Dow up 20 as stocks mount a comeback

Updated at 8:37 p.m. ET

 

Stocks rebounded to modest gains today despite miserable reports on new-home sales and industrial production.

But the market faces a big head wind on Thursday when the Labor Department issues its weekly report on jobless claims. Over the past few weeks, the report has signaled a deteriorating job market.

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What appeared to turn the market around today was a rebound in shares of Apple (AAPL) and Qualcomm (QCOM) and buying by  investors who were taking profits after selling stocks short.

The Dow Jones industrials ($INDU) closed up 20 points to 10,060 after dropping as many as 102 points soon after the open. But the blue chips fell back a bit from a 57-point gain around 3:40 p.m. ET.  The Standard & Poor's 500 Index ($INX) added 3 points to 1,055.

The Nasdaq Composite Index ($COMPX) rallied to add 18 points to 2,142, thanks to gains in such key stocks as Apple and Qualcomm.

Despite the risks of the jobless claims report, futures trading suggests stocks will open modestly higher on Thursday.

The Dow had hovered around 10,000 for all of the morning and much of the afternoon before the rally set in. The blue chips dropped below 10,000 on at least three occasions today.

The S&P 500 dropped twice to about 1,040, which technical analysts have been watching carefully. A close below 1,040 would be very bearish for stocks. 

Before today's rally, the Dow and S&P 500 had fallen 3.5% and 3.7%, respectively, over four straight losses. The Nasdaq had fallen three times over four days, losing 3.9%.

Despite the rebound from the day's lows, the Dow and S&P 500 appear headed toward their third straight weekly losses, with the Nasdaq headed toward its second loss in three weeks.

Crude oil settled up 89 cents to $72.52 after the dollar pulled back against major currencies. Crude had fallen after five straight losses.

Gold rose $6.10 to $1,239.50 an ounce. It's up 4.9% in August after falling 5.2% in July. Silver closed at $19.03 an ounce, up 3.5% on the day and its best close since June 25.

Copper was off 3 cents to $3.21 per pound.

Interest rates were up slightly, with the 10-year Treasury yield moving to 2.538% from 2.499% on Tuesday. 

Twenty-one of the 30 Dow stocks were higher today, along with 76 Nasdaq-100 stocks. Gainers were ahead of decliners 1.6-to-1 on the New York Stock Exchange and 1.7-to-1 on Nasdaq.

Energy prices -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Crude oil			$72.52			$71.63			-8.14%			-8.62%
(per barrel)
Heating oil			$1.9706			$1.9357			-5.63%			-6.85%
(per gallon)
Natural gas			$3.8710			$4.0390			-21.37%			-30.53%
(per mil. BTU)
Unleaded gasoline			$1.8639			$1.8494			-12.18%			-9.21%
(per gallon)
Retail gasoline			$2.6960			$2.7020			-1.64%			2.16%
(per gallon; AAA)

Energy weakness weighs on market
Energy, utility, industrial and materials stocks were the weakest links in the market. Energy shares were lower after the Energy Department reported a surge in domestic oil and natural-gas supplies. Crude oil, however, has rebounded off a low of $70.76 and was at $72.16 a barrel, up 53 cents.

Technology shares were mostly higher, led by Apple, Qualcomm, Research In Motion (RIMM), Google (GOOG) and Microsoft (MSFT). (Microsoft publishes MSN Money.)

Apple was up 1.2% at $242.89, in part because of reports the company is in talks with television networks in the hope of creating a service that would allow iTunes users to rent their favorite television programs for just 99 cents per episode. The company also scheduled a Sept. 1 "special event," which stirred speculation the company will announce an iPod touch with a camera and an updated Apple TV.

Apple had fallen for three straight days and is down 6.9% this month.

The Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, was up 16 points to 1,791.

Homebuilding shares were among the few winners, thanks in part to an upgrade in D.R. Horton (DHI) by Ticonderoga Securities. Horton was up 4.6% to $10.43.

