Stocks rise on recovery hopes

Financial and health care stocks lead the rally. Research In Motion results disappoint, but shares revive and may boost Friday's open.

By Charley Blaine Jun 18, 2009 2:30PM

Charley BlaineUpdated: 8:10 p.m. ET.

 

Stocks finished modestly higher today as the Dow Jones industrials ($INDU) and the Standard & Poor's 500 Index ($INX) broke three-day losing streaks.

 

The Dow closed up 58 points to 8,556. The S&P 500 was up 8 points to 918.

 

But the Nasdaq Composite Index ($COMPX) was basically flat at 1,808, and the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, fell 2 points to 1,454.

 

Futures trading suggests stocks may open higher on Friday.

 

There was some concern right after the close about Friday's market because fiscal-first quarter earnings from BlackBerry maker Research In Motion (RIMM) seemed to disappoint investors.

 

The shares were down as much as 6% after the report came out, but they climbed back to $76.51 before fading to $76.05, off 0.7%. The shares had fallen 0.9% to $76.55 in regular trading.

 

Research In Motion earned 98 cents a share after one-time items, up from 86 cents a share a year ago and ahead of the Street estimate of 94 cents. Revenue was $3.42 billion, up 53% from a year ago but off slightly from the Street estimate of $3.43 billion.

Rival Apple (AAPL) will start selling its new iPhone 3GS on Friday. Apple was up 0.2% to $135.88 in regular trading and rose an additional 0.7% after hours to $136.81.

 

Today's rally was set off in part by some relatively optimistic economic reports as well as gains in financial stocks.

 

The Index of Leading Economic Indicators rose for the second month in a row, and the number of workers collecting unemployment benefits fell.

 

Financials rebounded from Wednesday, when Standard & Poor's downgraded 22 bank stocks -- five to junk status -- over concern about what the new financial regulation environment might look like.

 

In addition, there was some cheer that 10 big banks repaid some $64 billion received last fall under the government's Troubled Asset Relief Program.

 

Bank of America (BAC) was up 4.9% to $12.90, the best performer among the 30 Dow stocks. JPMorgan Chase (JPM) was second-best, up 4.4% to $34.17.JPMorgan Chase

 

The S&P 500 Financial Sector ETF -- technically, the Select Sector SPDR-Financial ETF (XLF) --  was up 2.4% to $11.89, tops among the 10 ETFs that track the S&P 500.

 

Health care shares moved higher because investors believe President Barack Obama's reform package will be scaled back before it wins passage.

 

Coventry Health Care (CVH) led health insurance stocks higher, up 9.2% to $18.30, second-best among S&P 500 stocks. Drug maker Merck (MRK) was fourth among the Dow stocks, up 3.6% to $25.65.

 

The Select Sector SPDR-Health (XLV) exchange-traded fund, which tracks the health care sector of the S&P 500, was up 1.9% to $26. That was third-best among the 10 ETFs that track the S&P 500.  Coventry Health

 

But technology and energy shares were mostly lower and prevented the rally from becoming something more powerful.

 

Techs were weighed down during the day by Research In Motion as well as by Dow components Intel (INTC), Cisco Systems (CSCO) and Microsoft (MSFT). Intel fell 1.7% to $15.87, with Cisco off 1.1% to $18.99 and Microsoft down 0.8% to $23.50. (Microsoft is the publisher of MSN Money.)

 

Energy stocks moved lower even as oil moved higher.  BP (BP) fell 1.4% to $47.72. Apache (APA) dropped 1.3% to $77.89. Chevron (CVX) was off 0.6% to $68.43, but fellow Dow component Exxon Mobil (XOM) was up slightly to $71.44.

 

Worries about the economy had crept into the market, but better-than-expected news on continuing jobless claims, manufacturing in the Philadelphia region and leading economic indicators helped push those jitters aside this morning.

Falling jobless claims cheer the Street

 

The main catalyst for today's rally was some good news this morning about the number of people filing for continuing unemployment benefits.

 

The Labor Department's weekly jobless report showed the first drop in continuing claims since January. 

