Markets delivered a bounce on Tuesday following Monday's sharp decline. The rebound was worldwide. Investors digested a parade of better than expected retail sector earnings and a couple of economic reports on wholesale prices and the pace of construction. The rally in the U.S. dollar stalled, which allowed commodities to rebound. Crude oil ended a three-day decline with a $1.79 rally to $68.54 a barrel.
The Chinese market led the rebound in Asia. Yesterday it was the Shanghai index leading the way lower. Today Chinese stocks danced back and forth across the unchanged line before finally closing up 1.4%. The Hong Kong Hang Seng index gained 0.8%. The Japanese NIKKEI eked out a 0.16% rise. European stocks were up in unison. England released their latest report on inflation, which was unchanged in July at 1.8%. Meanwhile in Germany the ZEW Center for European Economic Research announced that their investor expectation index climbed from 39.5 in July to 56.1 in August. This was significantly above expectations. The German DAX index gained 0.9%. The English FTSE rose 0.88%. The French CAC-40 rallied 0.9%.
Here in the states there were several retail companies reporting earnings. Yesterday home-improvement retailer Lowe's (LOW) disappointed the street and helped fuel the market's decline. This morning LOW's larger rival Home Deport (HD) reported earnings that were 5 cents better than expected with a profit of 64 cents per share. Revenues were down more than 9% and came in less than expected. HD said same-store sales fell 8.5% last quarter but management lifted their full year guidance and the stock is up 2.9% on the session. Target (TGT) was another major retailer to report before the bell. Wall Street was expecting a profit of 66 cents per share. TGT delivered 79 cents on revenues that were under expectations. Cost cutting fueled the profit and TGT said gross margins rose 0.7% to 31.9% for the second quarter. TGT warned that the third quarter could be challenging. The stock is up 7.5% near $44.30 on the earnings beat. Watch for resistance near the $45.00 level.
We also heard from TJX Companies (TJX) who reported a profit of 61 cents per share, which was 1 cent better than expectations. Revenues were inline with estimates and the company reaffirmed their third-quarter guidance. Yet TJX's management lowered estimates for their fourth quarter. TJX is down 3.3% near $34.20. High-end retailer Saks (SKS) also managed to report better than expected results. Analysts were looking for a loss of 52 cents a share. SKS came in at a loss of 39 cents. Revenues were down more than 14% and gross margins fell 4.7 points to 29.9%. Same-store sales plunged more than 15%. Yet the stock is actually up 8.2% on the session but the bounce follows a sharp two-day decline. The next major earnings report is due out tonight from technology giant Hewlett-Packard (HPQ). Wall Street expects HPQ to earn 90-cents a share.
The economic reports getting most of the press today was the construction report. The Commerce Department said construction of new homes and multi-unit dwellings fell 1% in July. Economists were expecting a rise from a 587,000 unit pace to a 600,000 pace. Actual numbers reflected a pace of 581,000. Looking inside the report apartment construction fell while single-family home construction rose. This was the fifth monthly gain in a row for single-family home construction, which may have been fueled by builders trying to start more new homes before the $8,000 tax credit expires. First time homebuyers can receive up to $8,000 in tax credits if they buy a home by the end of November. Industry watchers are worried that when the tax credit program expires there will be a significant drop off in home sales. The second economic report out today was on wholesale prices. The Labor Department said wholesale prices in July fell 0.9% compared to a 1.8% jump in June. Core prices also fell 0.1%.
Currently the S&P 500 index is up 0.9% at 989. The NASDAQ composite is up 1.2% at 1954. The Dow Industrials are up 0.9% at 9219. The small cap Russell 2000 is up 1.59% at 556. The Dow Jones Transportation index is up 1.5% at 3630. The volatility index (VIX) is down 5% following yesterday's big spike higher.
Let's take a quick look at charts for the major averages:
Chart of the S&P 500:
Chart of the NASDAQ:
Chart of the Dow Industrials:
Chart of the Russell 2000 index:
Scanning the OptionInvestor.com play list for movers I see that FLR is up 2% on the session but volume is light. Railroad stock GWR is up 2.3%. FSLR, a put play, tried to rally this morning but failed under the $139 level. ICE is bouncing back toward what should be new resistance at $90.00. MVL continues to sink following yesterday's breakdown. Chinese stock SNDA is seeing a strong 3.7% bounce after yesterday's test of its exponential 200-dma.