After starting out edging up and then falling downward within the first hour after the opening bell at the New York Stock Exchange, stocks climbed back up in the later morning on Wednesday, report Bloomberg and other financial news sources.
A mid-morning report that oil futures were declining helped get investors enthusiastic again. Before the bell, Dow Jones Industrials member company Home Depot announced that it will be buying back up to $22.5 of its stock from shareholders and financial giant Morgan Stanley reported a record-setting second quarter profit. A stock buyback removes a portion of a company’s stock from the marketplace, typically leading to its price going up as it becomes more difficult to purchase.
“You’ve got two big positives with Home Depot and Morgan Stanley. World markets are up, so everything’s looking pretty good,” Tom Schrader, managing director of listed equity trading at Stifel Nicolaus & Co. in Baltimore, told Bloomberg.
The market started up right after the bell on that news, but as bond yields also began to rise, investors became cautious.
Rising bond yields indicate rising interest rates, which are seen as potential threats to the record-setting pace of mergers and acquisitions that has driven the stock market into record highs in 2007. The benchmark 10-year Treasury note’s yield was up from 5.09% at the end of trading Tuesday to 5.11% Wednesday.
“The recent pullback has led to a bit of stabilization in the marketplace,” Larry Peruzzi, senior equity trader at the Boston Asset Management Co., a division of Mellon Financial, told the Associated Press.
Nevertheless, bond yields have decreased significantly since rising to a five-year high last week and temporarily depressing the stock market..
“Interest rates moving back down closer to 5% is a big part of the story, helping to explain why we’re seeing more money flows into U.S. equities over the past week,” Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank, told MarketWatch.
But there were other reasons that the stock market was volatile in the morning trading session. Investors are beginning to follow the new earnings reports that are trickling in from companies as the second quarter of 2007 draws to a close, and they have seen some letdowns.
“We seeing some weakness from Best Buy and Circuit City, suggesting that the economy is not going to re-accelerate to the same extent as was thought a few weeks ago,” Fitzpatrick said.
Light, sweet crude oil futures fell off by a sharp $1.46 to $67.64 a barrel on the New York Mercantile Exchange, while gasoline futures also fell back. The federal government announced Wednesday in its weekly inventory report that crude oil stockpiles rose 6.9 million barrels last week and gasoline stockpiles rose 1.8 million barrels, meaning that fears over a lack of robust reserves of fuel have been mitigated.
Bloomberg, “U.S. Stocks Rise; Home Depot, Morgan Stanley Shares Advance”
MarketWatch, “Stocks turn higher as oil falls“
The Associated Press, “Stocks Waver After Home Depot Buyback”