Philly Fed Report Buoys Stocks; Oil Over $100
Stocks turned sharply higher Thursday after a closely-watched regional manufacturing report came in better than expected. Oil prices climbed back above $100 a barrel.
Among Standard & Poor's 10 key sector indexes, financials were the biggest gainer, climbing 4 percent. The energy, materials and health-care indexes declined.
Financial markets in the U.S., Canada, France, Germany and Hong Kong will be closed Friday. Japan, however, will be open. The U.S. bond market closes at 2 p.m. ET today.
The Philadelphia Federal Reserve's report on regional manufacturing activity beat forecasts. The index came in at minus 17 in March, compared with minus 24 in February. That was better than the minus 20 many economists had expected and significantly better than the minus 33 that had been making the rounds in the market rumor mill earlier today, which some economists said was based on the recent Empire State report from the New York Fed.
The Philadelphia report is the most closely watched regional report for signs of what to expect from the national reading on manufacturing, which is due out on April 1 from the Institute for Supply Management.
In other economic news, the Conference Board's measure of leading economic indicators fell 0.3 percent, as expected, in February, the fifth straight month of decline. Jobless claims rose by 22,000, more than expected, to 378,000 last week. That was the highest number of newly laid off workers filing for unemployment in nearly two months. The four-week moving average rose to its highest level since October 2005.
Offering investors another cause for optimism, Punk Ziegel analyst Richard Bove served up a report with the bold heading, "The Financial Crisis Is Over." He says that Bear Stearns was the watershed event that heralded the end and that "this is a once in a generation opportunity" to buy financial stocks.
Still, not everyone was convinced.
"I’m not sure we’re totally out of the woods," Art Cashin, director of floor operations for UBS Financial Services, told CNBC. "The focus is going to shift from the brokers and the bankers to the hedge funds now. And that’s so opaque that the rumor mongers are going to have a field day," Cashin said.
Profit-taking continued in commodities, but oil was back over $100 a barrelafter posting its biggest drop in more than 17 years on Thursday. Gold declined to around $925 an ounce after logging its biggest dollar decline in 28 years in the prior session.
On commodities, Cashin said, "I think what you’re seeing is the equivalent of a kind of margin call." When commodities start to slide, Cashin said, "it kind of feeds on itself for a couple of days."
Many analysts expect stocks to finish lower today ahead of the three-day holiday weekend as investors are wary to have too much money out there, especially in an uncertain market.
It's probably going to take a couple of days of quiet in the markets for investors to feel confident enough to jump back in, Cashin said. "The market wants to bottom. You can almost feel that," Cashin said. "But it just doesn’t know how to put it together."
Citigroup plans more job cuts in its securities division in order to offset writedowns from subprime and credit problems. The largest U.S. bank is expected to lay off about 2,000 investment bankers and tradersbefore March, the New York Times reported, citing people close to the situation.
British billionaire Joseph Lewis plans to fight to protect the value of his 8.4 percent stakein Bear Stearns, after a weekend offer by JPMorgan Chaseto buy the fifth-largest U.S. investment bank for $2 a share.
As banks get close to reporting their first-quarter results, investors should brace for more disappointing news, and it will be hard to gauge the size of the writedowns because it is difficult to value mortgage-backed securities as there are no buyers and the value of the collateral is still unknown, traders said.
"The credit crisis, at least here in the U.S., is still here and it's still unfolding," Drew Kanaly, chairman at Kanaly Trust, told "Worldwide Exchange."
"There's probably going to be other shoes to drop," Kanaly added.
In earnings news, Nike reported its earnings shot up 32 percent, beating expectations, helped by strong overseas sales, particularly in Asia. Net income jumped to $463.8 million, or 92 cents a share, from $350.8 million, or 68 cents a share, a year earlier. Analysts had expected earnings of 81 cents a share. Sales shot up 16 percent, with increases of 23 percent in Europe and 27 percent in Asia.
FedEx, which is often viewed as a gauge of the health of the overall U.S. economy, beat earnings expectations but lowered its outlook, citing high fuel prices and slowing U.S. economic growth. Net income slipped 7 percent to $393 million, or $1.26 a share, from $420 million, or $1.35, a share a year earlier. Analysts had expected earnings of $1.23 a share, according to Reuters Estimates. Revenue increased 10 percent.
Shares of Borders Group tumbled after the bookseller posted a profit but suspended its dividend and said it is exploring the sale of its business.
Larger rival Barnes & Noble reported its profit declined amid weak consumer spending.
Chip giant Intel announced plans to raise its quarterly dividend by 10 percent to 14 cents a share, payable June 1 to shareholders who own the stock as of May 7. Earlier this week, Intel said that under-$300 laptops are going to be available very soon in U.S. and Europe. The laptops were intended for poor children but may drive down computer prices.
The market also faces a quadruple witching, in which contracts expire for single stock futures, stock index futures, stock index options and stock options. Quadruple witchings happen four times a year and are generally considered bullish for the market, though they are often accompanied by high volatility and unpredictability in the 3 to 4 p.m. time frame, known as the "witching hour."
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