Dow Jumps 124 Points as Oil Dips and Bank Stocks Rally
The Dow ($INDU) added 124 points, or 1%, to close at 12,214. The blue-chip index was up as much as 161 points in intraday trading before pulling back. The broader S&P 500 ($INX) rose 12 points, or 0.9%, to finish at 1,322. The tech-heavy Nasdaq Composite ($COMPX) gained 20 points, or 0.7%, to close at 2,766.
Oil prices dropped Tuesday after setting a 29-month high in the prior session amid reports that OPEC could step up production to make up for supply disruptions in Libya. Talk that the U.S. could tap its Strategic Petroleum Reserve and rumors that Libyan ruler Moammar Gadhafi may be looking for a way to step down also helped oil prices cool off. Benchmark West Texas Intermediate crude futures fell 42 cents to settle at $105.02 a barrel on the Comex division of the New York Mercantile Exchange (CME).
Bank stocks led the market higher after Bank of America (BAC), the nation's biggest bank by assets and a Dow component, said it would return more money to shareholders through share buybacks and dividends. Chief Executive Brian Moynihan told investors that BofA can earn between $35 billion and $40 billion a year in pretax earnings when the business normalizes and that he would seek to return "every dollar" of capital to shareholders. The CEO made the remarks at the bank's first investor day conference since 2007.
The allure of dividends and buybacks helped BofA gain 4.8% on the day. Dow financial stocks JPMorgan Chase (JPM) and American Express (AXP) also had robust gains, and financials were the best-performing sector of the S&P 500 Tuesday, rising 2%. Energy was the worst-performer, closing down 0.9% on the drop in oil prices.
The rush back to riskier assets hurt bonds and gold prices Tuesday. The yield on the benchmark 10-year Treasury note, which moves in opposite direction of price, rose to 3.54% from a prior close of 3.5% Gold futures fell $7.30, or 0.5%, to settle at $1427.20 an ounce in NYMEX floor trading.
In other corporate news, Brown-Forman (BF.B) said third-quarter earnings rose 30% to beat Wall Street's estimates, helped by stronger sales of Jack Daniel's and el Jimador brands, as well as overseas strength. Additionally, the Louisville-based company, also known for making Southern Comfort, raised its full-year outlook.
Safeway (SWY), the nation's second-largest supermarket operator after Kroger (KR), issued a 2011 earnings outlook of $1.60 to $1.80 a share, which was in line with analysts' average estimate. The company also said it would pay down $600 million in U.S. debt.