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Bulls win battle Wednesday on further decline in oil prices. The Dow ($INDU) added 29.88 points to close the session at 11,632.38. The S&P 500 ($SPX) gained 5.19 points to 1,282.19. The Nasdaq ($COMPQ) tacked on 21.92 points to 2,325.88. Volume was strong on the session with 1.73 billion shares traded on the NYSE and 2.73 billion shares exchanged on the Naz. Market breadth was positive by a 20-to-12 and 17-to-12 margin on the Big Board and Naz respectively.

Earnings were abundant Wednesday, creating a lot of volatility in individual stocks. However, it might have been another decline in oil prices that ultimately left the bulls in charge. The fact legislation was near passing to aid Fannie Mae (FNM) and Freddie Mac (FRE) benefited stocks as well. Earnings reports from Dow components Boeing (BA), McDonald’s (MCD) and AT&T (T) were accompanied by dozens of other releases, keeping traders busy keeping track of corporate results.

Oil prices fell nearly four dollars a barrel on Wednesday to close the session at $124.46. Even an unexpected decline in weekly crude inventory levels didn’t benefit crude bulls today. The EIA reported that crude inventory levels for the week ending July 18 fell by 1.6 million barrels. However, gasoline reserves were up by 2.9 million barrels. It seems that supply is surpassing demand with supply up 6.0 percent this past year, while demand is down 2.4 percent.

After the close, the House of Representatives approved a bill that will provide an unlimited amount of credit for Fannie Mae and Freddie Mac. The fact traders were expecting this bill to pass benefited stocks, especially these two firms. FNM shares rose 11.86 percent to $15 with FRE up 11.34 percent to $10.80. Traders that were able to buy the bottom for these two stocks have done very well with the low for FNM at $6.68 and at $3.89 for FRE.

Shares of MCD fell 0.77 percent to $59.66 despite announcing very strong earnings results. The fast food giant reported that revenues rose 4.0 percent with global comparable sales up 6.1 percent. Adjusted earnings per share grew by more than 30 percent. Shares of AT&T rose 3.90 percent to $33.06 after matching estimates for a 30 percent rise in profits.

Costco (COST) was a big loser on Wednesday with the stock down 11.90 percent to $63.43. The wholesale retailer warned that quarterly earnings would fall well short of expectations due to high energy prices and a general slowing in the economy. The Fed Beige Book supported this view, showing that pricing pressures remain elevated and that economic growth is tepid at best.  

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site

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