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Market Recap: Financials Rescued; Housing Surprise; Markets Trade Higher


Financial stocks are being rescued. Are the homebuilders turning around? Stocks gain on the day.

Today was another day of the bulls ignoring the bad news. The Dow Industrials gained +101 points, or +0.74%, to 13727, the S&P 500 added +11 points, or +0.75%, to 1515, and the Nasdaq Composite added +12 points, or +0.47% to 2718.

Despite a flurry of bad news from the financial sector, the markets seemed to focus on the good. The morning began with UBS (UBS) disclosing over $10 bln in write-downs on subprime mortgage holdings. Later in the day, Bank of America (BAC) also surprised the markets by announcing that it froze its Colombia Strategic Cash Portfolio, a $12 bln cash fund catering to institutional investors. Yet investors seemed to focus on the good news from the sector with a $10 bln injection by the Government of Singapore Investment Corp (GIC) and MBIA's (MBI) $1 bln injection from private equity firm Warburg Pincus. MBIA finished the day +13.17%, although the stock did trade as high as +25%. UBS finished the day +2.3% and even BAC closed up +2.8%. Other financials performed just as well. The broader Philadelphia Bank Index (BKX) added +2.7%, Goldman Sachs (GS) closed up +2.9%, Bear Stearns (BSC) added +4.7%, and Lehman Brothers (LEH) added +3.4%. For more, please read Professor Depew's Five Things You Need To Know.

In other news, housing stocks performed well on the day due to strong economic data. Pending home sales came in at +0.6% better than what many economists had expected at -1.0%. Furthermore, the prior figure was revised upward to +1.4% versus +0.2%. D.R. Horton (DHI) led the homebuilders with a +6.49% gain; Pulte Homes (PHM) added +5.99%; and Lennar (LEN) added +3.8%. Also, the Philadelphia Housing Index (HGX) added +2.6%.

In commodities, crude oil fell -0.28 to 88.00. Precious metals gained, however, with gold adding +13.30 to 813.50, and silver adding +0.35 to 14.85. Copper fell on the day -3.30 to 309.30. For an excellent background on the what makes up the price of crude, read Professor Adam Michael's Trends Affecting Oil Price.

In after hours, Washington Mutual (WAMU) cut its quarterly dividend to $0.15 per share from $0.56. The stock fell -7.6% in after-hours trading.

Earnings Review

The following companies reported after the bell.

Diamond Foods (DMND) reported $0.52 EPS vs. $0.44 cons on revs $184.535 mln vs. $173.79 mln cons.

SAIC (SAI) reported $0.26 EPS vs. $0.23 cons on revs $2.37 bln vs. $2.29 bln cons.

For more summaries, click on 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: JBL, INWR, GMR, MAN, EXM, DRYS, FMD, GMRN, SPX, CLF, VMW, SIRF, QCOM, CSIQ, CY, FRPT, MBT, IIN, JPM, BK

Some bearish trade or investment ideas: AVT, ALTR, GE, T, AAPL, AMGN, CELG, DECK, GEF, SPX, SPY, SLM, OSTK, MYE, FACE

It was great seeing you all at Festivus. Hope you had an egg-cellent Monday. Have a great night!
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No positions in stocks mentioned.

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