Stock Market News for June 3, 2009

U.S. stocks continued their advance Tuesday as an optimism that housing market is showing signs of life offset concerns that sale of shares will hurt several lenders who plan to repay the bailout money.  Helping the sentiment further was the S&P 500’s move above its 200-day moving average.  Stocks seesawed between gains and losses after the opening bell but the release of housing data helped cool nerves and the major indexes managed to end the day in positive territory.    

The National Association of Realtors’ index for pending home sales continued its advance for the third month in a row, rising 6.7% in April.  At day’s end, the Dow Jones industrial average managed a gain of 19 points or 0.2%, after briefly turning positive for the year.  The S&P 500 edged up 0.2% and Nasdaq gained 0.4%.  Volume on the NYSE remained light with 1.4 billion shares exchanging hands with advancing issues outpacing declining stocks by a three-to-two margin.   Yesterday, better-than-expected reports on personal income, manufacturing and construction spending had propelled S&P 500 to a seven-month high.

Treasury Secretary Geithner, travelling to China amid growing worries in that country over the prospects of American economy, sought to calm nerves, noting, “What I sense is a fair amount of confidence in the underlying strength of the American economy.”  There is a growing worry in China, the largest holder of American debt, that bulging deficit in the US could hurt the dollar and obliterate the value of US Treasuries held by China.  Treasury prices edged slightly higher on optimism following the friendly talks in China.  However, US dollar dropped to its lowest since late September, declining 0.9% against a basket of currencies, after crude prices, continued to hover near the year's high set on Monday.

Among DJIA components, American Express (NYSE:AXP - Analyst Report) and Citigroup (NYSE:C - Analyst Report) led the list of declining components, off 4.9%, respectively.  JP Morgan (NYSE:JPM - Analyst Report) dropped 4.5%. Bank of America (NYSE:BAC - Analyst Report) shares, however, gained 1.8% after the company said it has raised almost $33 billion, and said it would easily achieve the $33.9 billion capital requirement.  During the last four weeks, banks have raised more than $85 billion, with American Express (NYSE:AXP - Analyst Report), JP Morgan (NYSE:JPM - Analyst Report) and Morgan Stanley (NYSE:MS - Snapshot Report) raising $7.7 billion meet heightened cash payback requirements. Nevertheless, Moody's (NYSE:MCO - Analyst Report) also maintained a negative outlook on banks and their credit outlook, noting US companies are expected to face $470 billion in pretax loan losses and write downs this year and next.

Allergan Inc. (NYSE:AGN - Analyst Report) added 4.6% to $46.23 and Intuitive Surgical Inc. jumped 6.5% to $159.05 after the stocks were upgraded by analysts.

Following the positive housing data, D.R. Horton (NYSE:DHI - Analyst Report) added 4.1% to $9.63; Pulte Homes (NYSE:PHM - Snapshot Report) increased 3.5% to $8.97; KB Homes (NYSE:KBH - Snapshot Report) shares rose 2.7% and Toll Brothers (NYSE:TOL - Snapshot Report) was up 3.9%.  This morning, Toll Brothers (NYSE:TOL - Snapshot Report) reported a second quarter loss of 52 cents a share, before items, versus the expectations of a 50 cents a share loss.  Revenues during the quarter plunged 51.3% year-over-year to $398.3 million. The company said it expects deliveries of 2200-2800 homes this year, versus its March guidance of 2000-3000 homes, but at lower delivery prices.

According to Autodata, Aggressive April discounting resulted in a total auto market annualized selling rate of 9.91 million, up from April's 9.32 million, and the highest so far this year.  Ford (NYSE:F - Analyst Report) shares rose 4.6% on the news, while General Motors (OTC:GMGMQ), now trading in the pink sheets, plunged 18.7%.