After moving sharply lower at the start of trading, stocks have once again shown a substantial turnaround over the first hour of trading on Tuesday. The major averages have bounced well off their lows for the session and into positive territory.
The initial weakness in the markets came as traders continued to express concerns about the economic impact of the swine flu outbreak as well as reports that major banks may still need to raise additional capital.
Despite only a minor increase in the number of confirmed cases of swine flu, the World Health Organization has raised the level of influenza pandemic alert to phase 4. At the same time, the WHO does not recommend that countries close borders or restrict travel.
A Wall Street Journal reported suggesting that regulators are pushing Bank of America (BAC) and Citigroup (C) to raise more capital following early results of the government's stress test analysis also contributed to the early weakness.
The Journal said that the capital shortfall amounts to billions of dollars at Bank of America. The report specified that executives at both banks are objecting to the preliminary findings from the government's examination.
Meanwhile, the rebound is partly due to the release of some better than expected economic data, with the Conference Board saying that its consumer confidence index came in well above analyst estimates amid a significant improvement in consumers' short-term outlook.
The report showed that the consumer confidence index jumped to 39.2 in April from an upwardly revised 26.9 in March. Economists had expected the index to increase to 29.7 from the 26.0 originally reported for the previous month.
Earlier, a report from Standard and Poor's showed a slowdown in the pace of decline in home prices in February, although home prices saw continued broad based declines.
The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index fell at an annual rate of 18.6 percent in February, a modest deceleration from the 19.0 percent drop in prices that was reported for January.
On the earnings front, drug giant Pfizer Inc. (PFE) has released its financial results for the first-quarter, reporting net income of $0.40 per share compared to $0.41 per share in the prior year.
Pfizer said its adjusted income for the quarter fell to $0.54 per share from $0.61 per share last year. On average, analysts expected the company to report earnings of $0.49 per share.
In the past few minutes, the major averages have edge down off their new highs for the session, although they remain in positive territory. The Dow is currently up 15.29 at 8,040.29, the Nasdaq is up 4.32 at 1,683.73 and the S&P 500 is up 2.00 at 859.51.
Healthcare provider stocks have helped to lead the way back to the upside amid expectations that the companies may benefit from the swine flu outbreak. The Morgan Stanley Healthcare Provider Index is up 2.7 percent, rising to its best intraday level in nearly six months.
Significant strength has also emerged among health insurance, biotechnology, and retail stocks. The Morgan Stanley Healthcare Payor Index is up 3.4 percent, while the Amex Biotechnology Index and the S&P Retail Index are posting gains of 2.2 percent and 1.7 percent, respectively.
At the other end of the spectrum, gold stocks continue to post steep losses amid a notable decrease by the price of the precious metal. With gold for June delivery down $17.10 at $891.10 an ounce, the Amex Gold Bugs Index is down 2.4 percent.
Continued weakness among steel, oil service, housing, and banking stocks are also helping to limit the upside for the broader markets.
Stocks Driven By Analyst Comments
Despite the rebound by the broader markets, Weyerhaeuser (WY) is posting a loss of 4.5 percent after being downgraded at Deutsche to Hold from Buy. With the decline, the stock has pulled back well off the four-month closing high it set on Friday.
The downgrade came as analysts see further deterioration in the timber and wood products markets.
Additionally, NetApp (NTAP) is down 3.3 percent following a downgrade at Merrill/BofA from Buy to Neutral. The downgrade came after channel checks suggested that near-term pricing and margin pressure would offset cost cutting.
Meanwhile, Tempur-Pedic (TPX) is posting a gain of 6.9 percent after the bed-maker was upgraded to Buy from Hold at KeyBanc Capital Markets.
In overseas trading, stock markets across the Asia-Pacific region closed considerably lower amid continued concerns about the economic impact of the swine flu outbreak. Japan's benchmark Nikkei 225 Index showed a notable decline, closing down 2.7 percent.
The major European averages are also seeing some weakness, although they have moved off their lows. The French CAC 40 Index is down 0.8 percent, while the German DAX Index and the U.K.'s FTSE 100 Index are both down 1.4 percent.
In the bond market, treasuries have turned lower over the course of the morning after seeing early strength. Subsequently, the yield on the benchmark 10-year note is up 1.5 basis points at 2.936 percent after hitting a low of 2.873 percent.
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