The stock market had some good reasons to rally on Tuesday. Positive earnings reports from Wal-Mart (WMT) and Home Depot (HD) combined with the fact that BHP made an unsolicited bid in the amount of $38.6 billion for Canadian fertilizer manufacturer, Potash Corporation (POT) to get the bulls roaring. Volume was thin, as normal for this point in the summer. As a result, the indices moved upward, squeezing the short sellers, forcing them to cover their positions and run up prices.
The Nasdaq Composite got the biggest boost, gaining 1.26 percent to end the day at 2,209. The S&P 500 jumped by 1.22 percent to close at 1092. The Dow Jones Industrial Average picked up 103 points (1.01%) to finish at 10,698.
Miami-based corporations had a huge day on Tuesday. Royal Caribbean (RCL) rocketed skyward by 4.17% to close at 26.98. Carnival Cruise Lines (CCL) was next, climbing 1.97% to finish at 33.11. Burger King (BKC) rose by 1.94% to close at 16.80. Ryder System (R) had a similar gain, climbing 1.93% to finish at 41.13. Lennar (LEN) lost all of its momentum after lunchtime, sliding back to a more modest gain of 1.07% to end the day at 13.28.
Our “thought for the day” comes from Tuesday’s Weekly Market Comment by John Hussman of the Hussman Funds:
My impression is that the market remains in a tenuous state in that we have not meaningfully cleared the overextended syndrome that has been with us in recent months. Even so, we’ll respond fractionally to any clearing that we do observe (with a growing responsiveness as we move through the year). We’re certainly not inclined to “buy the dip” to a material extent, and I continue to anticipate a second wave of credit difficulties in the months immediately ahead. But I also believe that if we can move through 2010 without a second “crisis-level” wave of credit strains, we’ll be more able to rely on post-1940 criteria in setting our investment positions, with less concern about the more hostile “post-crash” dataset.
Suffice it to say that we’re not about to lift a significant portion of our hedges early in a selloff provoked by fresh credit strains, but that I also don’t intend to specifically factor in concerns about a second-wave for an extended period if we don’t observe them.
There will be lots of earnings reports on Wednesday. Here are some of the companies that will be playing “beat the number”: Applied Materials (AMAT), Target Corporation (TGT), John Deere (DE), Brocade Communications (BRCD), NetEase.com (NTES), Limited Brands (LTD) and PetSmart (PETM). Good Luck!