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Closing Bell: 10.23.07

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Sponsored by the Financial Times.
Stocks opened sharply higher this morning, took a brief dip two hours into the trading day, and the blazed right back up. The Nasdaq kept climbing for most of the day, while the Dow and the S&P took a brief dip as we went into the final hour of trading. But all three rallied strongly going into the closing bell. The Nasdaq Composite Index shot up 45.33, or 1.7%, to 2799.26. The Dow Jones Industrial Average climbed 109.26, or 0.81%, to 13676.23. The S&P 500-stock index climbed 13.26, or 0.88%, to 1519.59. Volume on the New York Stock Exchange was slightly lower than yesterday, with 1.31 billion shares trading hands. Rising stocks outnumbered decliners on the NYSE by a margin of 2 to 1.
The Amex Broker-Dealer Index tracked the movements of the broader indexes but slightly exaggerated both its upside and downside volatility. Early in the day the Index shot up more than 1.25%, declined with the broader markets, then began rallying around 2 PM. At the close it was up 1.28%.
Merrill Lynch reports its earnings tomorrow and spent much of the day in negative territory. It rallied along with brokerage brethren late in the day, however, and was up about 1% for the day. The rally was remarkable given the widespread rumors that Merrill losses from Merrill’s fixed income positions, particularly in CDOs, may twice as high as the already staggering $5.5 billion Merrill has already said it will take in third-quarter right downs. The bank was also contending with a Sanford Bernstein analyst’s note projecting that a pull-back in its fixed income business may cost the bank $1 billion in lost earnings next year.
It was a hot and heavy day for tech. RIMM shot up after breaking news of a deal that had the word China in it. Apple gained after last night earnings announcement. Amazon climbed all day, gaining 10% by the market close. Shortly afterwards, it reported that everyone who can read bought a Harry Potter book.
The Entity—the Super Siv that Citigroup, JP Morgan and Bank of America are putting together to rescue the lesser citizens of SIV-world—found some new friends today. A senior Fed official was quoted as saying that the widespread impression that the Fed was unimpressed with the Entity was mistaken, and that the feeling inside the Fed was that the Entity could help beleaguered financial markets. Meanwhile news reports said that Allianz SE's Dresdner Bank is considering playing a role in the Entity.
Treasuries saw a mixed market today. Two-year Treasury notes were up 2/32 higher in price pushing the yield down to 3.84 percent yield from 3.86 percent late on Monday. Ten-year notes, were more or less flat, putting the yield at 4.41 percent yield, which is 1 basis point lower than late yesterday.
You can't have cookies for breakfast but you can have FT Alphaville.