 

Continuing claims for unemployment insurance were down 148,000 to 6.69 million for the week ending June 6, the biggest weekly decline since November 2001.

 

The Labor Department's weekly report on jobless claims also showed some improvement this morning.

 

Initial jobless claims rose slightly to 608,000 for the week ending June 13, pretty much in line with the revised 605,000 claims the previous week and economists' estimates for 604,000 claims.

 

Plus, The Conference Board's report on leading economic indicators showed a 1.2% gain in May, up from a revised 1.1% increase in April. The research organization said seven out of 10 indicators improved in May.

"The recession is losing steam," said Conference Board economist Ken Goldstein. "Confidence is building and financial market volatility is abating. Even the housing market appears to be stabilizing."

 

If all goes well, he said, a slow recovery should begin "before the end of the year."

 

And the Philadelphia Fed Index, which measures manufacturing activity in the Philadelphia region, came in at a reading of negative 2.2 in June. That was the best reading since September and a huge jump from the reading of negative 22.6 in May.

 

Experts warn: Don't get cocky

 

While the jobless claims look better, experts warn that investors shouldn't get too optimistic. "Things aren't as good as people hoped they would be," E. William Stone, chief investment strategist at PNC Wealth Management, told Bloomberg News.

 

Another expert pointed to worries about President Obama's plans for market regulation, announced Wednesday.

 

"Alarm bells are starting to ring that the implementation of overzealous regulation could well blunt the recovery of the economy," David Buik, a strategist at BGC Capital Partners, wrote in a research note.

Energy prices -- New York close
  Thur. Wed. Month chg. YTD chg.
Crude oil  $71.37 $71.03 7.63% 60.02%
(per barrel)
Heating oil $1.8370 $1.8630 12.22% 30.68%
(per gallon)
Natural gas  $4.0930 $4.2530 5.73% -27.20%
(per mil. BTY)
Unleaded gasoline $2.0295 $2.0326 5.47% 101.30%
(per gallon)
Retail gasoline $2.6850 $2.6790 8.85% 66.04%
(per gallon; AAA)

 

Oil, interest rates rise

 

Nineteen of the 30 Dow stocks were higher today, along with  301 S&P 500 stocks, but just 49 stocks in the Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks.

 

Interest rates were higher, with the yield of the 10-year Treasury note at 3.84%, up from 3.65% on Wednesday.

 

Crude oil was up 15 cents to $71.18 a barrel in New York. Gasoline prices were higher. Energy shares were down slightly.

 

Elizabeth Strott contributed to this report.

 

Short hits from the markets -- New York close
  Thur. Wed. Month chg. YTD chg.
Treasury yields  
13-week Treasury bill 0.170% 0.165% 30.77% 47.83%
5-year Treasury note  2.838% 2.658% 20.92% 82.98%
10-year Treasury note 3.834% 3.647% 10.65% 70.86%
30-year Treasury bond 4.624% 4.465% 6.59% 71.83%
Currencies    
U.S. Dollar Index 81.350 80.575 2.59% -0.97%
British pound $1.6343 $1.6396 0.92% 10.92%
(in U.S. $)
U.S. $ in pounds £0.6119 £0.6099 -0.91% -9.84%
Euro in dollars $1.3908 $1.3949 -1.79% -0.72%
(in U.S. $)
U.S. $ in euros € 0.7190 € 0.7169 1.83% 0.73%
U.S. $ in yen  96.49 95.65 1.26% 6.44%
Canada dollar $0.883 $0.883 -3.60% 8.01%
(in U.S. $)
U.S. dollar  $1.133 $1.132 3.74% -7.42%
(in Canadian $)
Commodities        
Gold $934.60 $936.00 -4.66% 5.69%
(per troy ounce)
Copper $2.2820 $2.6950 3.85% 61.84%
(per pound)
Silver $14.2400 $14.2800 -8.78% 26.43%
(per troy ounce)
Corn $4.0325 $4.0775 -7.56% -0.92%
(per bushel)
Crude oil  $71.37 $71.03 7.63% 60.02%
(per barrel)
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