Stocks Bounce Back; VIX Falls Below 30
Stocks bounced back Tuesday as banks rallied and a gauge of fear in the market dropped significantly.
Stocks had gotten off to a weak start after a report showed housing starts unexpectedly fell to a record low.
This came after stocks jumped 2.8 percent Monday, reversing much of last week's slump, following bullish analyst comments on banks.
Al Goldman, chief market strategist at Wells Fargo, said the recent pullback was simply the market taking a breather after getting ahead of itself in betting on better times ahead.
Goldman advises clients to proceed with caution but also to take advantage of the recent pullback.
"The current mood reminds us of the optimistic 10-year-old who, to test his optimism, was given a bag of horse manure for Christmas. Last seen, he had a big smile on his face as he ran around looking for his pony," Goldman explains in his weekly commentary. " We believe there is more good news (ponies) to come."
The CBOE Volatility Index , widely considered the best gauge of fear in the market, fell below the key 30 levelfor the first time since September, just before the market meltdown. In Monday's session, the VIX touched the 30 level, before settling just above that mark.
Goldman Sachs and Morgan Stanley wobbled at the open after the banks applied to pay back the funds they borrowed under the Troubled Asset Relief Program, various sources said. The early repayment of the funds may mean that the taxpayers are not getting the returns they were banking on, the New York Times reported.
Overall, banks were mixed, with Citigroup and State Street among the gainers, after the banks on Monday announced plans to raise capital.
In a sign that all is not rosy in the financial sector, American Express said Monday after the bell that it plans to eliminate 4,000 jobs, or 6 percent of its workforce, as higher customer defaults were brought on by the recession. Still, its shares declined.
Dow component Home Depot skidded after the home-improvement chain beat earnings expectations but reported sales declined nearly 10 percent.
This came a day after rival Lowe's reported its profit declined but beat expectations and the company raised its forecast. Its shares were down today after gaining more than 8 percent Monday.
Saks soared after the upscale department-store chain reported a smaller-than-expected lossas cost cuts and inventory paring helped offset weak sales.
TJX also gained as the off-price retailer, which operates TJ Maxx and Marshall's stores, reported a better-than-expected profit and said it could beat for the current quarter as penny-pinching shoppers flocked to its discount racks.
Over in tech land, American depositary shares of Nokia continued to climb a day after the Finnish handset maker announced it was rolling out three new phones that were capable of accessing the Internet but priced on the lower end of the scale.
And Germany's Vodafone , the world's largest mobile carrier by revenues, said it would speed up cost-cutting efforts after a $9.1 billion impairment charge because of problems in Spain and Turkey.
Sprint Nextel advanced following news that the U.S. carrier plans to sell the Palm Smartphone for $200 in an attempt to claw back some market share from Apple's iPhone and Research In Motion's BlackBerry.
General Motors rose as the automaker moves closer to what some say is imminent bankruptcy and as the government prepares to implement strict new fuel standards.
GM CEO Fritz Henderson said auto sales remain weak: "At this point, May feels a lot like April," were his exact words.
Shares of rival Ford fell.
In today's economic news, housing starts tumbled 12.8 percentto an annual rate of 458,000 units in April, after an 8.5-percent drop in March. That was the lowest on record and much lower than the 520,000 pace economists had expected. Building permits, a gauge of future activity, also dropped to a fresh record low.
TUESDAY: Fed's Stern speaks; Earnings from HP, Analog Devices after the bell
WEDNESDAY: Weekly mortgage apps; weekly oil inventories; Fed minutes; Fed's Plosser speaks; Earnings from Target, Toll Brothers and BJ's Wholesale
THURSDAY: Weekly jobless claims; Philly Fed report; leading indicators; Fed's Plosser speaks; Earnings from Gamestop, Hormel, Gap and Aeropostale
FRIDAY: Earnings from Campbell Soup
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