Stocks advance after day of decline
EmptyNEW YORK -- Stocks advanced Wednesday as Wall Street, coming off a sharp decline a day earlier, got a boost from takeover activity as it awaited second-quarter earnings reports.
Investors shaken by profit warnings earlier in the week appeared to be cautiously optimistic ahead of quarterly reports from biotechnology company Genentech Inc. and fast-food chain operator Yum Brands Inc. The two companies release their results after the market closes.
"We're due for a bounce after yesterday's selloff," said Jim Herrick, manager and director of equity trading at Baird & Co., noting that he doesn't expect the market to find direction until more earnings start pouring in next week.
New merger and acquisition activity helped lift stocks. Steelmaker Gerdau Ameristeel Corp. said late Tuesday it is buying Chaparral Steel Co. for $4.22 billion; speculation mounted that Colgate-Palmolive Co. was interested in buying Unilever; and aluminum producer Alcan Inc. reportedly began talks with Rio Tinto PLC to fend off a hostile bid by rival Alcoa Inc.
Meanwhile, Philadelphia Federal Reserve President Charles Plosser alleviated some investors' jitters about subprime lending, saying in a speech in London that the financial system is well-equipped to handle subprime troubles.
But market watchers said the market's concerns about risky home loans could re-emerge at any moment. "The actual financial impact is anybody's guess. The market doesn't like uncertainty," Herrick said.
In midday trading, the Dow Jones industrial average rose 62.51, or 0.46%, to 13,564.21, after dropping 148 points Tuesday.
Broader indexes also rebounded. The Standard & Poor's 500 index gained 7.03, or 0.47%, to 1,517.15, and the Nasdaq composite index advanced 10.01, or 0.38%, to 2,649.17.
Bonds slipped as investors re-entered the stock market. The yield on the benchmark 10-year Treasury note rose to 5.08% from 5.03% late Tuesday.
The dollar fell to a new record low against the euro and a 26-year low versus the British pound, but rose versus the yen.
Stocks plummeted Tuesday after Standard & Poor's and Moody's said they would slash the ratings of billions of dollars worth of bonds backed by subprime mortgages. A spike in oil prices and disappointing forecasts from Home Depot, Sears and homebuilder D.R. Horton also weighed on the stock market, which is positioning itself for next week's onslaught of earnings reports.
But after the market closed Tuesday, investors got some good news when oil company Chevron Corp. said it expected its quarterly financial results to get a boost from higher commodity prices and stronger refining margins. Chevron rose $1.22 to $90.22.
Chaparral rose $7.82, or 10.3%, to $83.50 after Gerdau said it was buying the company. Gerdau fell $1.38, or 8.8%, to $14.31.
Unilever rose $1.45, or 4.4%, to $34.56 on the Colgate takeover rumors, while Colgate rose 19 cents to $65.96.
Alcoa was the biggest gainer among the 30 Dow components, rising 62 cents to $42.28 on reports that its bid for Alcan would be countered.
Genentech traded flat at $74.85 ahead of its earnings report.
Yum Brands rose $1.37, or 4.2%, to $34.17, after being upgraded by a UBS analyst.
Crude oil futures rose 7 cents to $72.88 a barrel on the New York Mercantile Exchange. The Energy Department reported that U.S. crude inventories fell more than analysts expected, but gasoline inventories rose more than anticipated.
Gold prices edged lower.
Aside from the oil report, there are no major economic data scheduled to be released Wednesday. Thursday will bring the Commerce Department's reading on the international trade balance, and sales reports from various retailers.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 663.9 million shares.
The Russell 2000 index of smaller companies rose 2.97, or 0.35%, to 840.45.
In Asian trading, Japan's Nikkei stock average fell 1.11%; Hong Kong's Hang Seng Index fell 1.22%; and China's Shanghai Composite Index rose 0.3%.
In European trading, Britain's FTSE 100 was down 0.24%, Germany's DAX index was down 0.83%, and France's CAC-40 was down 0.30%.