While you were sleeping: Wall St rebounds on Lowe's earnings

Tuesday 19th May 2009

Shares on Wall Street rebounded after DIY retailer Lowe’s posted a smaller-than-expected decline in first-quarter profit and raised its full-year forecast and Bank of America led financials higher as analysts raised their ratings.

The Dow Jones Industrial Average gained 2.9% to 8504.08 and the Standard & Poor’s 500 Index advanced 3% to 909.71. The Nasdaq Composite rose 3.1% to 1732.36.

Lowe’s jumped 8.1% to US$1.49 after posting first-quarter per-share earnings of 32 cents, beating estimates of 25 cents. The retailer raised its full-year forecast to US$1.13 to US$1.25. Rival Home Depot Inc. rose 6.6% to US$26.02.

Bank of America jumped 9.9% to US$11.73, leading the Dow higher, after analysts at Goldman Sachs rated the firm a ‘conviction buy’ as it raises more capital and enjoys better trading in home loans and capital markets.

American Express rose 7.8% to US$11.73 and Citigroup climbed 4.6% to US$3.64.

Helping banks rally, the London interbank offered rate, or Libor, for three-month loans in dollars fell 4 basis points to 78 basis points, the biggest slide since March 19.

Energy shares rose after crude oil climbed above US$59 a barrel after threats by a Nigerian separatist group to block oil exports and as a fire at a Sunoco refinery in the US Northeast disrupted production.

Crude oil for June delivery jumped 4.9% to US$59.10 a barrel on the New York Mercantile Exchange.

Exxon Mobil Corp. gained 2% to US$70.50 and ConocoPhilips gained 3.6% to US$1.59.

Building companies advanced after the National Association of Home Builders/Wells Fargo index of builder confidence rose to 16 this month from 14 in April, the first two-monthly gained since February last year.

Lennar Corp. gained 13.7% to US$10.02 and Pulte Homes rose 7% to US$10.30.

Treasury Secretary Timothy Geithner told a National Press Club meet in Washington that the US economy has stabilised though it may take some time before Americans feel any improvement, given soaring unemployment.

“It’s not going to feel better for a long time for millions of Americans,” Geithner said.

Geithner also said the federal government shouldn’t try to cap executive pay at banks but should ensure pay packages were designed to prevent excessive risk-taking.

Geithner’s comments on the economic outlook were echoed in Europe, where World Bank President Robert Zoellick said the global economy’s slump is beginning to slow.

“The question is when we will return to growth in the global system and that could be late 2009 or 2010,” Zoellick said in Warsaw.

Stocks in Europe rounded out their third day of gains, led by financials, as interbank borrowing costs fell.

The Dow Jones Stoxx 600 Index rose 2.4% to 207.23. Lloyds Banking Group gained 5.8% after confirming plans to sell 4 billion pounds of stock this week as the UK government converts some of its preference shares into ordinary stock.

The UK’s Barclays rose 3.7% after the Wall Street Journal reported it is in talks to sell its asset management unit. Germany’s Commerzbank gained 4.7%.

Travel agents Thomas Cook Group climbed 8.9% after Switzerland’s largest travel firm, Kuoni Reisen, said it is seeking to acquire rivals.

The US dollar and the yen declined against the euro as the rebound in stocks sapped demand for the currencies as a haven.

The yen also weakened after Japan’s deputy Finance Minister Kazuyuki Sugimoto said excessive moves in the currency may hurt the world’s second-largest economy.

The dollar fell to $1.3541 against the euro, from $1.3495. The yen dropped to 130.48 from 128.43. The yen weakened to 96.38 per dollar from 95.21.

US Treasuries weakened as stocks gained, reducing the demand for the safety of debt’s fixed payments. The yield on 10-year Treasuries rose five basis points to 3.18%.

Copper extended its slide on signs of rising stockpiles in China, the largest consumer of the metal. Shanghai copper inventories jumped 28% to 35,389 metric tons last week, the Shanghai Futures Exchange said, according to Bloomberg.

Copper for July delivery fell as much as 1.9% to US$1.9790 a pound.

Gold for June delivery fell 1% to US$921.70 an ounce in New York.

Businesswire.co.nz

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