Stock overcame an early slump to post moderate gains despite worries that imposition of a steep tariff on Chinese tires would lead to a trade skirmish between Washington and Beijing. Shares of utility and industrial companies advanced as investors shook off initial jitters ahead of the anniversary of iconic Lehman Brothers’ collapse.
President Barack Obama’s speech on financial services reform received a cool response from traders. Obama, speaking on the Wall Street, warned against repeating the recklessness that led to Lehman’s collapse and unleashed the financial crisis. Obama said some in the financial industry are ignoring the lessons of the financial crisis. “The old ways that led to this crisis cannot stand,” Obama cautioned.
On Sunday, leading economist Joseph Stiglitz had warned of lingering problems at US financial institutions after the Lehman collapse. Yesterday San Francisco Fed president Yellen cautioned small and medium-sized banks were vulnerable to increasing losses on commercial real estate loans. Yellen said she “expect the recovery to be tepid,” cautioning, “What’s more, the gradual expansion gathering steam will remain vulnerable to shocks.” She warned that full employment is unlikely “for several years.”
This morning’s stock futures are indicating Wall Street would open with modest gains. Dow Jones industrial average futures are up 32, or 0.3%, at 9,643. Standard & Poor’s 500 index futures are up 4.60, or 0.4%, at 1,048.10, while Nasdaq 100 index futures are up 6.25, or 0.4%, at 1,694.25.
On Tuesday, the 30-stock Dow Jones industrial average added 21 points, or 0.2%, to close at 9,626.80. The broad Standard & Poor’s 500-stock index gained 6.6 points, or 0.63%, to 1,049.34. The tech-heavy Nasdaq rose 11 points, or 0.5%, to 2,091.78. On the New York Stock Exchange, advancing issues beat those that declined two to one on volume of 1.21 billion shares. The advance in the DJIA was led by a 4.6% surge in General Electric (NYSE:GE) shares as it went past the $15 level.
Of the ten S&P500 industry groups, nine managed gains, led by basic materials (+1.7%), utilities (+1.4%), financials (+1.4%) and industrials (+1.1%). Telecommunications shares retreated 0.1%.
Shares in utility companies jumped on reports China’s sovereign wealth fund was considering buying a stake in AES (NYSE:AES). The news sent AES shares surging 4.5%. JP Morgan (NYSE:JPM) shares added 2.9%. Shares in Goodyear Tire and Rubber (NYSE:GT) and Cooper Tire and Rubber (NYSE:CTB) soared 3% and 7.1%, respectively, on expectations the imposed tariffs would benefit the companies. However, this morning’s reports say China claims its US exports actually fell in the first half of 2009.
Among the few key corporate earnings releases expected, Adobe Systems (NASDAQ:ADBE) is projected to report fiscal third quarter earnings of 34 cents per share versus 35 cents a year ago. Best Buy (NYSE:BBY) is expected to show fiscal second quarter results of 41 cents, down from 48 cents a year ago.
