Closing Bell: Good Riddance To That Bloody 1st Quarter

Mar 31, 2009 1 Comment ›› Pat Dollard

WSJ:

Stocks Rise as Quarter Ends

By PETER A. MCKAY and ROB CURRAN
Stocks jumped as investors piled into recent winners in the financial and technology sectors, driving the Dow Jones Industrial Average toward its best month since the bottom of the 2002 bear market.

Tentative signs of stabilization in the U.S. economy and banking system have helped drive stocks higher. But the market’s gains will face challenges in April from earnings season and the outcome of the Treasury Department’s stress tests on the nation’s banks.

At 3:30 p.m., the Dow was up 190 points. The Dow is up 9% for the month to date, its best gain since October 2002, which turned out to be the bottom of the last bear market.

For the quarter, which also ends Tuesday, the average is down about 12%. The Dow industrials have declined six consecutive quarters — the longest string of quarterly declines since the six quarters ending June 30, 1970.

“This isn’t a rip-roaring bull market,” said Cantor Fitzgerald strategist Marc Pado. “But you have definitely had a change in perception. People are more likely to buy on weakness rather than sell into strength. That’s a healthy change.”

All of the blue-chip measure’s financial companies rose. Microsoft jumped 6.6% after an analyst upgrade citing improving personal computer demand in the U.S. and China. Shares of PC maker Hewlett-Packard rose 1.6%. General Motors, whose struggles drove much of the previous session’s drop, fell 15%.

The tech-oriented Nasdaq Composite Index jumped 3.1% to 1548.72, paring its losses for 2009 to 2%. The S&P 500-stock index advanced 2.5%, led by a 6.9% jump in its financial sector.

Traders said Tuesday’s gains were largely being driven by money managers engaging in “window dressing,” or selling losers and buying strong performers so those names show up on clients’ quarterly statements. International Business Machines, the strongest of the Dow’s two gainers for the quarter, added 3.5%. Intel, the second biggest gainer, added 3.7%;

Among glimmers of hope for stocks, the volume in the last two down sessions was weaker than on the preceding up sessions, reversing the trend where “bear-market rally” volume was lighter than dips.

The “two day 5% sell-off come on some of the lightest volume over the past month — so big institutions weren’t aggressively dumping,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

Long-term investors say they are reluctant to return to stocks overall as concern over both the upcoming first-quarter earnings season and bank stress test results remain, but are trying to cautiously position for the period thereafter.

David P. Prokupek, managing partner and chief investment officer at the Denver portfolio-mangement firm Consumer Capital Partners, said he plans to wait on the sidelines through not only first-quarter earnings season but through the second quarter’s reports as well until a clearer outlook emerges.

“People’s expectations for the bank earnings have gotten pretty high,” said Kent Engelke, a managing director at Capitol Securities Management in Glen Allen, Va. “We need the entire group to live up to those expectations. You could easily get a 1,000-point swing in the Dow either way depending upon whether they do.”

Oil prices rose $1.25 a barrel after slumping by more than 7% Monday amid the selloff in stocks. Treasurys were also higher. The dollar rose against the yen after Japan outlined a new stimulus package. The U.S. currency fell against the euro.

FOX:

Bloody 1Q Ends Green; Best Monthly Rally in Years

by Matt Egan

One of the Dow’s worst first quarters on record mercifully ended Tuesday on an optimistic note. The blue-chip index jumped nearly 100 points — capping its biggest monthly rally in years — in the face of the latest bearish economic reports and fears about the teetering U.S. auto industry.

Today’s Markets

According to preliminary calculations, the Dow Jones Industrial Average rose 79.01 points, or 1.05%, to 7601.39, the S&P 500 added 9.76 points, or 1.24%, to 797.37 and the Nasdaq Composite picked up 26.79 points, or 1.78%, to 1528.59. The consumer-friendly FOX 50 gained 5.91 points, or 1%, to 598.44.

“Right now the glass is clearly being viewed as slightly more than half full. Negativity is being shrugged off and positives are being emphasized,” said Michael James, senior equity trader at Wedbush Morgan Securities.

While stocks ended solidly in the green, they suffered a late-day slide that halved the day’s gains. Aside from a new report that showed U.S. home prices suffered a record decline in January, the markets withstood weaker-than-expected reports on manufacturing and consumer confidence as well as the latest news about General Motors (GM: 2.0178, -0.6872, -25.4%) and Chrysler LLC.

“Effectively you have to throw today away because it’s the last day of the quarter so we’re not acting in intuitive ways,” said Art Hogan, chief market strategist at Jefferies & Co. Hogan said Tuesday’s rally was caused at least in part by “window-dressing,” the practice where fund managers buy recently strong stocks to make their holdings appear stronger before making them public.

While Wall Street will try to forget a first quarter that saw the Dow plummet nearly 14% — potentially its worst first quarter since 1939 — traders will likely be sorry to see March end. The Dow soared more than 6% this month, its best rally since 2003, thanks to a series of government interventions, optimism about banks and the economy and bargain hunting.

“It’s always easy to have a great month when you’ve had two lousy months. But it’s nice to see a little upward movement,” said Hogan.

Slammed by fears about the future of General Motors (GM: 2.0178, -0.6872, -25.4%) and Chrysler LLC and talk of more capital injections for banks, the Dow plummeted 254 points on Monday, its worst selloff in nearly a month.

