Stocks Rise Despite Bad News

Stocks rose Tuesday despite plenty of bad news, including record oil prices and more pain from the financial crisis at mortgage giant Fannie Mae (FNM) and Swiss mega-bank UBS (UBS).

Investors is looking forward to "better times ahead" and ignoring bad news, says Richard Sparks of Schaeffer's Investment Research. "The market seems to be just shaking that off," he says. "The momentum is certainly to the upside."

Oil prices surged after Goldman Sachs (GS) predicted a barrel of oil could hit $150 to $200 per barrel within two years. After hitting record levels Monday, oil moved even higher Tuesday. After approaching $123 per barrel at one point on Tuesday, light sweet crude oil on the NYMEX settled at a record $121.84 per barrel, up $1.87.

UBS plans to cut 5,500 jobs after reporting $17.3 billion in first-quarter losses at its investment bank. The firm says it expects conditions to remain difficult in the financial industry. UBS shares fell 1.5%.

Fannie Mae, the Federal National Mortgage Association, posted a loss of $2.57 per share, vs. earnings of 85 cents a year ago. Net interest income rose 41% and revenue was up 38%, but the firm was hurt by the drop in home prices; mortgage delinquencies, defaults and foreclosures; lower interest rates; and wider credit spreads on securities. It reportedly plans to cut its dividend in the third quarter and raise $6 billion in new capital.

Shares in Fannie Mae recovered from earlier weakness Tuesday to jump 8.8% after a conference call with Fannie Mae's management. The call "turned investor frowns upside down, encouraging the view that the quasi-government-backed mortgage giant was getting a handle on its balance sheet," Action Economics says.

On Tuesday, the Dow Jones industrial average ended higher by 51.29 points, or 0.4%, to 13,020.83. The broader S&P 500 index moved up 10.77 points, or 0.77%, to 1,418.26. The tech-heavy Nasdaq composite index was up 19.19 points, or 0.78%, to 2,483.31.

Despite higher share prices, "slow trading suggests [the] market lacks conviction," said S&P's MarketScope. On the New York Stock Exchange, 18 stocks moved higher for every 13 lower in price. On the Nasdaq, the ratio was 16 to 13 positive.

The International Council of Shopping Centers said chain store sales fell 0.2% last week, after rising 0.9% the previous week.

Among other stocks in the news Tuesday, Wachovia (WB) said it is now reporting a first-quarter net loss available to common stockholders of $708 million, or 36 cents per share. On Apr. 14, it reported a loss of $393 million, or 20 cents per share. Wachovia increased the loss after reviewing information regarding $360 million of stable value agreements provided by a third-party guarantor, according to a Reuters report.

NYSE Euronext (NYX) reported earnings of 87 cents per share, vs. 43 cents a year ago, as revenue rose 84%.

Qwest Communications International (Q) posted earnings of 9 cents, vs. 12 cents a year ago, as revenue fell 1.4%.

R.R. Donnelley & Sons Co. (RRD) posted earnings of 85 cents per share, vs. 63 cents a year ago, as sales rose 7.3%. The firm increased the low end of its earning predictions for 2008.

Legg Mason (LM) posted a $1.81-per-share loss, vs. earnings of $1.19 a year ago. Revenue dropped 6.4%.

Airgas (ARG) posted earnings of 76 cents per share, vs. 54 cents a year ago, as same-store sales were up 8% and total sales jumped 27%.

Scotts Miracle-Gro Co. (SMG) posted earnings of $1.19 per share, vs. $1.40 a year ago, as sales fell 3.6%. The firm cited a slow start to the lawn and garden season because of cold and wet weather in March.

Weight Watchers International (WTW) posted lower-than-expected earnings of 72 cents per share, vs. 63 cents a year ago, as sales rose 9.4%.

Major European indexes were lower Tuesday. In London, the FTSE 100 index was essentially flat, down 0.3 points to 6,215.20. Paris' CAC 40 index fell 0.44% to 5,040.92, and Germany's DAX index dropped 0.5% to 7,017.10.

In Asia, Japan's Nikkei 225 was up 2.05% to 14,049.26, and Hong Kong's Hang Seng index rose 0.3% to 26,262.13.

Treasury market

Treasury prices fell as equities moved higher on Tuesday. The ten-year note fell 07/32 to 96-26/32 for a yield of 3.89%, while the 30-year bond sank 15/32 to 95-25/32 for a yield of 4.64%.