Transcripts

Wal-Mart & Oil Prices Send Wall Street Into Rally Mode

SUSIE GHARIB: An explosive rally on Wall Street today, thanks to a big jump in Wal-Mart shares and a big drop in oil prices. The Dow surged 319 points, its second biggest daily gain this year. And the NASDAQ soared almost 90 points or 3.5 percent. Investors went on a buying spree after Wal-Mart reported better than expected quarterly earnings and hinted that consumer spending will be stronger than anticipated this holiday shopping season. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Americans spend nearly one out of every 10 retail dollars at Wal-Mart, which is why the quarterly earnings report of the giant discounter draws as much attention as many of the government's reports on the economy. And today's report was surprisingly good. Wal-Mart posted earnings per share of $0.70 compared to $0.63 in the third quarter of last year. Analysts surveyed by Thomson Financial were expecting $0.67 a share. The company also raised its full year outlook, which Wall Street took to be an encouraging sign going into the critical holiday sales period. Wal-Mart has already begun holiday price-cuts, earlier than in previous years. Christine Augustine of Bear Stearns believes that is a good move. Wal-Mart is a non-investment banking client of Bear Stearns.

CHRISTINE AUGUSTINE, RETAIL ANALYST, BEAR STEARNS: The consumer is slowing. But in that sort of an environment, Wal-Mart is better positioned than some of the peers because of their prices. Because they've been very focused this year on offering the lowest possible price and they're advertising that quite a bit and I think they're getting some traffic back to the stores as a result.

GURVEY: This year Wal-Mart increased its selections of food products and electronics, adding well-known brand names to its stocks of flat screen televisions and laptops. Analysts say that will let it better compete on price with smaller rivals. Retail analyst Mark Husson of HSBC says in many ways as Wal-Mart goes, so goes the entire retail sector. HSBC provides non-investment banking services to Wal-Mart.

MARK HUSSON, RETAIL ANALYST, HSBC: Wal-Mart is so big these days that it is the trend. If you look at Wal-Mart's sales growth in the U.S., it's something like 1.5 percent comparable store sales, but probably more like 4 or 5 percent in total sales growth. So it's outperforming the market. It's gaining market share and its sales in the fourth quarter of this year is going to be $100 billion. So it's a massive, massive business.

GURVEY: Wal-Mart shares closed up today more than 6 percent, a clear indication, Husson says, that analysts were pleasantly surprised. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.