldman was rising 0.8%.

Also on Tuesday, Citigroup upped

American Axle

(AXL) - Get Report

to buy from hold after Friday's news that striking workers at the company had finally voted to accept an amended employment agreement and go back to work. The three-month strike had idled several

General Motors

(GM) - Get Report

plants, as American Axle is one of GM's main parts suppliers.

GM, on the other hand, was cut to hold from buy at Citi. The automaker said Friday that the strike had cost it $1.8 billion before taxes in the second quarter. Axle shares moved up 3.2% as GM lost 1.9%.

Separately, KeyBanc Capital Markets upgraded oil-and-gas name

Newfield Exploration

(NFX)

to buy from hold, and

Knight Transportation

(KNX) - Get Report

was lifted to outperform at Wachovia. Newfield shares rose marginally at $64.88, and Knight was up 6%.

Treasury prices were falling. The 10-year note was off 21/32 in price to yield 3.92%, and the 30-year bond plunged 1-8/32 in price, yielding 4.65%.

Foreign markets were mixed. The Nikkei 225 in Tokyo bounced 1.5% overnight, and Hong Kong's Hang Seng Index climbed by 0.6%. In Europe, however, the FTSE 100 slipped 0.5% and the Paris Cac surrendered 0.6%. Germany's Xetra Dax tiptoed 0.1% higher.