The day's major economic event is the 2 p.m. release of the Fed's Beige Book on the economy.
Will Oil Boil?
But the focus is on the oil markets. Oil's slide helped ignite a buying spree in stocks Tuesday. At the close, NYMEX crude was off $3.09 per barrel, or 2.4 percent to $127.95, its lowest close since June 5. It had reached an intraday low of $125.63 and was as high as $132.07 early in the day, but it sold off as traders became convinced that Hurricane Dolly would not prove a threat to Gulf of Mexico oil facilities.
The Dow jumped 135 or 1.2 percent to 11,602.50, and the S&P 500 rose 17, or 1.4 per cent to 1277. The dollar rose 0.76 against the euro and was trading at $1.5779 per euro.
Robert Sinche, head of global strategy and global rates, currencies and commodities for Bank of America, appeared on "Street Signs" and said that he expects oil's fall could push gasoline prices lower. Gasoline fell $0.0701 per gallon, to $3.1470 on the NYMEX Tuesday.
"Certainly at $3.15 per gallon, you could expect to see the AAA national average retail price to get down to somewhere between $3.85 and $3.90 a gallon. The peak was a little over $4.11 so that's about a 20 to 25 cents decline that would certainly help consumers' moods a bit," he said.
Sinche said the decline in crude could be good for the dollar. "If we bring those energy prices lower, we think the ECB will be less concerned about higher prices and probably be more focused on the weakening economy in the Eurozone. The Fed might be a little less concerned about the downside risks to the economy. The upstart of that is we think euro/dollar has probably seen its peak, back around $1.60, and we put out a recommendation to sell euro /dollar last week," he said.
Financials Not Folding
The view that financial earnings are not as bad as they might have been, and may in fact have seen the worst has helped create a spring board rally in the sector. Financial stocks rose 6.5 percent in Tuesday trading.
Look at Wachovia , a near $9 billion loss, but traders took it as a quarter where the bank was throwing in the "kitchen sink" and cleaning house. Its stock was helped by comments from influential bank analyst Deutsche Bank's Mike Mayo who said Wachovia's second quarter may mark a bottom. Wachovia's new CEO Robert Steel also helped reassure shareholders with comments that he does not expect to make any dilutive capital raising moves.
Washington Mutual , after the bell, reported a quarterly loss of $3 billion. Its chairman said it has sufficient capital and says that 2008 marks the peak for loan loss provisioning.
"The financials, as we discussed, have benefited ever since the government indicated there was a safety net," said Art Cashin, UBS director of floor operations. Cashin said the SEC's new short selling rules for financial stocks has also helped.
Stocks to Watch
Yahoo! also reported earnings in late trading and its stock was up nearly a percent after it said it earned $0.09 per share or $131 million. Analysts had expected earnings of $01.10 per share. CNBC's Jim Goldman interviews Yahoo President Susan Decker Wednesday morning.
Now We Know
When the credit crunch steam rolled markets about a year ago, there was a lot of shock and head scratching on Wall Street. Well, President Bush offered an explanation at a political fundraiser recently. He said Wall Street "got drunk and now it's got a hangover." That's some hangover.
To a laughing crowd, the President said the question is how long will it take the street to sober up, and "not try to do all these fancy financial instruments."
White House spokesman Tony Fratto said Bush was just describing the stock market the way many observers have.
Actually, we’ve heard way worse, and one can only ask if Wall Street was drunk, what were the regulators doing?
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