Stocks recover from early weakness on turnaround in Fannie Mae (FNM) shares. The Dow ($INDU) gained 51.29 points to close the session at 13,020.83. The S&P 500 ($SPX) added 10.77 points, closing at 1,418.26. The NASDAQ ($COMPQ) tacked on 19.19 points to 2,483.31. Volume was light on the session with 1.23 billion shares traded on the NYSE and 2.15 billion shares exchanged on the Naz. Market breadth was positive by a 19-to-12 and 17-to-12 margin on the Big Board and Naz respectively.

At the open, financials suffered on bad news from Fannie Mae and UBS (UBS). However, despite this news, FNM shares ultimately rallied and the broader market followed suit. Energy stocks also gained ground on another record high for crude prices. After the bell, Cisco (CSCO) and Disney (DIS) reported earnings and these results could be what traders look at to open trading Wednesday.

FNM reported that it lost $2.2 billion in the first quarter, which equated to a loss of $2.57 a share compared with a gain of 85-cents in the year ago period. On top of this news, the company cut its dividend by nearly 30 percent and said it would raise $6 billion in new capital in the form of a public offering of stock. After falling to a low of $26.24 intraday, FNM found support near its 50-day moving average and rallied 8.91 percent to a price of $30.81. This is a sign that many traders feel the worst might be over for FNM.

Shares of UBS fell 1.57 percent Tuesday after reporting a quarterly loss of $11 billion. This led the financial giant to announce that it might cut up to 5,500 jobs in the next few months. UBS also stated that it would sell off $15 billion in distressed assets to BlackRock. UBS has written down $37 billion in assets due to the U.S. mortgage market problems.

Oil prices rose to a high of $122.73 for delivery in June, ultimately closing with a gain of $1.87 to $121.84. Since last Thursday, crude is up more than 8 percent and is at an inflation adjusted high as well. Previously, crude hit a high at $101.70 in April 1980. Energy related stocks saw gains on this rise in oil with Chevron (CVX) up 1.31 percent, ExxonMobil (XOM) up 0.61 percent and the Oil Index ($XOI) up 2.31 percent.

Shares of CSCO are higher by about one percent in after hours trading after trading flat in the regular session. The networking giant reported better than expected results in its fiscal third quarter. Both sales and earnings per share beat estimates, which could provide strength in the technology sector.

Jody Osborne
Senior Writer & Options Strategist
Optionetics.com ~ Your Options Education Site