Bargain hunting back in Wall Street

Financial stocks help indices finish in green in an extremely volatile day

A volatile US market witnessed an extremely choppy session today, Wednesday, 1 August, 2007. Fresh news about Bear Sterns kicked off things in a very sour note. But a late turnaround in financial sector helped the indices register good gains at the day’s close. Big swings in crude prices were also a major reason for today’s choppiness.

The only positive news during the day that cheered investors was National Association of Realtors reporting contract signings on existing homes climbing 5% in June, the largest advance in three years.

The Dow swung within a two hundred and sixty point range before finishing considerably up. The Dow Jones Industrials Average today rose by 150 points at the end to close at 13362. Tech-heavy Nasdaq gained 7.6 points to close at 2553. S&P 500 added 10.5 points to close at 1465.

Twenty-eight out of the thirty Dow stocks closed in green. Merck, Walt Disney and AT&T were the main Dow winners. Honeywell and Alcoa were the only Dow losers.

After market closed, Walt Disney declared its result. It handily beat Wall Street’s expectations. But shares slipped in after hours trading. The growth of the company was fueled by higher advertising rates at the ABC television network and sales of merchandise from its films.

Good economic data get ignored in a volatile market

When market opened in the morning, all the three indices were trading lower. Of the six sectors trading lower, materials paced the way closely followed by financials. Reports that another Bear Stearns hedge fund has halted redemptions kicked things off on a sour note.

The Institute of Supply Management (ISM index) fell to a lower than expected 53.8% in July; but since any reading above 50 signals growth and the prices paid component fell to 65% from 68%, sellers did not react much to the data.

But soon, market turned direction and Dow was trading up by 80 points at one time. But volatility was today’s mantra for the entire day. Within a couple of hours, indices again turned negative and Dow was down by almost 100 points at one time. This continued for the rest of the day. But in the final hours of trading, a rebound in financial stocks pushed up the indices and all three ended in the green. .

Merck shares rose almost 3% today after reports that vaccines made by the company are being promoted by U.S. health officials to increase potentially life-saving immunization for preteens.

Crude slips by more than 2% even after reaching a new intra-day high

Crude oil futures today hit a new intra day high but eventually slipped and closed almost 2% lower. Before the retreat, it rose as high as $78.77 surpassing the previous all-time electronic high for a benchmark contract of $78.40 in mid-July of last year.

Increase in refinery utilization for the week ended 27 July 2007 contributed to a 600,000-barrel climb in motor gasoline supplies to 204.7 million barrels. This pushed down gasoline prices which in turn had a negative impact on the rising crude price and it closed lower for the day.

At the New York Stock Exchange today, volume hit 2.4 billion shares, with declining stocks topping advancers 19 to 14. At the Nasdaq, 2.9 billion shares were exchanged, and decliners beat advancing stocks 3 to 2.

Apart from a host of companies eg, Bausch & Lomb, Southern Copper etc. reporting their earnings tomorrow, on the economic front, Initial Claims will be released at 8:30 ET, while June Factory Orders will hit the wires are 10:00 ET.