Stocks higher Thurs. on earnings reports
EmptyNEW YORK -- Wall Street moved soundly higher Thursday as investors, having gotten over a bout of economic jitters in the previous session, focused on mostly upbeat earnings reports.
Profit news from companies like International Business Machines Corp. and Juniper Networks Inc. helped send stocks higher.
Even with a crush of earnings reports to keep them busy, investors also digested a good amount of broader economic news. Federal Reserve Chairman Ben Bernanke, returning to Capitol Hill for the second day of his semiannual report to Congress, said weakness in the housing market hadn't significantly dented consumption. However, a research group predicted Thursday that the housing slump will cause the economy to contract slightly in coming months.
Meanwhile, the Fed was also scheduled to release minutes from the June meeting of its Open Market Committee. At the meeting, the Fed left short-term interest rates unchanged as it has done for the past year and reiterated its concerns about inflation. Investors are keen to examine the minutes as they can offer a more unvarnished look at the Fed's deliberations than the brief statement that accompanies rate decisions.
"I think we are seeing people trying to decide whether earnings are sustainable or not," said Jeffrey Dunham, principal at Dunham & Associates in San Diego. He said the stock market's recent run-up, which was interrupted by a moderate pullback Wednesday, in part reflects investors' desire not to miss out on gains.
"I don't see any big conviction by anybody to leap into the market but we're all terrified to not be players. It's gone awfully far in an awfully short time and the market is trying to figure out 'Is this a head-fake or is this the real deal?"'
In early afternoon trading, the Dow rose 70.73, or 0.51%, to 13,988.95. The blue chip index continued to dance around the 14,000 mark, having first reached it on Tuesday but pulling below the milestone before the close. The Dow's advance Thursday again put the index above 14,000 but didn't propel it past the trading high of 14,021.95 set this week.
Broader stock indicators rose Thursday. The Standard & Poor's 500 index advanced 6.68, or 0.43%, to 1,552.85, while the Nasdaq composite index rose 21.81, or 0.81%, to 2,721.30. Bonds fell as stocks advanced. The yield on the benchmark 10-year Treasury note rose to 5.04% from 5.03% late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
The stock market's rise comes even as oil continues to hover around $75 per barrel. Often, higher energy prices can stir concerns about inflation. Oil finished above $75 Wednesday for the first time since last summer. Light, sweet crude recently fell 5 cents to $75 on the New York Mercantile Exchange.
Thursday's gains extended a partial recovery that started late in Wednesday's session, when the Dow pulled itself up from a loss of 134 points, ending with just a 53-point deficit. Stocks had ceded ground Wednesday amid uneasiness about Bernanke's assessment of the economy, though analysts subsequently noted there was little new in his comments.
In economic news Thursday, the Conference Board said its Index of Leading Economic Indicators fell 0.3%, showing a steeper decline than the 0.1% decrease Wall Street had expected. The group predicts housing will cause the economy to slow.
Concerns about the effects of the housing slowdown, which have damped investor sentiment to varying degrees in recent months, appeared to lessen Thursday. Nervousness had re-emerged Wednesday, however, following word that two Bear Stearns Cos. hedge funds were rendered essentially worthless by bad bets on the subprime lending market, which targets borrowers with poor credit. As home values in some parts of the country have drifted lower, those behind on payments have found it harder to tap into their home equity to square away their debts.
"There is a lot of bad news in the marketplace," Dunham said, citing oil prices, concerns about an unraveling of subprime loans and uncertainty about interest rates. He said, however, that if earnings remain robust and if interest rates eventually come down investors could look past some of their concerns and send the Dow and the rest of the stock market higher.
"We don't have another '99 occurring here," he said, referring to the stock market run-up in 1999 that preceded the dot-com collapse. "Things haven't reached stupid levels."
On Thursday, earnings held Wall Street's interest. IBM, one of the 30 stocks that make up the Dow industrials, jumped $4.76, or 4.3%, to $115.83 after the technology company said strength in its software division and an improvement in its services business helped second-quarter profits. The company raised its profit forecast for the year. Its stock surged past a 52-week high of $111.88, rising as high as $116.48.
Juniper Networks Inc., which makes networking equipment, reported it swung to a profit from a loss a year earlier in the second quarter. The stock rose $3.15, or 11.8%, to $29.88.
Avici Systems Inc. surged $3.56, or 42%, to $11.98 after the maker of networking technology saw a sharp increase in its second-quarter profits. The company also doubled its full-year sales forecast following strong orders for its router products.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 749.1 million shares.
The Russell 2000 index of smaller companies rose 5.44, or 0.64%, to 851.35.
In market action abroad, Japan's Nikkei stock average rose 0.56%. Britain's FTSE 100 rose 1.11%, Germany's DAX index rose 1.24%, and France's CAC-40 rose 1.16%.