Wall Street opened modestly higher this afternoon, following steep declines in the previous session, as bargain hunters scoured the market in search of attractive opportunities.

Financial stocks were in vogue this afternoon, with the likes of Bank of America, Citigroup and JPMorgan up by more than 1% to $16.79, $4.04 and $41.49 a share respectively. Goldman Sachs rose 1.9% to $160.21 after Pali Research upped its recommendation to ‘buy’ and said it anticipates continued strength in Goldman’s fixed income business. Credit-card company American Express also benefitted from an upgrade by KBW today. Its shares climbed 3.8% to $31.54. [1]

In the meantime, shares of UBS (USA) climbed 2.1% to $15.53 after unidentified sources told Bloomberg that the Swiss government is mulling over the possibility of selling its stake in the bank.

Commercial lender CIT Group was also in the limelight after announcing that it has completed its debt tender – a development that is likely to keep the embattled lender out of bankruptcy, at least for the time being. Its shares jumped 5.9% to $1.44.

Home builders were also in demand despite commencing the trading session in the red, following a seemingly bleak US housing market report. Official government data released today unveiled an unexpected 1% drop in US housing starts, which came in at an annualised rate of 581,000 in July.

The decline came on the back of a drop in construction on multi-family dwellings. Bloomberg was expecting total starts to rise to an annual pace of 599,000 in July, following an originally reported 582,000 the month before.

Building permits, which are a barometer of future construction activity, also declined in July, falling 1.8% to an annual pace of 560,000 from 570,000 in June. The report wasn’t as bad as it initially looked, however; single-family starts, which account for 75% of the industry, actually climbed 1.7% to a 490,000 annual rate in July, suggesting that the housing market recovery remains on track.

Shares in house builder D.R. Horton relinquished earlier losses and managed to gain 1.9% to $12.11 this afternoon. Lennar advanced 0.9% to $12.94 and KB Home gained 0.4% to $16.49.

US mining companies also gained traction as investors took the opportunity to re-enter the buoying sector following steep losses in the previous session. Freeport-McMoRan Copper & Gold was 0.6% higher at $59.72 and Newmont Mining was up 0.7% to $39.05.

Home Depot made the headlines today after unveiling second-quarter profits that fell less than consensus estimates after implementing tight cost controls. The largest US home-improvement retailer reported a 7.2% fall in second-quarter net income of $1.12 billion, or 66 cents a share.

After excluding certain one-off items, its profits came in at 64 cents a share, which was better than Bloomberg’s expectations for a profit of 59 cents. The company also raised its earnings guidance. Its share price climbed 3.7% to $27.07.

By 3.35pm (London time), the Dow Jones Industrial Average was up by 43.76 points (+0.48%) to 9179.10, while the broader S&P 500 was 4.18 points (+0.43%) higher at 983.91.

It is also important to note that the Labor Department today revealed that US wholesale prices fell more than anticipated in July as energy costs subsided. The producer price index fell 0.9% in July following a 1.8% gain the month before. After excluding food and fuel, so-called core prices unexpectedly fell 0.1%.

[1] Source: FT (18 August 2009)

By Anthony Grech, Research Analyst, IG Index.

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