Midday Market Update: After 2 Days in the Red, U.S. Stocks Find Positive Territory

              

During the past 2 sessions the Dow has fallen more than 500 points, but today bargain hunters and investors awaiting the Federal Reserve's next interest-rate cut helped the blue-chip barometer soar triple digits. U.S. stocks rallied despite a record-low consumer confidence index reading. Tony Crescenzi, bond market strategist at Miller Tabak & Co., said to MarketWatch, "These figures will reinforce the negative tone on Wall Street, although they can hardly be viewed as a shock and a game changer given all that happened of late."

Economic News

This morning, the Conference Board reported that U.S. consumer confidence fell to the lowest level on record during October. Specifically, the index decreased to 38. Economists were expecting the index to drop to 52. September's reading was revised up to 61.4, from an originally reported 59.8. David Gaffen of the Wall Street Journal wrote in his Marketbeat blog, "That's an all-time low for this index and represents a severe decline in consumer expectations, and it comes on the back of extended turmoil in the markets and in the financial system."

Lewis Alexander, chief economist at Citigroup Global Market Inc. in New York, said in a Bloomberg Television interview that, "The economy feels like it is contracting at a rapid pace. It's clear that consumers have really been affected by the volatility we've seen in the last 6 weeks."

Furthermore, Robert DiClemente, chief U.S. economist at Citigroup Global Markets in New York, commented in a note before the report's release, "Collapsing consumer confidence appears to be reinforcing the economic downturn, with labor market weakness poised to intensify."

Equity Update

This morning, BP (BP: sentiment, chart, options) reported that its third-quarter net profit jumped to $8.0 billion, or 53.43 cents per share, from $4.4 billion, or 21.27 cents per share, last year. The company cited higher oil prices during the quarter for the rise. Analysts had been expecting a profit of $6.78 billion. Revenue rose to $104.6 billion from $72.6 billion. "Although it has since fallen away sharply, the high oil price of the third quarter obviously helped our absolute result," said CEO Tony Hayward. "We are well-placed to weather the prevailing financial storm and to benefit from the business opportunities that may well arise from a downturn," he added. At last look, BP shares had tacked on more than 7%.

Also in earnings, Estee Lauder (EL: sentiment, chart, options) reported first-quarter, ex-item earnings of 26 cents per share, topping last year's same-quarter profit by 31%. Not only were this year's results better than those of a year ago, but they also topped the consensus estimate by 4 cents. The makeup maven attributed the strong results to overseas sales growth of its skin-care products and makeup. Quarterly revenue increased 11% to $1.9 billion, outpacing the consensus estimate of $1.88 billion. Despite the strong performance, EL forecast second-quarter and full-year results below analysts' estimates, thanks to a cutback in consumer spending. For the second quarter, EL expects earnings to fall between 97 cents and $1.05 per share, far short of the estimated $1.21 per share. For the year, profit is expected to total between $2.20 and $2.50 per share - the Street expects $2.60 per share. After hitting a multi-year low this morning, the shares found the black, and at last check, they had added almost 2%.

Elsewhere, shares of Energy Conversion Devices (ENER: sentiment, chart, options) were last seen trading almost 5% lower, after being hit with a downgrade. UBS dropped its rating on the shares from "buy" to "neutral."

In other news, handset maker Nokia (NOK: sentiment, chart, options) was slashed to "sell" at Goldman Sachs this morning, while sector peer Ericsson (ERIC: sentiment, chart, options) was added to the brokerage firm's "conviction sell" roster. Goldman cited the companies' heavy exposure to emerging markets as the impetus behind the downgrades, noting, "Recent negative data-points on subscriber and ARPU growth from several emerging market operators, combined with severe pressure on numerous emerging market currencies, greatly increases the risk of a worldwide slowdown in telecoms equipment demand." Shares of NOK and ERIC were last seen trading 1.76% lower and 4% higher, respectively.

Looking at the Numbers

At last check, the Dow Jones Industrial Average (DJIA – 8,306.31) had added 130.54 points, or 1.60%. All but 5 of the Dow's 30 components were trading in the black. Leading the pack higher were oil titans Exxon Mobil (XOM) and Chevron (CVX). For the declining issues, J.P. Morgan Chase (JPM) and Kraft Foods (KFT) were the biggest losers.

The S&P 500 Index (SPX – 858.77) tacked on 9.85 points, or 1.16%, with telecommunication services, information technology, and health care fronting gains among the index's 10 industry groups. The Nasdaq Composite (COMP – 1,516.68) rounded out the advancing indices. The tech-rich indicator climbed 10.78 points, or 0.72%.

Checking Commodities

Oil climbed this morning, after the Organization for Petroleum Exporting Countries (OPEC) ministers said the group may meet again before the scheduled December meeting. However, the gains were mild, and Phil Flynn, a vice president at Alaron Trading, told MarketWatch that, "The truth is that another emergency meeting or talk of another production cut before the first one has had a chance to take hold is a sign of OPEC's desperation." At last check, crude oil had erased its morning gains, losing 7 cents to trade at $63.15 per barrel.

After early-morning losses, gold found positive ground, bringing an end to a sell-off in commodities. Investors flocked to gold, as the low price attracted a few bargain-hunters. Furthermore, Greg Canavan, an analyst at Fat Prophets Management Ltd., told Bloomberg, "Gold now looks as cheap as it has been for a long time, and there's no reason why this short-term strength in the U.S. dollar will be sustained. We believe the U.S. dollar rally will soon begin to fade, providing a boost to the gold price into the end of the year." At last check, the malleable metal was trading up $2.78 at $763.50 an ounce.

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