Another Triple Digit Rally; Jobs Report Looms Ahead

Wall Street saw another triple digit rally on the Dow Jones index. This came after the Feds announced a ‘Subprime Solution’ fix to tackle the situation.

Quoted from http://www.foxbusiness.com/markets/article/triple-digit-rally-jobs-report-looms-ahead_394972_2.html:

Another Triple Digit Gain; Focus Now on Jobs Report

Thursday, Dec. 6 2007

Uptick

Another Triple Digit Gain; Focus Now on Jobs Report

Matt Egan FOXBusiness Articles Comtex SmarTrend(R) Morning Call — December 6, 2007 Stocks In Focus For Tuesday Ten Investing Ideas For The Next 12 Months FOX Business Unveils the FOX 50 SmarTrend(R) Market Wrap-Up — December 6, 2007

Wall Street saw another triple-digit gain on the Dow, nearly matching yesterday’s big gains, as traders cheered the Fed’s approval of a possible subprime mortgage fix. All eyes will now turn to Friday’s weekly jobs report and its implications for a potential interest rate cut.

Today’s Markets

The Dow Jones Industrial Average gained 174.93 points, or 1.30% to 13619.89, the Standard & Poor’s 500 index picked up 22.33 points, or 1.50% to 1507.34 and the Nasdaq Composite Index rose 42.67, or 1.60%, to 2709.03. The consumer-friendly Fox 50 rose 13.85, or 1.29%, to 1084.20.

The market moved steadily higher throughout the day, with all three major indexes advancing more than 1%.

Wall Street answered consecutive losing sessions earlier in the week with two big rallies, gaining back more than 370 points.

The market moved to session highs after Federal Reserve Chairman Ben Bernanke put his stamp of approval on the subprime plan, calling it a “welcome step.”

This afternoon Treasury Secretary Henry Paulson and President Bush outlined plans to freeze subprime mortgage rates, but gave few new details.

Countrywide Financial (CFC: 12.10, +1.68, +16.12%), which has been badly hurt by the subprime mess, rose more than 15% on the subprime plan.

Traders were also reacting to a fresh batch of November retail same-store sales reports, which came in mixed when compared to Wall Street expectations.

The November numbers are often considered the most important same-store numbers of the year because they include the Thanksgiving shopping weekend.

Target (TGT) dropped 7% on its soft December sales outlook weighed. The company said its same-store sales in November rose a better-than expected 10.8%. However, Target expects December sales to be “well short” of previous forecasts.

After that somber outlook Target was downgraded to market perform by Wachovia (WB: 44.07, +1.07, +2.48%) and the broader market briefly turned red.

AIG (AIG: 61.35, +3.20, +5.50%) continued its two-day strong run, rising another 5% and carrying the Dow higher. Yesterday traders cheered CEO Martin Sullivan’s reassurance that the insurance and financial giant’s housing exposure is “manageable.”

AIG has been one of the worst performers on the Dow year-to-date, falling 18%.

Retail sales were a mixed batch, with 19 stores beating estimates, two meeting and 22 falling short of expectations, according to Thomson Financial.

”It’s clear that the trend is for softer consumer spending. We’ve been seeing that for months now,” said Peter Boockvar, equity strategist at Miller Tabak.

Wal-Mart (WMT: 49.27, +0.37, +0.75%), the world’s largest retailer, reported a 1.9% increase in U.S. same-store sales, with its namesake brand posting a 1% gain. Despite beating estimates of a 1.2% increase, Wal-Mart was trading flat.

The Nasdaq Composite was led by Apple (AAPL: 189.95, +4.45, +2.39%), which had its price target increased to $249 by a Bear Stearns (BSC: 98.21, +5.61, +6.05%) analyst.

“As we have seen over the last couple of days the money continues to go into technology names,” said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles.

Volume was relatively light, with Wall Street anxiously awaiting tomorrow’s monthly employment report, which is expected to show a gain of 85,000 jobs.

If the report comes out either better or worse than expected it could affect whether the Federal Open Market Committee decides to cut interest rates next week - and by how much. Currently the market is pricing in a 100% chance of a 0.25% cut and a 66% chance of a larger 0.50% cut.

“The Fed is going to cut 0.25% next week regardless of tomorrow’s numbers,” said Boockvar.

For several weeks traders have been pushing for the FOMC to act on concerns about the credit crunch and housing slump.

“From a credibility standpoint the Fed needs to cut rates now to get more ahead of the curve rather than behind the curve like the last six months,” said James.

On the housing front, the Treasury Department and mortgage industry leaders came together to come up with the subprime rate freeze plan, which the Bush administration said 1.2 million people could be eligible for.

“The approach announced today is not a silver bullet,” said Paulson. “We face a difficult problem for which there is no perfect solution.”

