It's all in the attitude today: Stocks rose after an improvement in consumer confidence.
Stocks were already pointing higher as oil prices receded but that little shot of confidence pushed the Dow up to a triple-digit gain. The Dow was up over 200 points, roughly what it lost on Monday.
Banks fluctuated throughout the day as news that Merrill Lynch plans another hefty writedown and capital-raising move got investors thinking about what's to come for banks in the third quarter.
Oil prices fell below $122 a barrel -- briefly falling below $121 a barrel -- as demand in the U.S. continued to drop and the average price of gasoline fell below $4 a gallon for the first time in seven weeks.
Consumer confidence ticked higher, pulling it off a 16-year low as concerns about inflation subsided somewhat, the Conference Board reported. The group's gauge of the consumer mood increased to 51.9 in July, the first increase since December, from an upwardly revised 51 in June. Economists had expected a reading of 50, according to a Reuters survey.
More dismal news for the housing sector: Home prices fell by 15.8 percent-- the steepest decline on record -- in May, a 20-city index compiled by Standard & Poor's and Case-Shiller showed. A narrower measure of 10 cities tumbled 16.9 percent, also the biggest decline on record.
There was no time for taking a breather in the financial sector. Just as soon as we cleared the second-quarter and all of its baggage, it was on to the third quarter.
Merrill shares skidded after the brokerage announced plans towrite down about $5.7 billionremoving risky debt from its books and now plans to raise $8.5 billion by selling more shares.
Citigroup tumbled after Deutsche Bank widened its 2008 loss projection for the largest U.S. bank's 2008. Deutsche Bank analyst Mike Mayo suggested the brokerage may follow in Merrill's footsteps with writedowns of about $8 billion in the third quarter for its exposure to collateralized debt obligations. This came a day after Merrill agreed to sell its CDOs for just 22 cents on the dollar.
The lurch to the third quarter left investors a little dizzy: Bank stocks were up before the bell, then declined at the open before rebounding again.
General Motors shares ticked higher after its financing arm, GMAC, announced that it would suspend subsidized auto leasing in Canada beginning Aug. 1. No word yet on if it plans to do the same in the U.S.
Amgen jumped after two brokerages, Merrill and Citigroup, raised their ratings on the stock. The pharmaceutical company beat expectations late Monday and raised its 2008 forecast.
Consumer products company Colgate-Palmolive topped forecasts before the bell.
Analysts have brought down their estimates for 2008 S&P 500 earnings but Citi Investment Research strategists say the 21-percent growth expected for 2009 is still too high, going so far as to call it "irrational" and unattainable unless commodity prices fall considerably.
While earnings season is winding down in the U.S., several major European names weighed in with results. SAP reported better-than-expected software sales, while oil giant BP topped estimates by nearly $1 billion. Alcatel-Lucent, meanwhile, said its chairman and CEO would step down following a series of profit warnings. And Sony reported its profit felldue to weak mobile phone sales.
The Merrill writedown was enough to push Asian markets lower across the board, with Tokyo shedding nearly 1.5 percent. European markets were also lower, with only London bucking the trend amid strength in mining stocks.
TUESDAY: Earnings from Electronic Arts, Northrop Grumman, Sony, US Steel and Viacom
WEDNESDAY: Mortgage applications; crude inventories; Earnings from Comcast, Disney, Interpublic, Starbucks and Visa
THURSDAY: Q2 GDP; Chicago and Kansas City Fed branches report on manufacturing; Earnings from Aetna, Altria, ExxonMobil and Motorola
FRIDAY: Auto sales; Jobs report; construction spending; ISM manufacturing report; Yahoo annual shareholder meeting; Earnings from Chevron
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