Investors looking for a ray of sunshine following a week of dismal economic news and nervousness perpetuated by the Federal Reserve and a potential credit crunch in China got a three-course serving full of optimism today.
Regulators in both Chinese and U.S. markets did their best to downplay the worries that caused huge tumbles in the Shanghai Composite and broad-based S&P 500 (^GSPC 0.94%) over the past couple of sessions. In China, the central bank pledged to provide liquidity as needed to ensure growth would not be compromised while two Federal Reserve Bank presidents did their best to calm investors that the Fed wasn't going to simply pull the plug on QE3 in one fell swoop.
In addition to these market-soothing comments, we had quite a bit of positive and meaningful economic data this morning. The Case-Shiller Index, which is a measure of home values in the 20-largest U.S. cities, rose 12.1% from the year-ago period and signaled continued stability in the housing market. Even consumer confidence demonstrated a strong rebound from its previous month's reading of 74.3 and rose to 81.4. If consumers are more optimistic about the prospects for the U.S. economy, then consumer spending is likely to increase, which is good news, since it represents a huge chunk of U.S. GDP.
For the day, the S&P 500 rose by 14.94 points (0.95%) to close at 1,588.03. In spite of the big move higher, three components easily blew past this nearly 1% move in the S&P 500.
Being welcomed back to the best-performers list after a brief absence is U.S. solar panel maker First Solar (FSLR 0.05%) which tacked on 7.8% for the day. The impetus behind the strong upward move appears to be yesterday's coverage initiated by JPMorgan which placed an "overweight" rating and a $64 price target, and Maxim Group's upgrade to "hold" from "sell." Like always, I wouldn't put too much weight behind these analyst ratings, because they're often just short-term share price drivers. Instead, investors should focus on First Solar's falling costs and growing competitive advantage over highly indebted Chinese solar panel manufacturers which could give it an edge moving forward.
Voice, data, and video services provider Frontier Communications (FTR) also jumped an impressive 4.9% today in spite of no company-specific news. The reason Frontier is rallying does make sense if you consider that the company generates somewhat predictable cash flow and boasts a dividend currently yielding north of 10% -- two perfect ingredients for investors looking for a safe haven stock to buy in a tumbling market environment. However, investors should also be aware that Frontier is bleeding rural landline customers from its $8.5 billion, multi-state landline asset purchase from Verizon (VZ -1.24%) announced in 2009. The deal has thus far been a smart move for Verizon, netting it some cash needed to build out its now dominant wireless 4G LTE network, while it's been a drag on Frontier's bottom line.
Finally, cruise ship operator Carnival (CCL 6.29%) added 5% following its second-quarter results and announcing that current CEO Micky Arison will resign in a month. While I'm sure that investors are pleased with Carnival's adjusted-EPS of $0.09 compared with the expectation of $0.06 per share on the Street, I feel today's move is 99% tied to the exit of Arison. To put it mildly, Arison was a PR nightmare for Carnival over the past year and change, failing to step up when tragedy or calamity struck his cruise company time and time again. Although I'm not ready to give Carnival anywhere near a clean bill of health yet, Arison's stepping down is a big move in the right direction.
