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Apr.21

1:27 PM ET

Tuesday, 21 Apr 2009

Behind This Rebound

Posted By:Bob Pisani

Topics:Earnings | Wall Street | Investment Strategy | Stock Market

This was written by CNBC's producer Robert Hum

While indicating a modestly lower open earlier this morning, the markets turned around late in the morning on a strong rebound in financials and the digestion of a series of less pessimistic comments by corporate executives.

In his testimony in front of the TARP’s Congressional Oversight Panel, U.S. Treasury Secretary Tim Geithner said that the Treasury would “welcome” repayment of TARP funds from banks that have adequate capital to lend. While the government is still studying principles to guide TARP repayment, Geithner reiterates that his “basic obligation is to make sure the system as a whole...has the ability to provide the credit that recovery requires” before approving an individual bank’s TARP repayment.

Traders recently have been concerned about when the Treasury would actually begin accepting TARP repayments from some of the larger banks – even if the banks say they are ready to start repaying the funds.

During Secretary Geithner’s testimony, banks turned around noticeably. After being down as much as 7.5 percent this morning, the KBW Banking Index is now UP over 6 percent in early afternoon trading. Some individual banks –which were all down significantly at the open – have swung in a much wider range today.

Swings today (from session low to session high)

Regions Financial 36 percent
KeyCorp 31 percent
Citigroup 26 percent
Bank of America 25 percent
Comerica 24 percent
Wells Fargo 17 percent
Bank of New York Mellon 10 percent

Has the Tide Started to Turn?

While the Q1 earnings reports this morning were far from rosy, traders were far more concerned with the picture for business conditions looking ahead. Early on, the market’s losses were tempered as investors began to digest a slew of “less pessimistic” comments from various corporate executives this morning. Take a look at some of these potentially encouraging signs:

1) United Technologies CEO Louis Chenevert: “We saw stabilization in the rate of year-over-year decline across most of our businesses in March.”

2) Coach CEO Lew Frankfort: (We were) "encouraged by the stabilization of our comparable store sales to pre-Christmas levels in North America."

3) Honda President Takeo Fukui: U.S. market has shown signs of having bottomed out since the beginning April.

4) Delta CEO Richard Anderson: "We've seen some signs of stabilization as the revenue environment appears to have bottomed out.” He does note too, however, that he expects to see challenges remaining throughout the year.

5) Texas Instruments CFO Kevin March in a Reuters interview: "In the last few weeks of the quarter, demand got a little better in a few areas.” The company also provided Q2 revenue and earnings guidance largely above the street’s expectations.

6) IBM provided near-term (2009) and even longer-term (2010) earnings forecasts well above the consensus estimate from analysts in its Q1 earnings report.

7) AK Steel anticipates its Q2 shipments to be up about 3% from its Q1 shipments (although the company also notes that it expects Q2 selling prices to fall 4% from Q1 levels).