Stocks Edge Higher
Stocks gained ground Thursday as investors debate whether a Bush administration plan can alleviate the subprime mortgage crisis.
In an agreement to be announced Thursday afternoon, the mortgage industry would freeze interest rates on certain subprime mortgages for five years. The plan encourages homeowners to refinance mortgages, an effort to avoid a wave of foreclosures and a sharp drop in home prices.
On Thursday afternoon, the Dow Jones industrial average rose 46.50 points, or 0.35%, to 13,491.46. The broader S&P 500 index added 6.23 points, or 0.42%, to 1,491.24. The tech-heavy Nasdaq composite index gained 15.98 points, or 0.60%, to 2,682.34.
In economic news Thursday, U.S. initial jobless claims fell 15,000 last week to 338,000. Claims jumped 24,000 to 353,000 the week before. “The data aren’t likely to give the markets much trading impetus as most traders are sidelined awaiting Friday’s employment report,” Action Economics says. Friday’s employment reports are seen as a key test of whether the economy is slowing down, as many fear.
Oil prices continued their slide Thursday. January crude oil futures fell 75 cents to $86.74 per barrel in NYMEX trading.
Among the stocks in the news on Thursday, homebuilders were heading higher on hopes for the mortgage relief plan. Luxury home builder Toll Brothers («www.businessweek.com») reported October quarter loss per share of 52 cents, vs. EPS of $1.07 a year ago. The loss included $314.9 million in pretax writedowns, mainly for homes it could no longer sell at a profit.
Retailers reported mixed sales figures from November, including Wal-Mart («www.businessweek.com»), which reported same-store sales rose 1.5%, not including fuel. Total sales were 8.4% higher, and Wal-Mart expects December same-store sales to rise 1 to 3%.
Target («www.businessweek.com») shares fell after the retailer posts 1.1% higher November same-store sales (on calendar-adjusted basis). It says softness in the final week of November caused the month overall to fall short of its planned range. It says sales trends will need to meaningfully improve in December in order to achieve fourth quarter EPS growth.
Abercrombie & Fitch («www.businessweek.com») had 2% higher same-store sales and 25% higher total sales in November.
The Gap («www.businessweek.com») reported flat same-store sales and 11% higher same-store sales. It reiterated previous earnings guidance for the 2008 fiscal year.
Nordstrom («www.businessweek.com») reported same-store sales were up 8.7% and total sales were 7.4% higher.
American Eagle («www.businessweek.com») saw flat same-store sales in November, but total sales jumped 16%. It reiterated its fourth quarter earnings guidance.
Goldman Sachs («www.businessweek.com») and Morgan Stanley («www.businessweek.com») were reportedly downgraded by an analyst at Merrill Lynch from “buy” to “neutral.”
Conagra Foods («www.businessweek.com») says earnings last quarter, which ended Nov. 25, will be higher than expected. Outperforming were Conagra’s trading and merchandise unit and food and ingredients unit, the firm said.
Coca-Cola Company («www.businessweek.com») will get a new CEO when chief executive Neville Isdell steps down on July 1, 2008. President and chief operating officer Muhtar Kent will take over as CEO, while Isdell will remain chairman of the board until April 2009.
Genentech («www.businessweek.com») received disappointing news on breast cancer chemotherapy drug Avastin after an FDA advisory committee voted 5 to 4 that data are not sufficient to justify its use for certain patients.
European stock indexes were barely moving Thursday. In London, the FTSE 100 index was off just 0.06% to 6,490.20. In Paris, the CAC 40 index edged down 0.1% to 5,653.38. Germany’s DAX index moved 0.22% higher to 7,962.54.
Asian stocks moved higher overnight. Japan’s Nikkei 225 index rose 1.7% to 15,874.08. In Hong Kong, the Hang Seng index gained 0.73% to 29,558.92. The Shanghai composite index fell 0.15% to 5,035.07. Treasury market
Treasury prices were falling Thursday morning. Two-year notes were off 02/32 to 100-11/32 for a yield of 2.966%; 10-year notes were off 04/32 to 102-10/32 for a yield of 3.970%; and the 30-year bond fell 07/32 to 109-01/32 for a yield of 4.450%.
