Welcome to late-August trading. Can you feel the breeze blowing in your hair?
Stocks swayed back and forth Wednesday, pushed at once by tropical storm Gustav's threat and oil's ascent, and then back again by a better-than-expected durable-goods report.
This is the last week of August, a week of end-of-summer vacations and getting the kids ready to go back to school. Trading volumes have been about half of their daily average, which has created some whipsaw moves in the market.
Just be careful these August winds don't knock you and your portfolio over.
Crude oil jumped more than $2, topping $119 a barrel, due to Gustav jitters, as well as dollar weakness and tension between Russia and the West after Russia recognized breakaway regions in Georgia also supported energyprices.
Crude inventories fell by 177,000 barrels to 305.8 million barrels, the EIA reported. Analysts had expected crude supplies to jump by 1 million barrels.
Durable-goods orders, which are items such as cars and appliances meant to last three years or more, rose a surprising 1.3 percentin July amid strong aircraft sales. However, when you strip out the volatile transportation category, orders rose 0.7 percent, when analysts had expected a drop of 0.5 percent. Nondefense capital goods orders excluding aircraft, seen as a barometer of business spending, jumped 2.6 percent, the sharpest gain since April. That category was expected to drop 0.1 precent.
Fannie Mae and Freddie Mac jumped after Merrill Lynch issued a note saying all this bailout talk is premature: Capital depletion at the firms is unlikely for several quarters. Rep. Barney Frank said he doesn't think a bailout is inevitable. There also seemed to be a shift on the trading floor that a government rescue isn't a done deal.
"Shareholder interest would arguably be better served if policy makers delay any meaningful discussion of altering the current status quo for Freddie Mac and Fannie Mae, as the shares would benefit from any relief rally,'' Merrill analyst Kenneth Bruce said in a research note.
Morgan Stanley cut its profit forecast for Goldman Sachs nearly in half, saying it expects a third-quarter profit of just $1.65, compared with the prior view of $3 a share.
Meanwhile, the New York attorney general's office is probing the relationship between Fidelity Investments and Goldman Sachsover the sale of auction-rate securities, a person familiar with the investigation told the Wall Street Journal.
Lehman Brothers has asked three private-equity firms to remain in the bidding for its asset-management division even though it hasn't decided whether or not to sell it yet, the Financial Times reported.
Morgan Stanley slashed its third-quarter estimate for Lehman to a loss of $2.80 a share from its prior view of a profit of eight cents a share.
Citigroup may consolidate some midtown Manhattan offices and ordered employees to pare expenses such as unnecessary color copies, as the largest bank in the United States struggles to cut costs.
The FDIC reported that the number of problem banks on its watch list rose to 117 in the second quarter from 90 in the first. Combined assets increased to $78 billion from $26 billion, which indicates that there probably isn't a really big bank on the watch list.
The FDIC doesn't name names but CNBC's Jim Cramer does, listing three banks as potential candidates for failure.
Nine U.S. banks have failed so far this year, the latest of which was Kansas-based Columbian Bank and Trust Co. on Friday.
The FDIC itself might have to borrow money from the Treasury to cope with the wave of bank failures, according to a Wall Street Journal report. But such a scenario was unlikely in the "near term," FDIC Chairman Sheila Bair told the paper.
Elsewhere, Amylin Pharmaceuticals shares were under pressure early after downgrades that followed news that four more people died taking the company's diabetes drug Byetta, bringing the total to six. Amylin shares were off more than 12 percent premarket.
Shares of Borders Group shot up more than 15 percent after the bookseller posted a smaller-than-expected loss, helped by tight inventory and cost controls.
J.Crew was a different story: The stock skidded more than 5 percent after the clothing retailer missed its earnings target and slashed its full-year outlookto $1.44 to $1.54 a share from its previous view of $1.70 to $1.75 a share. J.Crew was among the first retailers to notice the slowdown in consumer spending but didn't pare its inventories as well as other retailers to keep pace.
Close-out retailer Big Lots reported its earnings rose 11 percent, beating forecasts, as shoppers scooped up bargains on furniture, food and paper products. The company also raised its full-year forecast.
Wedbush raised its price target on Big Lots to $42 from $40 and kept its "strong buy" rating on the stock.
Meanwhile, a jury awarded $100 million in damages to Mattel in a federal copyright lawsuit that pitted the house of Barbie against MGA Entertainment, the maker of the Bratz dolls.
Asian stocks closed mixed, in volatile trading, while European markets were also dragged lower by banks, despite a rebound in energy companies.
MONDAY-THURSDAY: Democratic National Convention in Denver
WEDNESDAY: Weekly mortgage applications; durable goods; Fed's Lockhart speaks; weekly crude inventories; Report from Chicago Fed; Earnings from American Eagle, Dollar Tree
THURSDAY: Jobless claims; GDP, corporate profits; natural-gas inventories; Earnings from Sears Holdings, Tiffany and Dell; Barack Obama's acceptance speech
FRIDAY: Personal income and spending; Chicago manuf. report; consumer sentiment; farm prices
WATCHERS: McCain VP announcement
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