OPEC’s decision to hold crude oil production steady and a government report showing oil inventories fell by 8 million barrels have helped oil prices soar higher again.

Oil gained $2.74 to settle at $90.23 a barrel in New York. Gold gained $4.50 to $808.20 an ounce.

Corporate Movers

Costco (COST: 70.83, +1.18, +1.69%) was a retail winner in November, posting a 9% jump in same-store sales compared with estimates of a 6.6% increase. Costco hit a new annual high on the numbers.

Nordstrom (JWN), the luxury retailer, reported an 8.7% rise in same-store sales last month, more than doubling predictions.

Macy’s (M: 29.81, -1.40, -4.48%) widely exceeded estimates with a 13.4% increase in same-store sales last month, however the company forecasted sales dropping up to 7% in December. Shares of Macy’s fell 4% today.

Saks (SKS: 21.34, +0.19, +0.89%) easily beat estimates with same-store sales surging ahead by 26.3%, but the company sees December sales as flat or modestly down.

Toll Brothers (TOL) posted its first loss in 21 years amid what it called the worst year in four decades. The largest U.S. luxury homebuilder lost $81.8 million, or 52 cents a share, compared with a profit of $173.8 million, or $1.07 a share, a year earlier. The latest results included pretax write-downs of $314.9 million, or $1.22 a share. Analysts expected the homebuilder to post a loss of 77 cents a share for the quarter, according Thomson Financial. Rival homebuilders Hovnanian (HOV: 9.01, +1.35, +17.62%) and Lennar (LEN: 18.73, +2.48, +15.26%) rose on the news.

The Coca-Cola Company (KO: 63.07, +0.02, +0.03%) announced this morning that Chairman and Chief Executive Officer Neville Isdell will step down as of July 1, 2008, to be replaced by President and Chief Operating Officer Muhtar Kent. Coke said Isdell will remain chairman until the company’s annual meeting with shareholders in 2009.

IBM (IBM: 109.70, +1.54, +1.42%) made gains today after a Wall Street Journal report said that the company’s scientists reached a “significant milestone” in an effort to make computer processors go faster.

General Electric (GE: 37.26, +0.55, +1.49%)’s NBC news division is expected to make large job cuts to its newsgathering operations, the New York Post reported. This includes eliminating an entire level of cable news channel MSNBC’s management team, in an effort to save up to $40 million. The cuts are expected this week or the next and are not expected affect CNBC, which is now in a battle for viewers with News Corp.-owned Fox Business Network.

Dell (DELL: 24.95, +0.64, +2.63%), the world’s second-largest computer manufacturer, announced a new deal to sell its computers at Best Buy (BBY: 52.71, +0.89, +1.71%). Before announcing similar deals with Wal-Mart and Staples (SPLS: 24.78, +0.86, +3.59%), Dell had relied almost exclusively on telephone and Internet sales.

Dow Jones (DJ: 59.97, +0.08, +0.13%) CEO Richard Zannino is leaving the company after News Corp. (NWS: 21.84, +0.65, +3.06%) completes its purchase of the company which includes the Wall Street Journal and Dow Jones Newswires. The deal is expected to close next week once News Corp.’s shareholders vote on it. The Journal cited anonymous sources in reporting that News Corp. executive Les Hinton will take over for Zannino.

MBIA (MBI: 29.84, +2.42, +8.82%), the bond insurer which plummeted 15% yesterday on concerns about a potential capital shortfall, reassured investors by saying it has been coming up with capital contingency plans. The stock shot back up 8% today.

Micron Tech (MU: 9.26, +0.31, +3.46%) was moving higher amid talks of a potential buyout. The company has long been looked at as a takeover candidate and more rumors that Samsung led to renewed hopes from Micron investors.

Family Dollar (FDO: 21.27, -1.92, -8.27%) droped 8% to a new annual low after reporting November same-store sales fell by 3.4%. Analysts polled by Thomson Financial expected a 1.8% rise in same-store sales.

Toro (TTC: 58.96, +4.74, +8.74%) reported a 46% rise in fourth-quarter earnings and boosted its quarterly dividend by 3 cents a share. The lawnmower company also said it expects up to 11% higher earnings per share in 2008.

Data Dump

Initial and continuing unemployment claims improved last week, falling 15,000 from the week before. Consensus estimates were for a larger drop of 18,000.

Continuing claims dropped 31,000 during the week ending Nov. 24 from the prior week.

While those numbers were relatively good, the overall trajectory of unemployment numbers remains high. However, yesterday’s ADP jobs report showed a much larger than expected increase in private sector payroll jobs.

Meanwhile, home foreclosures reached a new all-time high in the third quarter, according to the Mortgage Bankers Association. Home foreclosures have been on the rise amid the subprime mortgage mess and falling home values.

The MBA report on foreclosures said that the number of mortgage loans 30 days late or more reached the highest level since 1986.