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Stocks Pull Off a Gain; Dow Ends Above 10,000

Published: Wednesday, 25 Aug 2010 | 5:59 PM ET

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By: Cindy Perman, JeeYeon Park

Stocks snapped a four-day losing streak Wednesday after a late rally.

Stocks had been lower for much of the day after dismal housing and durable goods data stressed the prospect of an economic slowdown.

Major U.S. Indexes

.DJIA

.NCOMP

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The Dow Jones Industrial Average managed to finish above the 10,000, after falling below that level earlier. The index gained 19.61, or 0.2 percent, to close at 10,060.06.

This came after a four-day losing streak in which the Dow lost a total of 3.6 percent. The index has fallen for 15 of the past 20 trading sessions.

Consumer-discretionary stocks led the charge, with Home Depot at the front of the Dow pack. Energy and industrials were among the weakest links, with United Technologies among the biggest Dow decliners.

Some market pros said technical factors, like short covering, where investors have to cover their bets against stocks which sends stocks up, were at play.

Still, the CBOE volatility index, widely considered the best gauge of fear in the market, fell back below 27.

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What got the market off on a sour note today was another dismal report on housing: New-home sales dropped 12.4 percent to a 276,000 annual rate in July after a 12.1-percent increase in June.

This came after a report Tuesday showed existing-home sales fell 27.2 percent last month to their lowest pace in 15 years.

But investors were piling into homebuilder stocks following several research notes yesterday that now may be the time to get in on housing stocks. D.R. Horton [DHI Loading... () ] and Toll Brothers [TOL Loading... () ] were both up more than 4 percent. Earlier, Toll Brothers reported it swung to a profit, helped by tax benefits.

“It’s been a real struggle to get this market to go positive, but the fact that we didn’t just sell off and stay low all day—I’m taking a few grains of positive from there,” Warren Meyers, CEO of Walter J. Dowd told CNBC.

Talk of a double-dip recession has accelerated in recent weeks, with Gluskin Sheff economist David Rosenberg going so far as to say this is a depression, not a recession.

But several market pros in the past few days have offered a counterpoint, saying they don't think the signs of worsening are there.

“We’ve got a very soft economy—it’s a constant disappointment, but we don’t think we’re going to have a double-dip because the most cyclical sectors of the economy are already in the basement,” David Kelly, chief market strategist at JPMorgan Funds, said on CNBC.

Disney shares [DIS Loading... () ] slipped following news that the company is in talks with Apple [AAPL Loading... () ] about renting TV shows to viewers for 99 cents each through iTunes.

But Apple rose following news that the company will hold a news event at the beginning of September, which whipped Apple lovers into a frenzy of speculation about the possibility the company might add cameras or TV capabilities to its iPods.

The tech-heavy Nasdaq was the best performer of the three major indexes.

Dell shares [DELL Loading... () ] rose following news that the PC maker is planning to submit a more competitive bid for data storage firm 3Par [PAR Loading... () ], challenging Hewlett-Packard's [HPQ Loading... () ] offer of $24 per share, according to sources.

Dell also released its first smartphone called the Aero that costs about $100 and uses AT&T's [T Loading... () ] network.

In other merger news, Rio Tinto [RTP Loading... () ] is apparently not planning a bid for Potash [POT Loading... () ]. The Canadian fertilizer maker is said to be seeking alternative offers to the $130-a-share offer from BHP Billiton [BHP Loading... () ]. For its part, BHP slapped down speculation, that it would make a higher bid.

American Eagle shares [AEO Loading... () ] jumped 8 percent after the teen retailer reported quarterly earnings but said it would trim inventories and close stores.

Health care, among the least sensitive to economy swings, outperformed the overall market. United Healthcare [UNH Loading... () ] and Wellpoint [WLP Loading... () ] rose almost 3 percent each.

And in the morning's other economic news, orders for durable goods rose 0.3 percent but fell well short of the 2.8-percent increase expected. Excluding transportation, orders fell 3.8 percent.

Treasurys fell near the lowest levels of the year after the government auctioned $36 billion of five-year bonds. The high yield was 1.374 percent and the bid-to-cover ratio was 2.83. Auctions 7-year notes are expected on Thursday.

Meanwhile, central bankers, economists and other officials from around the world headed to Jackson Hole, Wyoming, to assess the economic outlook at the Federal Reserve’s annual retreat.

Crude oil rose to $72.52 a barrel after a report showed a 4.1-million barrel jump in crude supplies, more than double of what was expected. Retail gasoline prices are also falling heading into the Labor Day holiday, with the national average around $2.70 a gallon.

Gold rose to an eight-week high, settling at $1,239.50 an ounce as the dollar fell against the euro and economic concerns fueled interest in the metal as a safe haven. Gold miners including Barrick Gold [ABX Loading... () ] and Newmont Mining [NEM Loading... () ] rose about 3 percent.

FedEx [FDX Loading... () ] shares slipped following news that the package-delivery giant is suing New York attorney general Andrew Cuomo, seeking to stop an investigation of the company. The company said Cuomo has exceeded his authority in seeking information on rates, routes, and price information.

Volume was decent for a late-August day, with 1.1 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 18 to 11.

Still to Come:
THURSDAY: Weekly jobless claims, 7-year Treasury note auction
FRIDAY: GDP, corporate profits, consumer sentiment; Earnings from Tiffany

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