The strength in homebuilding spread to home-improvement retailers Home Depot (HD) and Lowe's (LOW), despite the weak new-home sales report. Home Depot was up 2% to $28.33, the top performer among the 30 Dow stocks.  Lowe's rose 2.4% to $20.71.

A record low in new-home sales
New-home sales dropped 12.4% from June to July to a seasonally adjusted annual rate of 276,000.

In a note to clients, Normura Securities described the sales rate as "feeble." It is, in fact, the lowest level since the government started tracking new home sales in 1963. The sales rate was off 32% from June 2009. New-home sales have dropped 80% from their peak in July 2005.

The report was especially disappointing because most analysts had expected sales to be flat from June.

Patrick Newport, an economist at IHS Global Insight, said the problems facing builders -- and anyone wanting to sell a home -- include:

• Consumer confidence about job security in the face of a 9.5% unemployment rate.
• Lower household formation rates. That's a function of children moving in with parents, relatives moving in with each other and divorced people not setting up separate households. Household formation grew as much as 2% a year in 2005. It's now at less than 1%. At the worst of the financial crisis, there was almost no growth in new household formation.

As noted, housing stocks had a good day today. The Philadelphia Housing Sector Index ($HGX) was up 2.7% to 91.92. There was a theory on Wall Street that some investors looked at today's new-home sales report and Tuesday's existing-home sales report and concluded housing can't get any worse. So they bought.

They also bought because of the upgrade for D.R. Horton and because of Toll Brothers (TOL), which rallied 5.8% to $17.13, its third-best day of the year. The largest U.S. luxury homebuilder unexpectedly reported its first quarterly profit since 2007 after a tax benefit and drop in writedowns.

CEO Douglas Yearley told CNBC today that the biggest impediment to seeing a rebound in business is buyer worry about the current economy. "They're scared," he said. Many believe "this is not the time to be buying anything."

• Video: See Toll Bros. Douglas Yearley's CNBC interview
  

Separately, the Commerce Department said durable-goods orders increased 0.3% in July, less than the 3% growth economists had expected. Excluding transportation, orders dropped 3.8% instead of rising a projected 0.5%.

We should be clearer about what the Commerce Department means about transportation. That's basically Boeing (BA), which pulled in billions of dollars in new orders at the Farnborough Airshow in England.

Once you take out Boeing, demand fell by the most in more than a year.  Economist Michael Feroli of JPMorgan Securities called the report  "a major disappointment." He added that the report suggests third-quarter economic growth will fall below 1%.

Short hits from the markets -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.150%			0.155%			7.14%			200.00%
5-year Treasury note			1.383%			1.331%			-13.45%			-48.51%
10-year Treasury note			2.538%			2.499%			-12.69%			-33.96%
30-year Treasury bond			3.575%			3.564%			-10.11%			-22.97%
Currencies
U.S. Dollar Index			83.331			83.206			2.05%			6.53%
British pound			$1.5461			$1.5413			-1.47%			-4.42%
(in U.S. $)
U.S. $ in pounds			£0.6468			£0.6488			1.49%			4.63%
Euro in dollars			$1.2658			$1.2636			-3.04%			-11.68%
(in U.S. $)
U.S. $ in euros			€ 0.7900			€ 0.7914			3.13%			13.23%
U.S. $ in yen			84.89			84.12			-2.04%			-8.72%
Canada dollar			$0.943			$0.943			-2.95%			-0.78%
(in U.S. $)
U.S. dollar			$1.061			$1.061			3.12%			0.78%
(in Canadian $)
Commodities
Gold			$1,241.30			$1,233.40			5.04%			13.24%
(per troy ounce)
Copper			$3.2110			$3.2410			-3.03%			-4.05%
(per pound)
Silver			$19.0260			$18.3780			5.68%			12.95%
(per troy ounce)
Wheat			$6.4775			$6.7475			-6.56%			19.62%
(per bushel)
Corn			$4.0475			$4.0525			3.06%			-2.35%
(per bushel)
Crude oil			$72.52			$71.63			-8.14%			-8.62%
(per barrel)