The Wall Street Journal-20080124-Citigroup and Bank of America Surge- Apple- Motorola Fall On Weak Forecasts- Brinker Jumps 22-
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Citigroup and Bank of America Surge; Apple, Motorola Fall On Weak Forecasts; Brinker Jumps 22%
A late-afternoon surge propelled stocks sharply higher as Citigroup and other financials jumped, but Apple and Motorola were beaten down after disappointing forecasts.
A big boost for the bond insurers and the broad stock market was news that regulators at the New York Insurance Department met yesterday with banks that are parties to contracts with bond insurers to discuss ways of stabilizing the business and bringing in additional capital and capacity. Bond insurers are key to other parts of the financial market like municipal bonds and bank stocks.
"You have to realize the market is extremely oversold," said Bruce Brittles, chief investment strategist at RW Baird. "We had a big cut by the Federal Reserve and they are likely to cut rates again when they meet." He said the fact that the beaten-down financial and retail stocks were able to move higher over the past two days encouraged short covering elsewhere.
Some of the worst-performing stocks of the past year, like bond insurers, banks, home builders and consumer-discretionary firms surged yesterday. While Tuesday's rate cut by the Federal Reserve failed to shore up the market in the first half of the day, the major indexes recovered late afternoon amid a recovery in transportation stocks and a ratings upgrade for the banks from Bear Stearns.
Apple (Nasdaq) fell $16.57, or 11%, to $139.07. The company posted a jump in fiscal-first-quarter net income, helped by strong sales of Macintosh computers and wider margins. But the iPod maker's second- quarter outlook fell well short of Wall Street's expectations.
Banking stocks rallied for the second straight day, continuing to benefit from hopes the Fed's rate cut will help pad profits. An analyst at Bear Stearns, upgraded his rating on large-cap banks to "market overweight" from "market underweight" yesterday. Wachovia jumped 3.39, or 11%, to 35.30; Bank of America rose 3.18, or 8.5%, to 40.57; J.P. Morgan Chase & Co. gained 4.86, or 12%, to 45.72 and Citigroup added 1.96, or 8%, to 26.36.
Motorola plunged 2.31, or 19%, to 10.01. The company exceeded estimates for fourth-quarter profit but said a steep drop in sales of its mobile phones will contribute to an expected loss for the current quarter.
Freeport-McMoRan Copper & Gold lost 4.22, or 5%, to 77.30. The mining company's fourth-quarter net income fell 2.8% amid charges, including those related to the company's purchase of Phelps Dodge.
General Motors rose 2.05, or 8.7%, to 25.70, helping to prop up the Dow Jones Industrial Average. Beaten-down retail and housing stocks also gained. Home Depot rose 1.75, or 6.2%, to 29.95, and Toll Brothers added 2.47, or 14%, to 20.56.
Brinker International rose 3.31, or 22%, to 18.63. The restaurant company's fiscal-second-quarter net income rose 23% on divestiture gains, despite same-store sales numbers that continue to flag.
Tyco International rose 2.68, or 7.9%, to 36.40. The manufacturing and services company issued preliminary fiscal-first-quarter results and boosted its fiscal-year expectations.
PetSmart (Nasdaq) fell 29 cents, or 1.3%, to 22.76. The pet-food and supplies company lowered its earnings forecast to a range of 57 cents to 61 cents a share from 70 cents to 74 cents.
Ciena (Nasdaq) lost 3.34, or 13%, to 22.83. The telecommunications- equipment maker agreed to buy privately held World Wide Packets for about $200 million in cash and 3.4 million shares of Ciena stock.
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Shira Ovide and Josee Rose contributed to this article.
