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Stocks Off Session Highs; Apple Above $300

Abby Schultz, JeeYeon Park
Wednesday, 13 Oct 2010 | 3:56 PM ET

Stocks pared gains but remained significantly higher Wednesday as the dollar slumped, commodities soared, and a series of better-than-expected earnings reports gave investors confidence in the economy's health.

The Dow Jones Industrial Average was up more than 90 points, afterreaching a five-month high during a volatile session Tuesday.

Cisco , Microsoft , and Hewlett-Packard led the blue-chip index, while Intel and Bank of America fell.

The S&P 500 and the tech-heavy Nasdaq were also higher. The S&P 500 has risen about 12 percent and the Nasdaq has surged almost 15 percent since the beginning of September. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 19.

Most of the S&P 500 key sectors were higher, led by materials, industrials and energy, although financials and telecom slipped in the last half hour of trading.

The upbeat tone to the market comes on the heels of better-than-expected earnings reports from Intel, CSX, and JPMorgan. Also playing a role are increased expectations that the Federal Reserve will step into to boost the economyafter the release of minutes from the central bank's September meeting.

"I know I was pretty cautious on earnings," said Jack Ablin, chief investment officer at Harris Private Bank. "I wanted to get into the market, but I was also a little bit concerned about how these earnings would play out."

The fact that earnings have started to come in better than estimates Ablin had considered too optimistic is a positive sign that gives investors a reason to buy.

"Stocks are cheap," Ablin added, especially with the prospect of another recession seeming less likely.

On the tech front, Microsoft shares rose after news on Wednesday that the company has expanded its search partnership with Facebook.

Intel slipped even after the tech giant released strong results, powered by demand from emerging markets and corporations. Analysts had mixed reviews: FBR raised its price target to $27 from $26, while S&P equity lowered its price target to $22 from $25.

Oracle and Microsoft advanced after Evercore Partners started coverage of the tech giants with an "equal-weight" and "overperform" ratings, respectively.

Shares of Apple topped $300 for the first time. The iPod maker's stock price had been trending higher ahead of its earnings release next week. In addition, the firm is scheduled to unveil the next version of its operating system at an event next week, CNBC reported Wednesday.

And for those keeping tab at home, Apple has the 4th highest share price in the S&P 500, followed by Google, Washington Post and Priceline .

Search engine giant Google and chipmaker AMD rose ahead of their earnings due Thursday after the bell.

CSX continued to climb after reporting better-than-expected profits due to rising demand for freight.

Rival railroad stocks also rose, including Kansas City Southern , Union Pacific and Norfolk Southern . The Dow Jones Transportation Indexalso rose.

Costco shares were slightly higher despite a rating downgrade to "neutral" from "buy" from UBS. The brokerage said it continues to believe Costco has a strong business model, but after a 15 percent gain in the stock, it is fairly valued.

Wal-Mart, meanwhile, was also higher after CEO Mike Duke said he expects higher sales in the fourth quarteras the discount retailer shifts back to an "everyday low price strategy." Duke spoke at Wal-Mart's annual meeting with analysts and investors.

Chevron slipped slightly after the oil giant warned that its quarterly earnings could belower than those of its second quarter.

Western Refining surged almost 15 percent after Morgan Stanley upgraded the independent oil refiner to "outperform."

And elsewhere in energy news, Williams soared after the natural gas firm announced Alan Armstrong will become CEO at the end of the year after CEO Steve Malcolm retires.

Oil prices, rose for a third straight day near $83 a barrel as the dollar weakenedon reinforced expectations of more monetary easing by the U.S. central bank and on news that China's crude imports jumped in September. Gold surged to a record high near $1,375 an ouncewhile silver hit a 30-year peak.

The CRB index, the commodity price index, is at a 2-year high.

Buy Bank Stocks Now?
Discussing whether investors should buy bank stocks on JP Morgan's earnings, with Matt McCormick, Bahl & Gaynor Investment Counsel, and Chris Kotowski, Oppenheimer & Co.

Financials slumped in the last half hour of trading, led by several regional banks. Keycorp was cut to "perform" from "outperform" by Oppenheimer.

Also, JPMorgan Chase slumped, despite kicking off earnings for the big banks with better-than-expected profits, helped by lower loan losses in its retail and credit card units.

Credit card companies surged following JPMorgan's earnings news. American Express , Visa and MasterCard all climbed 3 percent.

Investment management firms were also higher after several ratings upgrades. JPMorgan raised its price targets for Invesco , Eaton Vance , Federated Investors , Franklin Resources , Janus Capital , and T. Rowe Price .

Meanwhile, Standard Chartered fell sharply after the bank announced a rights issue.

Shares of St. Joe plunged almost 10 percent after Greenlight Capital hedge fund manager David Einhorn said the land developmenet company faces a number of challenges during a speech at the Value Investing Congress in New York. Einhorn has had a previously disclosed short position since 2006.

MGM Resorts also tumbled almost 10 percent after disclosing that Tracinda, its largest shareholder, was reducing its stake in the casino company from 30 percent from 37 percent. Also weighing was the announcement that the firm would sell 41 million new shares in a secondary offering.

In mergers and acquisitions news, Lion's Gate Entertainment has proposed merging with Metro-Goldwyn-Mayer, which is in bankruptcy. Carl Icahn, Lion's Gate's largest shareholder, approved the merger.

Meanwhile, the government auctioned $21 billion of 10-year notes, which had a yield of 2.475 percent and a bid-to-cover ratio of 2.99.

Auctions of 30-year bonds are expected on Thursday.

In the day's conomic news, import prices declined, as a decline in oil prices offset gains in food and other goods, the U.S. Labor Department reported.

And mortgage applications for home refinancing loans rose for the first time in six weeks,although applications for new homes declined, the Mortgage Bankers Association reported. The seasonally adjusted index of mortgage applications, including purchases and refinancings, rose 14.6 percent for the week ended Oct. 8.

Coming Up This Week:
WEDNESDAY: Richmond Fed Pres Lacker speaks
THURSDAY: International trade; PPI; weekly jobless claims; oil inventories; 30-year bond auction; Minnesota Fed Pres Kocherlakota speaks; OPEC meeting; Earnings from Google and AMD
FRIDAY: Atlanta Fed Pres Lockhart speaks; Bernanke speaks; CPI; retail sales; Empire State mfg survey; consumer sentiment; credit card default rates reported; Earnings from GE and Mattel

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