Closing Wrap-Up, July 22
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July 22, 2008
Early weakness on disappointing earnings doesn’t last with major market indices ending with solid gains. The Dow ($INDU) added 135.16 points to close the session at 11,602.50. The S&P 500 ($SPX) gained 17.00 points to 1,277.00. The Nasdaq ($COMPQ) tacked on 17.00 points to 2,303.96. Volume was solid on the session with 1.57 billion shares traded on the NYSE and 2.55 billion shares exchanged on the Naz. Market breadth was positive by a 22-to-9 and 20-to-10 margin on the Big Board and Naz respectively.
Unlike last week, earnings releases last night and this morning were disappointing. However, after initial weakness, the major market indices recovered due to a sharp drop in oil prices. Even shares of Wachovia (WB) saw strong gains despite reporting weak results. WB shares tacked on 27.39 percent to $16.79 after hitting an intraday low at $11.65. The financial company cut its dividend from 32.5-cents to 5-cents, but laid out a plan to cut costs, which included the cutting of more than 10,000 jobs.
Other financial shares also saw gains on the session on the view the worst might be over for the sector. There is no doubt that financial stocks have taken a major hit and the feeling is that these losses might be overdone. Shares of Bank of America (BAC) tacked on 13.3 percent to $32.35 and SunTrust (STI) gained 16.2 percent to $39.66.
One laggard Tuesday was American Express (AXP), which saw its shares fell 7.1 percent. The credit card giant stated that it would not meet earnings estimates due to problems in the economy. The company was less than optimistic, leaving its shares down sharply. The stock closed at $37.99 and has a 52-week range from $35.55 to $65.49.
Oil prices provided incentive to buy Tuesday with the commodity falling more than $3. The September contract closed at $127.95 and becomes the new front month contract tomorrow. Crude sold off on news Tropical Storm Dolly will miss key oil installations in the Gulf of Mexico. Comments from Fed leaders about inflation concerns also strengthened the dollar. Oil prices could see volatility tomorrow due to the release of the weekly inventory data.
Also impacting stock prices tomorrow will be another round of earnings reports and the Fed Beige Book report. Philadelphia Fed President Charles Plosser talked tough on inflation today, saying that Fed leaders need to start showing their concern with actions, not just words.
Jody Osborne
Senior Writer & Options Strategist
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