News at a Glance
Modest Gains: Major indexes flutter, hug the line.
Oil Pulls Back: Crude back down $4+, now under $125.
GSE Relief: House set to vote on housing legislation.
Signal Strength: Profits, customer base up at AT&T.
The Lowdown
Another sharp drop in energy prices left stocks with modest gains Wednesday.
The major indexes advanced as traders welcomed more energy relief after an Energy Department report. After a volatile session, the Dow Jones Industrial Average ended up 30 points at 11632. The Nasdaq picked up 22 at 2326, and the S&P 500 gained 5 at 1282.
Traders grew more aggressive as oil prices fell again. Shortly after 4 p.m., crude traded down $4.21 on the day at $124.21 a barrel. Prices eased after the latest Energy Department report on crude inventories showed inventories had returned to "the lower half" of the average range for this point in the year, up from "the lower boundary."
Gas prices fell for the sixth straight day, according to AAA's Fuel Gauge Report. The national average is now $4.042 a gallon.
Earnings were a mixed bag. Several Dow components overcame difficult economic conditions last quarter and reported rosy results. AT&T (T) posted a rise in profit on a big bump in wireless customers. McDonald's (MCD) and Pfizer (PFE) topped analysts' estimates on strong sales abroad. Boeing (BA) was the exception. The aircraft manufacturer disappointed after a delayed military contract weighed on second-quarter results.
In Washington, the Bush administration said it would not stand in the way of proposed housing legislation, even though it include a $3.9 billion provision to repair neighborhoods left in disarray by foreclosures. The president had argued that measure offered more help to lenders looking to resell properties than to homeowners looking to hang on to their houses.
The House prepared to vote on the bill, which would also give the government the authority to offer Fannie Mae (FNM) and Freddie Mac (FRE) an unlimited line of credit in case of an emergency. The Congressional Budget Office has put the odds of such a scenario at less than 50%.
The House bill would also allow homeowners in danger of foreclosure to refinance their home loans, switching to fixed-rate mortgages backed by the Federal Housing Administration.
Corporate News
AT&T (T) reported a 9% increase in adjusted second-quarter earnings per share, as the Apple (AAPL) iPhone helped promote growth of its wireless customer base. Excluding one-time items, the firm earned $4.5 billion, or 76 cents a share, up from $4.3 billion or 70 cents a share. AT&T said it added more than 1.3 million new wireless customers during the quarter.
Costco (COST) predicted its fourth-quarter earnings would come in "well below" analysts' estimates of $1 a share. The discount retailer said its results have been affected by high energy costs. Costco also said it would increase its share repurchasing plan by $1 billion.
PepsiCo (PEP) posted a 9% rise in second-quarter net income, as strong international sales and a weak dollar helped the firm overcome relatively slow growth in the U.S. Pepsi earned $1.7 billion, or $1.05 a share, up from $1.56 billion, or 94 cents a share, in the year-ago period, the firm said. Excluding one-time items, Pepsi earned $1.03 a share, topping Street estimates by a penny a share. The firm also expanded its share buyback program by $1 billion.
Washington Mutual (WM) reported its largest quarterly loss in company history. The bank lost $3.33 billion, or $6.58 a share, down sharply from a net gain of $830 million, or 92 cents a share, in the year-ago period. Excluding one-time charges, WaMu lost $3.34 a share, well below Street estimates of $1.05 a share. The firm said it was hurt by a $3.74 billion increase to its loan loss provisions. WaMu plans to lower its costs by $1 billion by the end of next year.
Yahoo (YHOO) reaffirmed its full-year guidance in spite of a decline in second-quarter profits. The Internet firm earned $131 million, or nine cents a share, down from $161 million, or 11 cents a share, in the year-ago period. Chief Executive Jerry Yang said he was "absolutely committed" to remaining at his job, Reuters reported. The results were released shortly after a boardroom shake-up that put activist investor Carl Icahn and two of his supporters on the board.
The Economy
Crude inventories fell by 1.6 million barrels last week, leaving them in the lower half of the average range for this point in the year, the Energy Department said. REPORT
The Federal Reserve's latest Beige Book report described stagflationary pressures in the nation's regional economies. Most areas reported slower growth in the housing, banking, manufacturing and retail sectors, but much of the country also experienced a bump in prices. REPORT
ReadMe
The Wall Street Journal on housing legislation: Congressional leaders have agreed on the terms of a deal to allow the government to act in emergency to keep the GSEs afloat. STORY
The Los Angeles Times on oil: An energy expert says oil prices will increase sharply after the world's easily accessible crude resources have been tapped. STORY
U.S. News on selling your home: Staging, or preparing a home to be showcased to potential buyers, has been shown to lead to faster and more lucrative sales. STORY
WatchMe
CNBC on financials: Hans Goetti, CIO with LGT Bank in Liechtenstein, says investors should be in no rush to return to U.S. banks. VIDEO
President Bush on alternative investment vehicles: The president explains the origin of the subprime lending crisis in his signature vernacular: "Wall Street got drunk." VIDEO
Night Shift: Repo Men: The episode explores the work of repossession agents in New Jersey. NGC, 9 p.m.
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