The major averages trended lower on Tuesday for over an hour at the opening bell. Today’s session followed an erratic Monday session that ended with a moderate loss.
Two pieces of economic data hit the wires this morning: May pending home sales, which fell 4.7%, compared to the expected decline of 2.8% and wholesale inventories, rising 0.8%, slightly more than the consensus estimate that called for growth of 0.6%. However, the major averages reversed from that point, heading moderately higher at midsession, as the market reacted to a sharp retreat in crude oil. Oil hit a session low of $135.14 p/b, losing more than $5 in trading. This was seen as a positive sign for the markets, even as investor concerns persist about the ongoing problems in the financial sector and a slow-growing economy ahead of 2Q earnings.
Equities have rebounded off this morning’s lows and are currently near highs of the day.
Worth pointing out is that while market support levels have been broken, (Dow is trading near two-year lows) this aspect may also indicate that indices are deeply oversold, as we believe they are, as opposed to projections for more downside. We think that market action is showing signs of improvement heading toward positive prospects.
In other news
Fed Chairman Bernanke speaking at the FDIC’s forum on mortgage lending in Arlington, Virginia, said that: “The Federal Reserve may extend Wall Street’s access to lending until 2009”.
Today, T. Boone Pickens stressed the need for more aggressive action on our energy dependence.
He launched a huge public-policy push that takes his wind bet one step further. His argument: The U.S. can wean itself off foreign oil if it puts its faith in prairie breezes. [Via WSJ]
Office Depot (ODP) announced that it expects North American retail same-stores to slip 10% from last year, citing the sluggish economic environment. Office Depot anticipates its EBIT margins to have declined 200-250 basis points in the 2Q versus a year ago.
VMware (VMW ) plunged 24% to its lowest level since its August 2007 IPO . The tech-company said it expects fiscal year ’08 revenue growth to be below prior guidance that called for more than 50% growth. The company announced the departure of its president and CEO.
A change in accounting rules could result in Fannie Mae (FNM) and Freddie Mac (FRE) needing to raise capital. Standard & Poor’s Equity Research believes Fannie Mae and Freddie Mac will be granted an exemption from the rule changes due to their importance in the mortgage markets.
Shares of Wal-Mart Stores Inc. (WMT) rallied to a 2-week high. The company posted solid gains of over 2% during trading hours. According to reports, Merrill Lynch added Wal-Mart to its US 1 list, saying earnings upside should continue to be driven by above-trend comparable-store sales resulting from rising customer traffic.