Market Insider

Wall Street Edges Toward Quarter End With Positive Tone

The Street is edging toward the end of one of the most volatile quarters in recent memory ... and for all those a bit tired of the excitement, it looks like it might actually have a laid-back and happy ending.

Housing news and a few story stocks could help influence direction Thursday. Friday is the final trading day of the quarter.

General Motor'shistoric accord with the United Auto Workers started Wednesday trading off on solid footing and the day ended in a swoosh up after the New York Times named a few possible buyers for a stake in Bear Stearns .

It didn't hurt that one of those potential buyers was Warren Buffett. Just a whiff of the Buffett name was enough to cause a rush of buyers into stocks ahead of the close.

The Dow jumped 99.50 points, or 0.7%, to 13878.15, its highest close since July 23. The Dow has been up three of the last four days and is just 122 points from its July 19 high of 14,000. It is up 11% for the year. Nasdaq was up 15.58 points  , or 0.6%, and the S&P 500 was up 8 or 0.5%.

Housing starts data is released Thursday morning at 10 a.m. It is a fickle number, (expected to be weak) and for that reason is not as impactful as existing home sales. The final number for second quarter GDP is released at 8:30 a.m. New York time, and weekly initial jobless claims are also reported.

It's hard to get too excited about the last look at GDP, but I'm getting excited about the end of the quarter," said CNBC's Rick Santelli. (by the way, we believe he really is excited by that. it's not an act.) "I just think we're going to get more news. There's always a news cycle as you get to the end of the accounting period, whether its monthly, quarterly, or as in the case of Japan, the half year."

Also worth noting: Fed Chairman Ben Bernanke gives welcoming remarks at the Domestic Prices in an Integrated World Economy conference at the Fed in Washington Thursday afternoon. He will take no questions. Fed Governor Frederic Mishkin, however, speaks at 7 p.m. at the  same conference. His topic is "globalization, macroeconomic performance and monetary policy" and he will take questions. A few earnings are due Thursday, including KB Homes and Rite Aid

Hair on the Bear Story?
But the story that really does fascinate is the one, or ones, about Bear Stearns, appearing in the form of serious news stories or in rumors whispered on trading desks. The joke of the day, seemingly every day lately, is what didn't you hear about Bear Stearns.

A buyer stepping up for a big investment stake in Bear, the most injured of the Wall Street firms, would be a real vote of confidence that the street will overcome the subprime-induced credit drama. A big investor's presence could also inspire hope that the core business is in tact and on the road to recovery.

Today, Bear stock was on the move even before the New York Times Web site, in a late day report, said Bear was in serious talks to sell as much as 20%. The paper said several serious investors including Buffett, Bank of America , Wachovia , China Construction Bank and China's Citic have all expressed an interest in taking minority stakes in Bear, according to sources.

Rumors circulating Wall Street earlier in the day focused on China Construction Bank, fresh from its initial offering on the Shanghai exchange. There were also rumors a Chinese buyer might want to take a bigger bite out of Bear, possibly buying a stake of 30%.  Bear Stearns spokesman Russell Sherman held tight to his no comment as we called him with new versions of the rumor throughout the day.

CNBC's Charlie Gasparino, who has been following the Bear drama, says he is highly doubtful that Buffett is a buyer for a 20% stake in Bear based on his reporting. It was Gasparino who reported weeks ago that Bear CEO Jimmy Cayne was looking for a Chinese investor.

British-born billionaire Joe Lewis recently reported a 7% stake in Bear but he did not disclose his intentions for buying the stock. Gasparino says Lewis was enticed to buy the stock by his broker, a heavy hitter at Bear Stearns and close associate of Cayne.

He is an Icon
Carl Icahn spoke to CNBC's "Fast Money" team Wednesday. Dylan Ratigan asked the legendary investor if he had looked at Bear or other financial stocks, and he said he believes there's too many unknowns about their future earnings from derivatives and the mortgage business. "I think you have to be quite cautious about the financial investments," he said.

Icahn also told "Fast Money" that you have to cautious about the stock market right now because of the credit crunch and it will take some time to be worked out. "This market is on a precipice and could go either way," he said. "... We have to be extremely careful when we have one of these crunches," he said.

Oil Spill
As oil made an interesting move Wednesday, CNBC's Rebecca Jarvis was at the NYMEX to track it and says the move appears to be technical. Crude started Wednesday higher,  but then immediately trended lower following the inventory data which showed a rise in crude supplies.

Jarvis sent us a note after Wednesday's close and said traders were saying they think the energy market is acting "whacky" and that the dollar will weaken, driving oil higher. Oil closed up 1%, at $80.30 per barrel.

"Joe Marshall of McNamara Options says if you look at today's low - $78.44 - it's the trend line set a week and a half ago. Prices immediately bounced off that level, and once crude touched the median - $79.50 - new buyers entered. Marshall says "when market trends sharply one direction, corrections don't last long." He sees today as a sign the correction is over, and we're back to rising prices. "The numbers are telling you that it wants to trade $85," he says," Jarvis writes.

More Fissures
Another deal cracked apart Wednesday when the buyout group for Sallie Mae said it wants to back out of the $25 billion deal, claiming material changes since the deal was agreed in April. The JC Flowers group says it is open to renegotiating the deal and says that legislation about student lending practices has impacted the deal as has the economic environment.

This is the second deal in several days to get blown apart. An $8 billion leveraged buyout for Harman Industries , the stereo maker, collapsed late last week. KKR and Goldman Sachs buyout arm walked away from the deal because financial conditions at the company were unacceptable for the deal to work.

Third Quarter Winners and Losers
If you had your energy holdings in your mattress this last month while the markets rocked, you'd be up 8.9% for the quarter. The S&P energy sector was the top performer followed by information technology, up 6.2%, then industrials, up 4.9% and materials up 3.9%.

Worst performers were consumer discretionary, off 6.5% and financials, down 5.3%.

Questions?  Comments?