“It’s almost like yesterday didn’t happen. There was uncertainty whether yesterday’s action was going to be the beginning of another decline or just a pullback leading to further higher levels,” said James.

During Tuesday’s trading, aluminum maker Alcoa (AA: 7.33, 0.64, 9.57%) and Bank of America (BAC: 6.79, 0.71, 11.68%) were the two biggest percentage winners on the Dow. Microsoft (MSFT: 18.37, 0.89, 5.09%) and American Express (AXP: 13.61, 0.7801, 6.08%) also rose sharply. Only a handful of the index’s 30 components traded lower, including Johnson & Johnson (JNJ: 52.58, -0.5, -0.94%) and GM.

The Nasdaq Composite posted stronger gains than the Dow as tech heavyweights such as Google (GOOG: 348.06, 5.37, 1.57%) and Amazon.com (AMZN: 73.44, 2, 2.8%) bounced back from Monday’s plunge.

Financial stocks also rebounded as Wall Street hopes for positive developments from the G-20 summit in London and a meeting on mark-to-market accounting rules

Bleak Economic Data Ignored

The markets had little reaction to the S&P/Case-Shiller Home Price index, which showed home prices in the 20 largest U.S. metropolitan areas fell by 19% in January, the largest drop in the index’s 10-year history. Wall Street also shrugged off the Conference Board’s consumer confidence report, which showed confidence barely rebounded in March after hitting an all-time low in February.

In a preview of Wednesday’s national manufacturing report, the Chicago Purchasing Managers index tumbled to a worse-than-expected 31.4 reading in March.

Autos in Focus

Meanwhile, the markets remain jittery about the future of the auto industry a day after the White House ousted GM CEO Rick Wagoner and threatened to cut off funding for the auto maker and rival Chrysler LLC.

With just 60 days to reach new concessions with unions and bondholders, GM’s new CEO Fritz Henderson said the company’s restructuring will succeed in or out of court and could be completed ahead of the government’s June 1 deadline. He also said more buyout programs and plant closures are likely.

At the same time, Chrysler parent Cerberus Capital Management is so financially desperate to sell the auto maker to Italy’s Fiat that it is willing to lose all equity in Chrysler if a deal is reached, according to The Wall Street Journal.

In the commodity markets, crude oil enjoyed a late rally to rebound from Monday’s plunge below $50 per barrel. Crude closed at $49.90 per barrel, up $1.49. Gold ended at $922.60 per ounce, up $7.10, or 0.78%.

Corporate Movers

Ford (F: 2.64, -0.1299, -4.69%) unveiled a new incentive plan that will cover payments for up to 12 months on any new vehicle if a customer loses their job. The auto maker is also offering 0% financing on select vehicles.

Barclays (BCS: 8.58, 0.29, 3.5%) is nearing a deal to sell iShares, its exchange-traded funds business, to British private-equity firm CVC Capital Partners for $4.29 billion, Dow Jones Newswires reported. Barclays would receive warrants equivalent to 20% of iShares, the wire service reported.

Lennar (LEN: 7.47, -1.29, -14.73%) lost nearly one-fifth of its market value after the second-largest U.S. home builder posted a deeper-than-expected quarterly loss of 98 cents per share. Lennar’s revenue plunged 44% as it delivered 38% fewer homes.

Toyota (TM: 63.44, -0.17, -0.27%) plans to slash its fiscal 2008 dividend, the first dividend cut for the auto maker since 1995, Japanese newspaper the Nikkei reported.

Sun-Times Media Group (SUTM: undefined, undefined, undefined%), the owner of the Chicago Sun-Times and other local newspapers, filed for bankruptcy protection and said it will explore the sale of assets. The company plans to continue to operate while restructuring.

Alcoa (AA: 7.33, 0.64, 9.57%) was upgraded to “hold” from “sell” by Deutsche Bank, which cited the aluminum maker’s asset sales. The firm also upgraded its price target on Cliffs Natural Resources (CLF: 18.207, 1.707, 10.35%), Freeport-McMoRan (FCX: 38.06, -0.54, -1.4%) and Silver Standard Resources (SSO: 19.7306, 0.3486, 1.8%).

Visteon (VSTN: undefined, undefined, undefined%), the auto parts supplier that used to be owned by Ford (F: 2.64, -0.1299, -4.69%), said one of its British units has filed for bankruptcy protection in the U.K.

Gottschalks (GOTTQ: undefined, undefined, undefined%) plans to liquidate some assets as the bankrupt-retailer was unable to reach a deal with creditors to attempt a turnaround. If approved, the liquidation of unspecified assets could start Thursday and be completed by mid-July.

Google (GOOG: 348.06, 5.37, 1.57%) launched a $100 million venture fund called Google Ventures, which will operate as a separate company. The venture will invest in a range of start-ups, including IT, health care and biotech.

Altria’s (MO: 15.98, -0.405, -2.47%) Philip Morris USA lost its bid to overturn $79.5 million in punitive damages given to the widow of a smoker. The Supreme Court ruled against the cigarette maker without giving an opinion.

Global Markets

European markets also bounced back from steep selloffs as London’s FTSE 100 gained 4.34% to 3926.14, Germany’s DAX rose 2.39% to 4084.76 and Paris’ CAC 40 rallied 3.24% to 2807.34.

In Asia, Japan’s Nikkei 225 slipped 1.54% to 8109.53 while Hong Kong’s Hang Seng rallied 0.89% to 13576.02. China’s Shanghai Composite rose 0.64% to 2373.21.