Wednesday Stock Market Recap: Stocks Up Despite Gustav’s Pressure On Oil Prices

A larger than expected increase in orders for big ticket manufactured goods led Wednesday’s moderate, but positive market performance and is a good indication that our economy is stronger than people thought. The Commerce Department reported that orders for durable goods jumped 1.3% in July from the previous month, led by a strong demand for commercial aircraft. Economists only expected the increase to be 0.1%. This 1.3% increase follows an equal increase in the month of July and sheds some positive light on our economy. This news carried stocks early in the day, which later pulled back off their highs in the late session.

We had a relatively good day across the major indices, each ending up around 80 basis points. A late rise in the price of oil due to concerns of Hurricane Gustav hitting the Gulf Coast pushed these indices down from their daily highs. The Dow Jones Industrial Average (^DJI) traded ended the day at 11,502.51, up 89.64 points, or .79%, after reaching as high as 11554.46 early in today’s session. The Nasdaq composite index (^IXIC) closed at 2,382.46, up 20.49 points, or .87% and had a high of 2395.02 in mid-day trading. The S&P 500 (^GSPC) climbed as high as 1285.05 and ended at 1,281.66, up 10.15 points, or .80% from the previous day.

Oil prices rose for a third straight day, ending at 118.43 per barrel up 2.16 points, or 186% from the previous day due to concerns about hurricane Gustav’s potential run in with the Gulf Coast. Heating oil and natural gas both rose on the day, to 3.2728 up 0.0629 points or (1.96%), and to 8.394 up 0.116 points or 1.40% respectively. 10 year treasury bonds fell 0.0120 points or 0.32% to 3.7720. Currently the dollar is trading at 0.6788 to the Euro and 109.53 to the yen. The dollar as of late has showed relative strength against both of these foreign currencies, but it will be interesting to see what happens in the coming days with the Dollar as speculation continues to circulate about whether the Fed will indeed hike rates or not.

The FDIC announced that there is a possibility it might have to borrow money from the Treasury Department to safely see itself through the next expected wave of bank failures. However, the FDIC has made it clear that if it does need to borrow money from the Treasury Department, it would repay the debt once the assets of the failed banks are sold and that this possibility of needing to borrow money will not happen any time soon, the FDIC, was just throwing the possibility out there because its Deposit Insurance Fund used to repay insured deposits at failed banks has been drained due to a rise in the number of troubled banks.

As discussed yesterday, a FAA software malfunction delayed hundreds of flights on Tuesday, but the FAA said today that airports were back to normal today and the FAA found the source of the computer software malfunction, a packet switch that failed due to a database mismatch.

For those of you who thought that there was a potential announcement regarding mortgage finance companies Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE) to take place today, the U.S. Treasury shot down this rumor today, but did not shoot down the prospect of an announcement in the near future. This news contributed to easing investors’ certainty that there would be a government bailout for the two troubled financial companies and shares of both Fannie Mae and Freddie Mac rose for the third straight day. Fannie Mae closed at 6.48, up 86 basis points, or 15.30% while Freddie Mac ended the day at 4.75, up 78 basis points, or 19.65%.

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