U.S. stocks opened higher Tuesday morning in a rebound from a four-day skid. Traders eyed a report showing a surprising rise in housing starts in October, but a plunge in building permits. Wall Street also weighed strong results from tech titan Hewlett-Packard (HPQ) and a $2 billion loss from mortgage finance company Freddie Mac (FRE). Market rumors of an emergency FOMC meeting were greeted with skepticism, notes S&P MarketScope.
Major indexes moved solidly higher after each suffering losses of more than 1.5% on Monday. On Tuesday, the Dow Jones industrial average rose 109.75 points, or 0.85%, to 13,068.19, moving back above the psychologically significant 13,000 level. The broader S&P 500 index gained 14.99 points, or 1.05%, to 1,448.26. The tech-heavy Nasdaq composite index added 32.91 points, or 1.27%, to 2,626.29.
Action in the broader market was positive. On the New York Stock Exchange, 17 shares advanced in price for every 10 that declined. NASDAQ breadth was 13-9 positive.
Phil Roth, a technical analyst for Miller Tabak in New York, notes that that this is a holiday week, when the market is usually up in the days that bracket Thanksgiving. "So the market will probably rebound and again abort its decline temporarily," he wrote in a Nov. 20 note. But Roth expects to see "a deep short term oversold condition and a medium term oversold condition before the next broad, sustained advance".
After Monday's sell-off, traders remained on the alert for any clues to the health of the U.S. economy. Wall Street awaited Tuesday's release of the Federal Reserve's first installment of quarterly projections for growth, jobs, and inflation over the coming three years that will be released alongside the minutes from the Oct. 30-31 FOMC meeting.
"We would expect the FOMC's views on near-term growth risks to be skewed to the downside while those on unemployment and headline inflation tilt to the upside," wrote Goldman Sachs economist Edward McKelvey in a Nov. 20 note.
In economic news Tuesday, U.S. housing starts rebounded 3% to a 1.229 million annual pace in October from a 1.193 million rate in September, which was revised from 1.191 million. On a year-over-year basis, starts are down 16.4%, compared to a -30.8% pace in September. Alongside the upside surprise in start came a gloomier development: Building permits fell 6.6% to a 1.178 million pace last month, from 1.261 million in September, which was revised from 1.226 million.
Despite the 3% increase in starts, the report contains no evidence of housing market stabilization, according to Bear Stearns economist John Ryding. New York. He pointed out in a Nov. 20 note that single-family starts fell sharply in October and the three-month declines in both starts and permits are running well ahead of the pace seen over the last 12 months. "Housing is likely to be a drag of close to 1% point [to GDP] in the fourth quarter, similar to the average drag seen over the last year and a half," he wrote.
In the energy market Tuesday, January West Texas Intermediate crude oil futures were up $1.02 to $95.66 per barrel as the dollar fell to a record low against the euro. Also, Royal Dutch Shell (RDSa) reported a fire at an oil-sands crude production plant in Alberta, potentially cutting shipments to U.S. refineries. The market's direction could be influenced by Wednesday's Dept. of Energy report on inventories. Prices fell after last
Among Tuesday's stocks in the news, Freddie Mac posted a third quarter loss of $3.29 per share vs. a $1.17 loss one year earlier, noting that the loss reflects a higher provision for credit losses and on mark-to-market items, and a significant deterioration of mortgage credit as a result of continued weakness in the housing market. Freddie said that in order to manage to the 30% mandatory target capital surplus, and respond to regulatory concerns, it plans to take several actions, including engaging Goldman Sachs and Lehman Brothers as financial advisors.