Stocks Up As Wal-Mart Posts Profit Rise

AP
Tuesday February 19, 1:32 pm ET
By Madlen Read, AP Business Writer
Wall Street Gains As Wal-Mart Reports Profit Rise, but Banks See More Credit Problems


NEW YORK (AP) -- Stocks advanced Tuesday as investors found some relief in a quarterly report from Wal-Mart Stores Inc. that showed a rise in sales in the United States and abroad.
Investors were pleased about Wal-Mart's modest profit increase because it was a sign that consumers might not be as hesitant to spend as the market has feared. Still, the world's largest retailer said the uncertain economy will be a critical factor going forward.


Wal-Mart's report "signaled that the consumer is cautious, but that was already priced into the marketplace," said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners Inc. "By the same token, I'm not seeing any indication that we're headed for consumer spending to be in the minus column."

Consumer spending, a key driver of economic growth, has been shaky in recent months as Americans struggle with falling home prices, rising food and energy costs and a volatile stock market.

A spike in oil prices back above $98 a barrel could bring more problems for consumers, but it gave energy stocks a boost. Light, sweet crude oil jumped $2.89 to $98.39 per barrel on the New York Mercantile Exchange due to worries about a possible decline in production; shares of Chevron Corp., ExxonMobil Corp. and ConocoPhillips all rose.

In early afternoon trading, the Dow Jones industrial average rose 88.41, or 0.72 percent, to 12,436.62 following the three-day Presidents Day weekend. On Tuesday, Bank of America Corp. and Chevron Corp. replaced Altria Group Inc. and Honeywell International Inc. among the 30 Dow components.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 9.01, or 0.67 percent, to 1,359.00, while the Nasdaq composite index rose 13.44, or 0.58 percent, to 2,335.24.

Government bonds dipped as stocks gained. The yield on the 10-year Treasury note, which moves opposite its price, jumped to 3.84 percent from 3.77 percent late Friday.

The dollar was mixed against most major currencies, while gold prices rose.

Wal-Mart rose 39 cents to $49.83.

In addition to consumer spending, Wall Street is concerned about credit problems facing financial institutions. British bank Barclays Group PLC revealed credit-related losses totaling $3.13 billion, up from a smaller write-down in November, while Credit Suisse, Switzerland's second-largest bank, said it has suspended "a handful" of traders in connection with the overvaluation of asset-backed securities by $2.85 billion.

Also, The Wall Street Journal reported that Lehman Brothers Holdings Inc. could see big losses due to its significant investments in commercial real estate loans. Lehman fell 80 cents to $53.97.

There have been some signs that troubled financial institutions are finding ways to regain their footing, however.

Bond insurer Ambac Financial Group Inc. is discussing a plan to raise at least $2 billion in capital to maintain its superior credit rating, the Journal reported, citing people familiar with the matter. The move would mirror a $3 billion cash-raising effort by rival bond insurer MBIA Inc., which said Tuesday that its former chairman and chief executive has returned to the lead the company.

Ambac fell 16 cents to $10.06, while MBIA slipped 17 cents to $12.07.

"We're heading to some sort of, perhaps, dare we say, closure on the bond insurance situation," Cardillo said. "If that does occur, the market does start to price in economic recovery."

In other corporate news, Microsoft Corp. chairman Bill Gates said the software company is not privately haggling with Yahoo over its rejected $31-per-share buyout offer. Microsoft Corp. made an unsolicited offer to buy the struggling Internet company just over two weeks ago. Microsoft rose 35 cents to $28.66, and Yahoo fell 39 cents to $29.27.

In economic news, the National Association of Home Builders said its index measuring homebuilder confidence inched up in February. Wall Street remains wary about the prospects for the housing market, however.

The Russell 2000 index of smaller companies rose 6.06, or 0.86 percent, to 707.58.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 708.8 million shares.

Overseas, Japan's Nikkei stock average gained 0.90 percent. Britain's FTSE 100 advanced 0.34 percent, Germany's DAX index added 0.50 percent, and France's CAC-40 increased 0.49 percent.

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