Wall Street opened sharply lower on Tuesday, following disappointing earnings announcements from co’s, such as – American Express Co. (AXP), Wachovia Corp., (WB), and several other high-profile names, including Apple Inc. (APPL), SanDisk (SNDK), and Texas Instruments (TXN).
However, broader indexes began trending higher and regained some ground after oil prices took another sharp drop, touching a session low of $125.63. As oil extended its decline while remaining within its corrective pattern which started last week ; the Dow Jones Industrial and S&P 500 kept edging higher as the Nasdaq Composite, after a brief advance – paused, and started trading sideways.
At mid-session the Dow turned higher, after an early loss of more than 70 points, led by the financial sector. This fact alleviated investor fears about earlier negative earnings reports from several co’s, implying – that some of them might be only company specific and not broader.
In the final hour of trading, after a confined action dominated session – the indices surged and were able to establish new recovery highs. The Dow added 135 points.
In other news
– General Electric (GE) announced on Tuesday a partnership with Abu Dhabi’s Mubadala Development Co., an $8 billion venture to invest in emerging markets in the Middle East and Africa. GE and state-owned Mubadala will each provide $4 billion in equity over three years to the fund, aiming to reach $40 billion in assets. The Abu Dhabi investment company intends to become one of GE’s top 10 holders.
– Caterpillar (CAT), the world’s largest maker of earthmoving equipment, topped its earnings estimates. The co. reported a 40% increase in earnings per share and made some cautious comments regarding the economy. Demand from emerging markets drove sales.
– Computer and consumer electronics maker Apple (AAPL) topped its earnings estimates yesterday, but issued an earnings guidance that fell short of estimates. 3Q net income came in at $1.07 billion, or $1.19 per diluted share, up 31% from last year’s earnings of $818 million, or 92 cents per share. Sales rose to $7.46 billion, up 38% from the same quarter a year ago. Analysts raised questions about Apple Chief Executive Officer Steve Jobs’s health during a conference call yesterday.
– Wachovia (WB), the nation’s fourth-largest bank reported an $8.86 billion loss because of charges and reserves for bad mortgage loans. The Charlotte-based bank cut its dividend, for the second straight time, to $0.05 from $0.375 and is exiting its general bank wholesale mortgage origination channel.
– On the economic front, U.S. retail sales, according to ICSC – rose 0.1% versus a week ago.
– Philadelphia Federal Reserve President Charles Plosser spoke on the economy, stressing the necessity for a rate increase. He said there could be rate hikes “sooner rather than later” even if employment and financial conditions haven’t revived. Treasury Secretary Paulson also spoke today. At the New York Public Library, Mr Paulson noted that 99% of banks are well capitalized.
– Gold’s tape printed lower in today’s session by $14.80 to $948.90/oz. August crude, closed lower as well by $3.79 to $127.25