Wednesday, May 6, 2009

Wall Street Rallies As Stress Test Worries Fade, Disney Jumps

. Wednesday, May 6, 2009

By stockOzone team

US stocks rallied on Wednesday as investors drew a sigh of relief after stress test results indicated that most banks are healthier than thought. Better than expected ADP payrolls data also added to the positive tone.The Dow Jones Industrial Average gained 101.63 points or 1.21% to finish at 8,410.65. The S&P 500 added 4.98 points or 0.28% to end at 1,759.10. The Nasdaq Composite advanced 15.73 points or 1.74% to 1,759.10.

ADP survey on Wednesday reported that a total of 491,000 private-sector jobs were lost in April. Economists had projected a drop of 645,000 private sector jobs.

Shares of financials skyrocketed on optimism that big U.S. banks will comfortably find the capital they need to meet government requirements. Bank of America (NYSE: BAC) rallied $1.85 or 17.07% to $12.69. According to media reports, Bank of America Corp. would require about $34 billion in fresh capital as a result of its U.S. government stress test. Citigroup (NYSE: C) surged 53 cents or 16.01% to $3.84. The New York Times said that Citigroup will have to raise $5 billion to $10 billion in new capital to meet U.S. government requirement. Wells Fargo & Co.(NYSE: WFC) soared $3.62 or 15.59% to $26.84. According to Bloomberg, Wells Fargo will need about $15 billion in capital following a U.S. government-led stress test. JP Morgan (NYSE: JPM) and American Express (NYSE: AXP) gained 6.89% and 2.18% respectively. JPMorgan Chase, Morgan Stanley (NYSE: MS) and Goldman Sachs Group Inc. (NYSE: GS) will not be asked to raise additional capital when federal officials announce the test results, media reports added.

Results of the stress tests conducted by government officials, the Federal Reserve on the 19 largest U.S. financial companies will be released on May 7 publicly. According to the Wall Street Journal, about 10 of the 19 largest U.S. banks being stress tested will be asked by regulators to raise additional capital.

Among energy stocks Chevron Corp. (NYSE: CVX) jumped $2.36 or 3.59% to close at $68.11. Exxon Mobil (NYSE: XM) rose 89 cents or 1.31% to $68.58.

The largest US aluminum maker Alcoa Inc. (NYSE: AA) increased 40 cents or 3.95% to $10.50.

Shares of diversified US firm General Electric (NYSE: GE) finished at $13.67, up 57 cents or 4.35%.

General Motors (NYSE: GM) slumped 19 cents or 10.27% to $1.66.

Late on Tuesday, Walt Disney Co. (NYSE: DIS) said that its fiscal second-quarter profit plunged 46% to $613 million, or 33 cents a share, from $1.13 billion, or 58 cents a share, in the prior year quarter. On an adjusted basis, the company earned 43 cents a share in the latest quarter. Revenue decreased 7% to $8.1 billion. Shares of the company surged $2.72 or 11.75% to $25.87.

Lincoln National Corp. (NYSE: LNC) soared $3.86 or 32.98% to $15.57 after said that it swung to a fiscal first quarter loss of $579 million, or $2.27 a share, from a profit of $289 million, or $1.10 a share, in the year ago quarter.

Shares of Pulte Homes Inc. (NYSE: PHM) plunged 99 cents or 8.05% to $11.31 after it reported that its first-quarter loss narrowed to $514.8 million, or $2.02 a share, from a loss of $696.1 million, or $2.75 a share, in the same quarter last year. Revenue slid to $587.4 million from $1.45 billion.

Las Vegas Sands (NYSE: LVS) plummeted $1.09 or 9.61% to $10.25 after it said that its first quarter loss nearly tripled to $34.6 million, or 14 cents a share, compared to a loss of $11.2 million, or 3 cents a share, in the similar quarter, a year ago.

Electronic Arts Inc. (NASDAQ: ERTS) fell $1.06 or 4.96% to $20.32 after it reported that its fiscal fourth quarter net loss narrowed to $42 million, or 13 cents a share, compared to a loss of $94 million, or 30 cents a share, in the comparable quarter last year. Revenue decreased 24% to $860 million.

European stocks settled up. The UK FTSE rose 59.55 points or 1.37% to 4,396.49. The German DAX and French CAC increased 0.57% and 1.81% respectively.

Asian stocks finished higher. The Hang Seng index of Hong Kong climbed 404.49 points or 2.46% to 16,834.57.

NYMEX crude oil for May delivery climbed $2.46 or 4.6% to $56.30 a barrel.

Disclosure: Author does not own any of the stocks discussed here.

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