Wall Street earnings send stocks soaring
Financial stocks roared back on Tuesday morning as a pair of better-than-expected earnings reports from Wall Streets biggest firms spurred an opening rally ahead of a likely rate cut from the Federal Reserve.
With investors looking for the Fed to lower its benchmark interest rate Д and some expecting the steepest cut in a generation Д the stage was set for a optimistic bounce after Mondays mixed performance.
Shortly before noon, the Standard Poors 500-stock index was up 2.7 percent, erasing its losses from Monday. The Dow Jones industrials were up 290 points, and the Nasdaq composite index was up 2.3 percent.
Lehman Brothers, whose share price plummeted 19 percent on Monday as rumors swirled that the bank was facing liquidity problems, gained back nearly all its losses after reporting a 57 percent decline in net income for the first quarter. That figure beat expectations and restored some confidence; its stock rose 38 percent, to $43.91 a share, at 11:30 a.m.
Goldman Sachs reported a 53 percent earnings decline, also better than Wall Street estimates, and its shares rose 13 percent, to $170.29 a share.
The Wall Street firms led a resurgence in financial stocks, which took a severe beating on Monday after the near-collapse of Bear Stearns spurred credit fears around the globe.
Foreign stock markets rose in overnight trading on the strength of banks and financial services firms, though some could not pare their losses from Monday. The Nikkei 225 in Tokyo gained 1.5 percent and Hong Kongs benchmark Hang Seng index rose 1.4 percent.
In Europe, indexes in London, Paris and Frankfurt were all up more than 3 percent in late afternoon trading.
The yields on Treasury notes, some of which reached 50-year lows on Monday, climbed back on Tuesday, and commodities like oil and wheat recovered from a sell-off a day earlier. Gold set another record high and the euro gained against the dollar.
Still, Wall Streets focus remains squarely on the outcome of Tuesdays Fed meeting. Future markets are continuing to predict a full percentage point cut to the federal funds rate, which affects mortgage rates, car loans, and other consumer transactions. A lower interest rate can stimulate growth in the economy but also lead to higher prices and a devalued dollar.
