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HP provides reason to buy Tuesday with stocks rallying the last hour of trading. The Dow ($INDU) gained 151.17 points Tuesday, or 1.83 percent, to close the session at 8,424.75. The S&P 500 ($SPX) added 8.37 points, or 0.98 percent, to 859.12. The Nasdaq ($COMPQ) was virtually flat on the session, adding just 1.22 points to 1,483.27. Volume was moderate on the session with 1.60 billion shares traded on the NYSE and 2.39 billion shares changing hands on the Naz. Market breadth was negative by an 11-to-19 and 12-to-18 ratio on the Big Board and Naz respectively.

Shares of Hewlett-Packard (HPQ) rallied sharply on the session, up 14.49 percent to close at $33.59. The company preannounced earnings for the fourth quarter that were much stronger than expected. Better yet, the technology company raised its guidance for the quarter and fiscal 2009. HP has done a good job of cutting costs and has benefited from its repurchase program. Ironically, HP didn’t provide the boost many expected in technology stocks.

Yahoo (YHOO) shares gained ground on the session, up 8.65 percent to $11.55. CEO Jerry Wang has announced he will step down and this was viewed as good news by traders. This has some analysts expecting Microsoft (MSFT) to make another move for the Internet portal. YHOO shares hit a low at $9.76 with a 52-week high of $30.25.

Home Depot (HD) reported its quarterly results this morning with the home-improvement retailers seeing earnings fall by 31 percent. Nonetheless, the company’s profit of 45-cents a share did beat estimates and the stock was able to add 3.55 percent on the session. The company did state that fiscal 2008 sales could fall as much as 8 percent with earnings down 24 percent.

In earnings news, producer prices fell 2.8 percent, a much larger drop than the 1.7 percent decline expected. However, the core rate, which excludes food and energy prices, rose 0.4 percent, 3-tenths more than anticipated. Despite the sharp drop in energy prices, spending continues to fall with weekly same-store sales data showing weakness once again. The ICSC-Goldman and Redbook reports showed early declines of 0.1 percent and 0.9 percent respectively.

The housing market index continued to plummet, falling to 9 in November from 14 in October. This doesn’t bode well for new and existing sales data due out later in the month. A reading below 50 is a sign that more builders view market conditions as poor rather than favorable. November’s figure is the lowest on record since the report began in 1985. Another report showed that foreclosures in October were down 25 percent from the year ago period.

At least the bulls finally saw some strength after seeing strong declines the past two sessions. The lows have held so far on several retests, which is a positive sign. Though volatility is likely to continue, as long as the floor holds, we could start to build a bottom to build off.

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

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