With traders picking up stocks at reduced levels following the sell-off that was seen in the previous session, stocks have shown a notable move to the upside over the course of the trading day on Tuesday. The major averages have moved firmly into positive territory after some earlier uncertainty.
Stocks saw some weakness earlier in the day, as traders reacted negatively to the latest batch of earnings. Nonetheless, the major averages showed a strong upward move due in part to a rebound by banking stocks, which moved higher amid comments from Treasury Secretary Timothy Geithner.
In testimony before the Congressional Oversight Panel, Geithner assured lawmakers that there is enough money left in the government's $700 billion financial rescue program to stabilize the financial system. Geithner said there is at least $134.4 billion in funds left.
The Treasury Secretary also said that the vast majority of U.S. banks have enough capital and hinted that the credit markets may be thawing following their deep freeze.
Indicators on interbank lending, corporate issuance and credit spreads generally suggest improvements in confidence in the stability of the system and some thawing in credit markets, Geithner said.
Earlier in the session, Merck (MRK) helped to lead the Dow lower after the drug giant reported first quarter earnings that fell short of analyst estimates and lowered its full year revenue guidance. While the Dow has rebounded since then, shares of Merck remain down 5.5 percent.
Meanwhile, shares of Caterpillar (CAT) have rebounded after seeing some earlier weakness, with the construction equipment maker currently up 1.7 percent. While Caterpillar reported much better than expected adjusted first quarter earnings, it also slashed its full-year guidance.
DuPont (DD) is also seeing notable strength even though the chemical giant reported first quarter earnings that fell year-over-year and lowered its full-year guidance. The company's downwardly revised earnings guidance brought it in line with analyst estimates.
Dow components Coca-Cola (KO) and IBM (IBM) are among the slew of other companies that have recently reported their quarterly results as the earnings season picks up steam.
The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is currently up 66.74 at 7,908.47, the Nasdaq is up 26.07 at 1,634.28 and the S&P 500 is up 10.67 at 843.06.
After turning in a mixed performance earlier in the session, most of the major sector indices have moved to the upside over the course of the trading day. Airline stocks have helped to lead the way higher, driving the Amex Airline Index up 7.7 percent on the day.
Within the airline sector, Delta Air Lines (DAL) is turning in one of the best performances of the day, rising 17.9 percent after reporting a narrower than expected first quarter loss. With the advance, shares of Delta have risen to their best intraday level in nearly three months.
As mentioned above, the upward move by the broader markets also reflects a turnaround by the banking sector, with the Dow Jones Banks Index currently up 5.4 percent after falling as much as 5.3 percent earlier in the trading day.
Healthcare provider, networking, and steel stocks have also shown strong upward moves over the course of the trading day. The Morgan Stanley Healthcare Provider Index is currently up 6.8 percent, while the Amex Networking Index and the Amex Steel Index are up 5 percent and 4.8 percent, respectively.
At the other end of the spectrum, gold stocks are seeing notable weakness after being among the few groups to buck the downtrend that was seen in the previous session. The Amex Gold Bugs Index is currently down 2.3 percent after ending Monday's trading up 4 percent.
Some weakness also remains visible in the health insurance sector, as reflected by the 1.1 percent loss being shown by the Morgan Stanley Healthcare Payor Index. Within the sector, UnitedHealth (UNH) is currently down 4.9 percent despite reporting better than expected first quarter earnings.
Stocks In The News
Emulex Corp. (ELX) is posting a sharp gain after Broadcom Corp. (BRCM) announced that it has made a proposal to acquire all the outstanding shares of Emulex for $9.25 per share in cash, representing a total equity value of approximately $764 million.
Shares of Emulex are up 43 percent on the day, reaching their highest level in over six months. Broadcom's offer represents a 40 percent premium to Emulex' closing price on Friday.
Additionally, Western Union Co. (WU) is posting a gain of 13.5 percent on the day after the company reported first-quarter earnings that rose year-over-year and came in better than analysts had expected.
Meanwhile, New York Times Co. (NYT) is down 12.8 percent after releasing a quarterly report that showed a wider loss year-over-year that came in worse than anticipated.
In overseas trading, stock markets across the Asia-Pacific region closed mostly lower on Tuesday following the sell-off seen on Wall Street overnight. Japan's benchmark Nikkei 225 Index showed a notable decline, closing down 2.4 percent.
Meanwhile, the major European markets have shown a notable turnaround after seeing earlier weakness. While the French CAC 40 and the German DAX Index are now up 0.2 percent and 0.3 percent, respectively, the U.K.'s FTSE 100 Index remains down 0.1 percent
In the bond market, treasuries have also turned around, pulling back into negative territory after seeing earlier strength. Subsequently, the yield on the benchmark 10-year note is currently up 4.1 basis points at 2.884 percent after hitting a low of 2.781 percent.
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