Credit worries aside, bargain hunters boost stocks
NEW YORK - Wall Street bounded higher today as investors still mindful of widening credit problems nonetheless went in search of bargain stocks. The Dow Jones industrial average rose 117 points, with soaring oil and precious metals prices driving up the companies that produce those commodities.
The Dow Jones industrial average rose 117.54 to 13,660.94. The size of the gain masked the nervousness in the market; stocks were down earlier in the session.
But Microsoft, one of the 30 Dow stocks, fell 32 cents to close at $36.41 a share. Boeing, also a Dow stock, slipped 27 cents to $97.70.
Broader stock indicators also turned higher. The Standard & Poor’s 500 index rose 18.10 to 1,520.27, and the Nasdaq composite index rose 30.00 to 2,825.18.
Investors remain haunted by the big debt problems at banks, notably Citigroup and Merrill Lynch.
But companies outside of the banking, lending and housing industries have been posting strong financial results. Tenet Healthcare, Nortel Networks and Archer Daniels Midland impressed Wall Street today with their quarterly earnings.
And with no major bad news to follow up Citigroup’s Sunday announcement that it was preparing to mark down another $8 billion to $11 billion of subprime debt, even bank stocks, pummeled in recent months, looked like bargains.
Citigroup fell, but Washington Mutual, JPMorgan Chase, Bank of America, Wachovia and Wells Fargo - which all hit 52-week lows Monday - each jumped Tuesday. Seattle-based WaMu gained $1.05, or 4.5 percent, to $24.23.
“There was an absence of bad news,” said Jim Herrick, manager of equity trading at Baird & Co. “But there’s room for another shoe to drop. I don’t think we’re out of the woods yet. It’s a classic relief rally.”
Government bonds dipped as money flowed back into stocks. The yield on the 10-year Treasury note, which moves opposite the price, rose to 4.37 percent from 4.34 percent late Monday.
The Dow is about 500 points, about 3.5 percent, below the all-time high close of 14,164.53 it reached Oct. 9. Many companies, particularly in the technology and industrial sectors, have been consistently posting strong quarterly results and appear undervalued. But third-quarter weakness in the financial sector - the biggest in the S&P 500 - has dragged down overall U.S. earnings growth.
“We’ve had a pretty good run, as far as a return for the year for the broad market indices,” said Janna Sampson, director of portfolio management at Oakbrook Investments, pointing out that the S&P 500 index is up more than 8 percent for the year. “There may not be, given the level of earnings growth, a lot more for this quarter.”
Anthony Conroy, managing director at BNY ConvergEx Group, said it’s a stock-picker’s market. “If you do your due diligence, you can make money in the markets.”
In earnings news, hospital operator Tenet Healthcare reported its third-quarter loss narrowed on higher charges and more admissions in commercial managed care. Tenet rose 72 cents, or 22.3 percent, to $3.95.
Nortel Networks said it swung to a profit in the third quarter despite lower revenue. The Canadian telecom equipment supplier reported its best operating margin since 2004. Nortel rose $2.90, or 17.8 percent, to $19.18.
Agricultural processor Archer Daniels Midland (ADM) said its fiscal first-quarter profit rose 9 percent as improved results at its oilseeds processing business offset higher corn prices. ADM rose $2.37, or 6.9 percent, to $36.89.