Wall Street rebounds on strong earnings reports
EmptyNEW YORK -- Wall Street ended an erratic session with a big advance Tuesday as investors uneasy about the economy were reassured by solid earnings from blue chip names including Apple Inc. and American Express Co. The Dow Jones industrial average rose more than 100 points.
Technology stocks were among the biggest gainers after Apple surpassed analysts' expectations with a 67% jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. Two component companies of the Dow Jones industrial average -- American Express, one of the largest credit card companies, and chemicals maker DuPont Co. -- posted better-than-expected profit gains as well.
But comments from DuPont CEO Charles O. Holliday Jr. that the company doesn't expect a recovery in the housing market next year reminded investors of the still uneasy forecasts for the economy. Holliday's remarks helped pull the major indexes down from their session highs before the indicators rebounded in afternoon trading.
"Housing is obviously still a big concern, and the question is how much does it spill over into the rest of the economy," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. "I think the trend for the market is down unless investors see something positive, and the market drifts back up again."
He said investors were also adjusting their positions ahead of key housing data this week. On Thursday, the National Association of Realtors will release its existing home sales report, while the Commerce Department reports new home sales a day later.
According to preliminary calculations, the Dow rose 109.26, or 0.81%, to 13,676.23.
Broader stock indicators also had solid gains. The Standard & Poor's 500 index rose 13.26, or 0.88%, to 1,519.59; the Nasdaq composite index rose 45.33, or 1.65%, to 2,799.26.
The stock market had a fitful recovery Monday after plunging Friday. Wall Street had sold off for five straight sessions as worries about the credit market's effect on the economy escalated, when several blue chip companies offered dimmer-than-anticipated outlooks and S&P downgraded more mortgage-backed securities.
Higher energy prices and a weakening dollar are also hanging over the market. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
Analysts believe investors are also looking for the Federal Reserve to throw them a lifeline when it meets next week to decide the future of rates. Wall Street widely expects the central bank will again lower rates after its half-point cut in September.
"I think you're going to see trading will be really choppy between now and next week's Federal Reserve meeting," said Scott Fullman, director of investment strategy for I.A. Englander & Co. "The market is very sensitive right now, and I continue to tell my clients that I don't mind being long so long as you're hedged -- risk levels are still high."
Treasury bonds were little changed amid a disappointing auction of new issues, and as investors moved back into stocks. The yield on the 10-year note, which moves inversely to its price, edged higher to 4.41% from 4.40% on Monday.
Oil prices dipped on expectations of rising U.S. crude inventories, and concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude fell 75 cents to $85.27 on the New York Mercantile Exchange.
The dollar fell against most other major currencies, while gold rose.
Earnings commanded most of the attention on Tuesday as investors looked for any indication about how companies fared during the quarter, and what they expect for the balance of the year. Recent results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow Friday.
So far, roughly 41% of the Standard & Poor's 500 index have reported results -- with 51% beating expectations, according to the rating agency.
Apple rose $11.80, or 6.3%, $186.16 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34% from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express said late Monday higher spending by cardholders pushed third-quarter profit up 10%. Shares rose $1.79, or 3.2%, to $58.66.
DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose 24 cents to $46.81.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42% after its acquisition of BellSouth Corp. Shares rose 85 cents, or 2.1%, to $42.02.
The Russell 2000 index of smaller companies rose 8.45, or 1.05%, to 818.53.
Advancing issues led decliners by a 2 to 1 margin on the New York Stock Exchange, where volume came to 1.15 billion shares compared to 1.39 billion on Monday.
In Asian trading, Japan's Nikkei stock average inched up 0.07%, while Hong Kong's Hang Seng index soared 3.54%. In European trading, Britain's FTSE 100 rose 0.85%, Germany's DAX index rose 0.61%, and France's CAC-40 rose 0.77%.