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Market Recap: Late Day Push, Markets Finish Strong


The Dow recovered to gain 600 points off the lows of today. Markets finish strong.

Stocks avoided a sixth straight day of declines a day after the Fed surprised the markets with a 75 bps rate cut. Major indexes surged into positive territory late into the trading session. The Dow Industrials added +298 points, or +2.50% to 12270, the S&P 500 added +28 points, or +2.14% to 1338, and the Nasdaq Composite gained +24 points, or +1.05% to 2316.

The sharpest rallies occurred in the homebuilding and financial sector. The Philadelphia Bank Index (BKX) closed the day +8.02% to $86.57 with 23 out of 24 stocks finishing in positive territory.

"Really?" said new Minyanville Professor Michael Paulenoff, "[These are] interest rate sensitive sectors that figure to benefit in a significant way from the Fed's intention to fight for growth, not against inflation…"

Some of the biggest winners were Wachovia (WB) +10.62% to $35.30, Capital One (COF) +11.03% to $44.20, and JP Morgan (JPM) +11.89% to $45.72.

Toddo noted JPM on the Buzz this morning, "Did JPM jump up and scream 'BUY ME!' when it was flat in the face of this morning's fugly futures? Does Mother Morgan (MS) have room to $55?" For more read today's Random Thoughts.

Over in the real estate sector, the Philadelphia Housing Index (HGX) gained +9.55% to 138.87. "What a move," Prof. Paulenoff said, "no wonder, though, because the interest rate sensitive sector is reacting to a sense that the Fed will press rates continually lower to improve profitability of the banks, which in turn will relax some of their recently imposed restrictions on lending to both residential and commercial borrowers…" Other winners included Ryland Group (RYL) +15.54% to $31.20, Pulte Homes (PHM) +22.07% to $13.11, and Meritage Homes (MTH) +25.35% to $10.78. For other major movers, check out Professor Tuttle's Winners & Sinners.

Tech stocks, however, were beaten up on Apple's (AAPL) earnings news. Although the company had a solid quarter, guidance was below analyst estimates. See Minyanville Editor Andrew Jeffery's Irrational Reaction to Apple's Outlook. The stock recovered during the late-day broad market rally but still managed to close -12.04% to $138.87. The tech bellwether brought down with it Research In Motion (RIMM), down -1.81% to $88.51, Google (GOOG) -5.71% to $552.05, and Baidu (BIDU) off -1.57% to $269.50.

Commodities were weaker in today's trading. Crude oil fell -1.41 to 87.80. Gold declined -1.10 to 889.10. Silver fell -0.128 to 15.902. Copper plunged -12.55 to 306.35.

"Are we to assume today that all is well in the economy and financial system because the BKX is up?" Professor Lewis responded when asked about gold's intraday weakness. "Just because gold and gold shares correct a bit from all-time highs isn't a time to assume deflation must have taken hold.

Corrections do happen. But the Fed has told us that it (the Fed) is going to inflate, regardless of the inflationary cost, in order to fight the credit contraction that has emerged from the housing bust. And inflation is exactly what it will get."

For more recaps, check out Minyanville's Buzz Bits.

Idea Flow

Below is a recap of some of the idea flow on today's Buzz & Banter. Please note that stocks may appear in both bullish and bearish categories, due to long and short term trades by our many Minyanville professors.

Some bullish trade or investment ideas: SGP, GS, AAPL, C, MS, KO, PHM, LM, JPM, WM, MER, MDR, TRMB, BSC, IYR, IAT, PFE, XLF, TXN, ADI, gold

Some bearish trade or investment ideas: BAC, COH

Time to go to sleep! Good night!

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No positions in stocks mentioned.

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