Bulls Back at the Helm; Dow Rises Nearly 200 Points

The past 4 weeks have been very interesting. For those of us who trade or have exposure, the subprime mortgage mess must have been the attention grabber the past months. Stocks and shares over the past couple of months have fallen and risen overnight.

Quoted from http://www.foxbusiness.com/markets/article/bulls-helm-dow-rises-196-points_389910_2.html:

Bulls Back at the Helm; Dow Rises Nearly 200 Points

Wall Street broke through its two-day losing streak, with some positive economic data and big gains from insurance and financial giant AIG lifting the major indexes more than 1% higher.

Today’s Markets

The Dow Jones Industrial Average rose 196.23 points, or 1.48% to 13444.96, the Standard & Poor’s 500 index gained 22.22 points, or 1.52% to 1485.01 and the Nasdaq Composite Index picked up 46.53 points, or 1.78%, to 2666.36. The consumer-friendly Fox 50 index rose 14.52 points, or 1.38%, to 1070.35.

Wall Street was more than 150 points higher for most of the day and closed near session highs.

Several key economic reports took center stage before the market opened and gave Wall Street a shot in the arm after two straight losing sessions.

The U.S. Labor Department said that worker productivity, the amount of output per hour, advanced by an annual rate of 6.3% in the summer, the fastest pace in four years. Also, wage pressures dropped by 2%, the largest fall in four years.

Those two elements of that report could hold off concerns of a recession and worries about inflation.

Traders have also been reacting to any clues into the outcome of Friday’s much anticipated monthly jobs report, which is expected to show a gain of 85,000 jobs.

The ADP Employment Survey, which was released this morning and is considered a preliminary look at the job market, showed that the economy added 189,000 private sector jobs in November, well above consensus estimates of 50,000.

It represents the biggest month to month increase in the ADP survey in a year.

“While the number is historically a poor indicator for the Labor Department’s monthly report, the 189,000 increase in jobs for November is clearly at odds with recent talk of economic recession,” said Frederic Ruffy, analyst at Optionetics.

AIG (AIG: 58.15, +2.70, +4.86%) was the best performer on the Dow, rising 4% after CEO Martin Sullivan comforted investors by saying the company’s housing exposure is “manageable.” AIG has been one of the worst performers on the Dow this year.

The Nasdaq Composite rose nearly 2% after tech giant Intel (INTC: 27.22, +0.91, +3.45%) was upgraded to overweight from market weight by Thomas Weisel Partners on strong demand for PCs.

However, MBIA (MBI: 27.42, -5.21, -15.96%), a financial company, plummeted more than 15% after Moody’s said it believes a capital shortfall is “somewhat likely.” Shares of MBIA fell sharply to the lowest levels since March 2000.

That news briefly sent financials off of session highs but the broader market held strong.

“I think now investors are treating the headlines within the financial sector as problems for specific companies and industries…For example, what do capital spending shortfalls at MBIA have to do with computer and semiconductor sales in the emerging markets,” said Ruffy.

Oil is also on Wall Street’s radar this morning. OPEC, meeting in Abu Dhabi, decided not to increase production, despite previous expectations that the oil cartel would offer a hike of as much as 500,000 barrels a day. Instead, OPEC will review conditions in February.

That news was followed by a massive drawdown in U.S. crude oil supplies, which fell by 8 million barrels, 10 times as much as the 700,000 barrel drop that was expected.

Despite that bullish news, oil was well below $90 a barrel. In New York, oil fell 83 cents to settle at $87.49.

The subprime mortgage mess also continues to be an issue with traders after mortgage giant Fannie Mae (FNM: 36.13, +0.95, +2.70%) said late Tuesday that it was cutting its dividend and selling a new class of stock to help raise capital. Financial stocks like Lehman Brothers (LEH: 60.01, +0.40, +0.67%) and Goldman Sachs (GS: 218.26, +3.04, +1.41%) also declined in trading yesterday.

News broke that tomorrow President Bush will outline the subprime mortgage rate freeze which came to light last week. The freeze will cover loans originating from between the beginning of 2005 and July 2007.
Corporate Movers

Bristol Myers Squibb (BMY: 29.26, +0.20, +0.68%) plans a 10% staff reduction over the next three years, raised its dividend by 11% and announced a series of other moves this afternoon.

Comcast (CMCSA: 18.18, -2.55, -12.30%) plummeted 12% after it said it will miss expectations for adding new subscribers, revenue and cash flow. CFO Michael Angelakis told investors the company was hurt by the fact that “this is not a robust economy.” The news led JPMorgan Chase (JPM: 44.90, +0.75, +1.69%) to downgrade the stock from buy to neutral.

Genentech (DNA: 66.75, -6.03, -8.28%) dropped 9% to a new annual low after the Wall Street Journal reported that an FDA advisory panel narrowly rejected its breast cancer drug Avastin.

Guess (GES: 45.78, +2.30, +5.28%) beat the street with third-quarter earnings of 62 cents a share, compared with mean analyst estimates of 57 cents. The company also raised its 2008 earnings outlook.

Adolor (ADLR: 4.48, +0.73, +19.46%) surged nearly 20% on the news the company is teaming up with Pfizer (PFE: 23.98, +0.51, +2.17%) to develop new pain medication.

McClatchy (MNI: 13.49, +0.05, +0.37%) sees profit growth in 2008 when analysts had expected a drop in profits. The company is expected to detail its new forecast later today.

Western Digital (WDC: 30.42, +2.19, +7.75%) hit a new annual high as it raised its fiscal second-quarter earnings guidance to between $1.02 and $1.06 a share, above current analyst estimates.

The New York Times (NYT: 16.72, -0.23, -1.35%) was upgraded to a buy by an analyst at Benchmark Capital, citing strength at its flagship newspaper. The company said today that it sees revenue growth of 1% to 2% in November due to growth in both digital and circulation revenue.

Novell (NOVL: 6.94, -0.10, -1.42%) fell more than 5% after the company said it is delaying the release of its fourth-quarter earnings due to a Securities and Exchange Commission review. The quarterly report had been expected to be released today.

Data Dump

Mortgage applications increased 24.2% from the same week last year, according to the Mortgage Bankers Association’s weekly index. The survey covers approximately 50% of all U.S. retail residential mortgage applications.

There was a 15.9% rise in layoff announcements in November from October, according to outplacement firm Challenger, Gray and Christmas.