Tuesday Look Ahead: Melting the Glacier
When stocks mostly go in the same direction all day, that's the new definition of quiet on Wall Street.
Monday was actually quiet by that standard, but there was still a huge 413-point Dow gainwhich of course picked up speed in the final hour. The Dow's 4.7 percent gain to 9265 was its fourth best day of the year. The S&P 500 rose 44 points, up 4.8 percent to 985.
Investors Tuesday will again be watching for progress in the credit markets, where the trickle from a slow thaw has been enough to end the drought of buyers in the stock market. There is also a long list of companies reporting earnings before the opening bell, including Dow components Caterpillar , DuPont , 3M and Pfizer .
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American Express stock was higher after the bell Monday on better-than-expected earnings. American Express earned $815 million or $0.70 per share, a decline of 24 percent, but better than the $0.59 per share analysts expected. American Express debt was downgraded by Moody's to A2 shortly after its report. Texas Instruments reported a 26 percent decline in profits, earning $563 million or $0.43 per share, slightly below analysts expectations. Its stock fell after it gave a weaker than expected outlook for the fourth quarter.
Missing in Monday's stock market was the chatter from traders that fund redemptions will continue hitting the market. That was a common theme last week when the stock market was making huge swings in both directions. "Maybe we're in the 7th inning in terms of redemptions," said one trader. "I'd like to say it's over, but it's not."
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Credit markets continue to show signs of progress. "Conditions are far from perfect, but today's improvement was substantial," wrote Miller Tabak's Tony Crescenzi Monday. "The most important development was the decline in dollar-based Libor, which saw sharp declines across the board in all major maturities." Eurodollar futures point to another decline in Libor at Tuesday's setting, he notes.
Crescenzi said commercial paper rates were also lower and swap rates fell. "For example, swap rates fell sharply, with the widely-followed 2-year rate falling by 123 basis points relative to Treasurys, to a spread of 111 basis points." Crescenzi said, in the note, that each major decline in the 2-year swap rate has been accompanied by a 1,000 point Dow move.
Bottom or No?
It still feels a little early to call a bottom in this market, but the collective comments of pundits certainly point to the likelihood that a market bottom is near. That is, if they are right.
It may be anecdotal, but it was encouraging Monday to see that research analysts were more actively looking at upgrading stocks, based on valuation. For instance Oppenheimer put a buy on a list of energy stocks, saying the upside potential outweighs the decline in oil prices. Energy stocks rose 11 percent.
Earnings expected Tuesday include several financial companies: BlackRock, Fifth Third, National City and US Bancorp. Drug maker Schering Plough and Biogen Idec also report. After the bell, both Apple and Yahoo report. (See more below on earnings and energy prices.)
Other events include a speech by Treasury Secretary Hank Paulson who attends the annual gala of the National Committee on U.S.-China Relations in New York at 6:30 p.m.. At 7:30 p.m. Minneapolis Fed President Gary Stern speaks at an economic club dinner.
Oil rose $2.40 per barrel Monday, or 3.3 percent to $74.25 ahead of Friday's emergency OPEC meeting. Gasoline rose 3.2 percent in the futures market to settle at $1.7201. Gas at the pump fell $0.237 per gallon in the past week to $2.914 per gallon, according to the EIA. This is the first drop below $3 since February.
(Note to Readers: In an earlier version, State Street was incorrectly listed as a company reporting earnings Tuesday. It reported a week ago.)
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