News at a Glance
Big Gains: Major indexes cap the day with a rally.
Wachovia Disappoints: ...but shares rise on cost-cutting plans.
Industrials Surprise: Dupont, Caterpillar beat estimates.
Oil Plummets: Crude down $3+, below $128 a barrel.
The Lowdown
A late rally in financials lifted stocks to big gains Tuesday.
Traders warmed to a cost-cutting plan by Wachovia (WB), strong earnings from two Dow components and another sharp drop in oil prices. Each of the major indexes gained more than 1%. The Dow Jones Industrial Average climbed 135 points to 11603. The Nasdaq picked up 24 at 2304, and the S&P 500 rose 17 to 1277.
The session got off to an ominous start. The financial sector's streak of high-profile earnings surprises ended when Wachovia said it lost $8.86 billion, or $4.20 a share, in the second quarter on bad loans. Analysts had been looking for a loss of 78 cents a share.
However, traders ultimately embraced Wachovia's plan to cut costs by $2 billion. The bank will exit the wholesale mortgage business and eliminate more than 6,000 jobs.
Also in finance, American Express (AXP) reported second-quarter earnings well below analysts' estimates. With more loans expected to go belly up, the credit card company was forced to raise its loan loss provisions by $1.5 billion and boost its credit reserve by $374 million.
MORE ON STOCKS FROM SMARTMONEY.COM
The disappointing results from Wachovia and American Express ended the financial sector's string of earnings surprises. Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (
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