By Jason Simpkins
Following a week in which U.S. stocks posted their worst showing since March 2003, shares yesterday posted some solid gains after a day of choppy trading.
After being down as much as 46 points, the Dow Jones Industrial Average reversed course and rebounded to gain nearly 93 points, or 0.70%, to close at 13,358.50 – with 24 of its 30 members posting gains. The Nasdaq and Standard & Poor’s 500 Index both also rebounded, with the S&P actually gaining 1% for the day.
The market took a huge tumble last week as the reality of what promises to be a prolonged housing slump set in.
On Thursday and Friday, the Dow plunged by a total of 585 points. All the major indices were down for the week: The Dow slumped 4.2%, the S&P dropped 5.0% and the tech-laden Nasdaq skidded 4.6%.
On Thursday, the Dow plunged by as much as 450 points – sparking a worldwide decline – after news about new home sales fanned anxieties that the global credit markets were in much worse shape than most experts had thought. Fears over the sub prime credit market continued to head that list of worries.
The Dow’s strong start this week may be a good indicator that the financial markets haven’t been as deeply wounded as feared by the sub prime meltdown. An abysmal housing market has certainly made its presence felt in the stock market in the past few months, but the indices have proved resilient, making hasty comebacks from sharp and sudden plummets in the market.
The pain is far from over, to be sure, but investors were apparently cheered by some solid earnings reports yesterday, including impressive profit numbers from the likes of Archer Daniels Midland Co. (NYSE: ADM), and HSBC Holdings (NYSE: HBC), and Tyson Foods Inc. (NYSE: TSN).
These three companies were significant because each one bucked a worrisome marketplace trend to turn in strong earnings.
Archer Daniels Midland Co. more than doubled its quarterly profit. Its earnings rose to $954.8 million, a 132% increase from $410.3 million a year ago.
Despite a large increase in debt from the U.S. housing market, HSBC said the global boom helped its pretax profit rose 13% to $14.16 billion for the six months ended June 30. That was well ahead of the consensus expectation of $13.27 billion.
The fuel for this growth: Strong growth in Hong Kong, its Asia-Pacific business region, and record investment-banking profits. Earlier this year, HSBC blamed bad U.S. mortgage loans for its first-ever profit warning. However, HSBC did say that charges for bad debts rose to $6.35 billion, up 63% from last year’s $3.89 billion.
Despite a much-publicized conflict with China, Tyson Foods Inc. stock rose more than 2.5% yesterday on news that quarterly profit came in at $111 million, or 31 cents per share, compared with loss of $52 million, or 15 cents per share a year earlier.