Closing Update for Wednesday, August 12: The Fed's Relative Optimism Is Catching

4:15 PM, Aug 12, 2009 --

• NYSE up 75.3 (1.2%) to 6,538.87.
• DJIA up 120.2 (1.3%) to 9,362.
• S&P 500 up 11.5 (1.2%) to 1,006.
• Nasdaq up 28.9 (1.5%) to 1,999.

GLOBAL SENTIMENT

• Hang Seng down 3.03%
• Nikkei down 1.42%
• FTSE up 0.97%

UPSIDE MOVERS

(+) Applied Materials (AMAT) continued upside reaction to earnings, guidance beat.

(+) Jazz Pharmaceuticals (JAZZ) continued upside reaction to evening earnings.

(+) CytRx (CYTR) says cancer drug dramatically inhibited tumor growth in animal study.

(+) E-House (EJ) easily beats with results.

(+) Palatin (PTN) reports positive study results for sexual dysfunction treatment.

(+) Citigroup (C) gets China regulatory approval.

(+) ADC Telecommunications (ADCT) guides for Q3 in line to above Street.

(+) Macy's (M) beats with earnings and raises guidance.

(+) ING (ING) lower after results.

DOWNSIDE MOVERS

(-) ReneSola (SOL) beats loss estimate but misses revenue estimates.

(-) Sara Lee (SLE) loss narrows but disappoints.

(-) Liz Claiborne (LIZ) misses with loss, sales figure.

(-) JA Solar (JASO) beats with revenue but sees deeper GAAP loss.

MARKET DIRECTION

Stock averages end up between 1% and 1.5%, in the upper end of the day's range but off the highs. Wall Street embraced the Federal Reserve's latest announcement, in which the group said it will rein in bond buybacks in a move signaling improving confidence in the economy.

The Federal Reserve's policy-setting FOMC said it would slow its purchases of long-term Treasurys and let the program end entirely by the end of October. Long-term Treasury yields edged higher on the news. The Fed, as expected, left its funds target rate 0% to 0.25%.

The Fed said that since its last meeting in late June, "economic activity is leveling out." Conditions in financial markets also "have improved further."

As stocks rallied, crude closed up $0.71 at $70.16 a barrel.

Stock opened tepidly out of the gate, but buyers moved in around mid-morning and sent the three major indexes soaring well above 1%.

Company news contributed to early gains. A day after the domestic market posted its biggest losses in five weeks, stocks were largely expected to tread water. But investors may have gotten some lift from Macy's (M), which is the latest retailer to report a better-than-expected Q2 profit. The retailer also raised its outlook largely on the effect of reducing costs. Retailers are being closely watched this week, as they report earnings, to get a fix on consumer spending.

Homebuilders jumped after Toll Brothers (TOL) said 3% more homebuyers signed contracts in Fiscal Q3, the first annual increase in four years. Toll's statement that many of its markets are improving boosted confidence about the prospects for a recovery in the overall economy because along with unemployment housing is one of the biggest obstacles to a rebound. Homebuilders are rallying across the board.

Comments

[ebworthen:]

The FED said everything is o.k.? Phew! That's a relief, just when I was thinking a jobless recovery was pie in the sky.

If Ben and the boys say things are looking up, by golly I guess I should too! Wait, isn't this kind of like a confidence game where they want us to believe things are getting better? Isn't Bernanke up for reappointment to the FED?

I'm just being a negative thinker, sorry, will stop it right now.

Less bad than expected bad but still bad earnings from Macy's is a bullish sign! They're going to cut costs by cutting hours and firing employees, like every other company in the nation.

Good thing those consumers are going to be patriotic and go out there and spend money they don't have or go into debt to do so. Wait...that either won't happen or will make our problems worse...savings rate and unemployment are both up...hmmm...

I'd better go watch reruns of the FED meetings and press conference...

Aug 12 06:22 PM

[sheople:]

"The Federal Reserve's policy-setting FOMC said it would slow its purchases of long-term Treasurys and let the program end entirely by the end of October." The feds are not only manipulative crooks, they're liars.

Aug 12 07:51 PM

[Big Bubbette:]

The United States set another record for public debt in July, but don't look for the total to discourage investors: They're focusing on the economic recovery.

The federal budget deficit increased to $180.7 billion in July, the U.S. Treasury announced Wednesday. Outlays increased 26 percent from a year ago to $332.2 billion, while receipts fell six percent to $151.5 billion, Bloomberg News reported.

Economists surveyed by Bloomberg News had expected the July deficit to total $180 billion. The U.S. posted a $94.3 billion deficit in June.

Nothing to see here move along:

"The July deficit brings the fiscal year deficit to about $1.27 trillion, largely ballooned by the $787 billion stimulus package to jump-start the U.S. economy and the $700 billion bank sector bail-out. The Obama administration forecasts a record $1.84 trillion deficit for this year and a $1.26 trillion for next year, fiscal year 2010, which begins October 1, 2009. Last year, fiscal year 2008, the U.S. government posted a then-record $454.8 billion deficit."
www.dailyfinance.com/2.../

Aug 12 08:12 PM

[Redpenny:]

Is anyone watching the market? It just continues going up. That means that stocks are going higher and it is a good chance to make money...... Isn't that what we all want?

Any of us at any time can sell what we have and return to cash. In the meantime you buy and catch one of the best moves of your lifetime. Unless you are a dyed-in-the-wool buy and hold guy there is no reason not to participate in this rally no matter how long it lasts.

Yeah GS is making tons of money (on your money) along with all of the other mother-schemers. And the Fed is probably (OK, more than probably) lying through their teeth or living in Hopeful Town. What can you do? Do you hang your head and just bitch or do you find some stocks that seem to love this market, buy them and just hold on for the ride.

Yeah, yes, this will all end when everyone catches on to what seems to be obvious about the dismal state of the country and the equally dismal fundamentals of the market. It will probably blow up big time. But until then the cash register is open and they are handing out samples.

Just keep your hand on the sell button and get ready to push it when the time is right. Then go enjoy all the money you made and buy back when the wreckage settles once again.

It just isn't that hard.

Aug 12 09:25 PM

[Joe Shareho...:]

Just a question for the Fed, where's the money coming from to buy 300 billion in treasuries? I bet China is pissed about it. This forcing the rate down thing has to be frustrating them.

Aug 12 11:18 PM

[Brian McMorris:]

What China is REALLY pissed about is that Americans are not buying all their products. THAT is why they put up with it. China needs America. America needs China. Sounds like a formula for global stability to me.


On Aug 12 11:18 PM Joe Shareholder wrote:

> Just a question for the Fed, where's the money coming from to buy
> 300 billion in treasuries? I bet China is pissed about it. This forcing
> the rate down thing has to be frustrating them.

Aug 12 11:54 PM

[six:]

Really Ben? Come on! Retail Sales DOWN! (Even with the Gov paying people to buy cars! This means it slowed that much more in other categories) Unemployment UP! (like that is any surprise) Foreclosures UP! (what did you expect?) Home Prices DOWN! (That sure sounds like good news) Stop the BS, the economy is still declining. Remember- Deflationary Debt Destruction... Until the excess debt is discharged there will be recovery. Ignore this at your own risk...

Aug 13 10:02 AM