Banks, Builders and … Bedding? — Wednesday’s IP Market Recap

by Marc Bastow | June 6, 2012 5:33 pm

InvestorPlace Market Recap[1]A rising tide of optimism helped to light a fire under the markets Wednesday as indices rallied more than 2% on good news from both Europe and the U.S. regarding the possibility of stimulus measures to help jump-start their flagging economic growth.

In the U.S., Atlanta Fed president Dennis Lockhart, who is a member of the Federal Reserve’s policy-setting committee, said continuing Operation Twist is now “an option on the table.” The policy, which swaps short-term bonds for ones with a longer duration to keep interest rates low, currently is set to expire at the end of the month.

In Europe, comments from the European Central Bank and a new proposal for European-wide bank rescues and bailouts helped to spur optimism.

The net result was a banner day on Wall Street, with the Nasdaq climbing 2.4% to 2,844, the Dow Jones gaining 2.37% to 12,414, and the S&P ending the day up 2.3% to 1,315.

Financial stocks surged for a second straight day, with Bank of America (NYSE:BAC[2]) tacking on 7.7% gains to Tuesday’s 4% advance. Citigroup (NYSE:C[3]) forged ahead by 5.4%, Morgan Stanley (NYSE:MS[4]) roared up 8%, and JPMorgan (NYSE:JPM[5]) — the “laggard” of the group — still managed a 3.4% gain.

Homebuilders also saw a jolt of momentum after Hovnavian (NYSE:HOV[6]) reported its first quarterly profit in more than two years. Profit of $1.8 million (2 cents per share) vs. a year-ago loss of $72.7 million (69 cents) led HOV shares to a 18% march. KB Home (NYSE:KBH[7]) and Ryland Group (NYSE:RYL[8]) rode the coattails, up a respective 7.4% and 5.8%.

Tech stocks also moved ahead smartly, with Oracle (NASDAQ:ORCL[9], +3%), Microsoft (NASDAQ:MSFT[10], +3%) and IBM (NYSE:IBM[11], +2.5%) headed higher, and even beaten-down Facebook (NASDAQ:FB[12]) finding momentum with a 3%-plus gain.

Making a rare (and horrid) show Wednesday were mattress makers, which took it on the chin as Tempur-Pedic (NYSE:TPX[13]) forecast a disappointing second quarter. Sales in North America are running below plan, leading the company to cut guidance for the year. Investors led a mass exodus of almost 50% on the day. Meanwhile, Mattress Firm’s (NASDAQ:MFRM[14]) fiscal first-quarter profit soared after reporting improved same-store sales, but shares plummeted more than 20% as revenue missed analyst expectations.

The combination of negative news from Mattress Firm and Tempur-Pedic weighed on shares of peer and innocent bystander Select Comfort (NASDAQ:SCSS[15]), which fell also dropped more than 20%.

Finally, for those looking for additional respite to end the day, Diageo (NYSE:DEO[16]) announced it would boost production of scotch whiskey[17] during the next 10 years in response to consumer demand. Investors cheered the news by buying up the stock more than 4% — a nice, smooth finish to the day.

Three Up

Three Down

Marc Bastow is an Assistant Editor at As of this writing, he was long MSFT.

  1. [Image]:
  2. BAC:
  3. C:
  4. MS:
  5. JPM:
  6. HOV:
  7. KBH:
  8. RYL:
  9. ORCL:
  10. MSFT:
  11. IBM:
  12. FB:
  13. TPX:
  14. MFRM:
  15. SCSS:
  16. DEO:
  17. announced it would boost production of scotch whiskey:
  18. IRM:
  19. TEX:
  20. GRPN:
  21. JRCC:
  22. ABX:
  23. KMI:

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