Upbeat Profit News Helps Lift Stocks
Another wave of positive earnings news from companies such as IBM propelled stocks higher Thursday, giving Wall Street its fifth advance in six sessions. The Dow Jones industrials jumped 239 points, bringing its recent advance to just shy of 1,000 points.
Analysts said investors were becoming more optimistic after a week of good news from companies ranging from General Electric to Advanced Micro Devices. A belief that stocks were oversold, after hitting multiyear lows last week, is adding to the good mood, despite Wednesday’s steep decline
“I think economy-wise the worst days have passed,” said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. “We are very likely in a phase where stocks are catching up from the bottoming of the economy several quarters ago.”
The Dow Jones industrial average climbed 239.01 points, or 3%, to close at 8,275.04, more than wiping out Wednesday’s drop of 220 points. Since hitting a five-year low Oct. 9, the Dow has surged 988.77 points. The Nasdaq composite index rose 39.87 points, or 3.2%, to 1,272.29. The Standard & Poor’s 500 index gained 19.18 points, or 2.2%, to 879.20.
Winners beat losers by more than 2 to 1 on the New York Stock Exchange and Nasdaq in active trading.
IBM rose $7.30, or 11.3%, to $72.20. After the closing bell Wednesday, the technology giant reported third-quarter earnings that beat analysts’ expectations by 3 cents a share and reaffirmed its fourth-quarter outlook, prompting a Merrill Lynch stock upgrade.
Microsoft rose 36 cents to $50.77 ahead of its fiscal first-quarter earnings report. After the market closed, the software giant reported earnings that beat analysts’ estimates by 7 cents a share. In after-hours trading, Microsoft climbed more than 4%.
Investors took heart from a government report Thursday showing housing construction rebounding strongly in September to a 16-year high, and shook off two other surveys indicating a dip in industrial production and a jump in jobless claims.
“Investors have only been responding to the negative numbers. Now, eyes are being open to the positive numbers,” Freeman said. “What happens at major turns in markets is that investors’ responses to some of the negative numbers become less dramatic.”
Analysts said Wednesday’s pullback was expected after a four-day rally helped end six straight weeks of sell-offs. They remained hopeful that the market could continue its advance with more third-quarter earnings reports, which overall are expected to beat expectations.
“We think the confidence is coming back, the accounting scandals are past us, the banks are reporting better-than-expected results and the balance sheets are slowly being cleaned up,” said Jason R. Graybill, senior portfolio manager and managing director at Abner, Herrman & Brock Asset Management.
Still, analysts acknowledged lingering uncertainties about the strength of the economic recovery as well as a possible war with Iraq. Wednesday’s selling intensified after President Bush signed a resolution allowing him to use force against Iraq.
“We think the bottom from last week ... is really going to be the lows in the markets. But we don’t see a runaway on the upside,” Graybill said.
In other highlights Thursday:
* Investors continued to pull money out of the bond market. The yield on the benchmark 10-year Treasury note rose for a sixth straight session, closing at 4.20%, up from 4.05%.
* Advanced Micro Devices jumped 84 cents, or 24.1%, to $4.33, after the computer microprocessor maker said it expected sales to improve significantly in the fourth quarter.
* Eastman Kodak rose $2.09 to $32.44 after the film company raised its third-quarter outlook, citing improved performance.
* Nokia gained $1.60 to $16.60 after the cell phone maker reported an unexpectedly large rise in third-quarter profit.
* Losers included Sears, which fell $10.80, or 31.8%, to $23.15, after reporting a 26% decline in third-quarter earnings that missed analysts’ expectations. The retailer also reduced its outlook for the rest of the year, citing uncollectable credit card debt.
* Overseas, Japan’s Nikkei stock average finished 0.8% higher. In Europe, France’s CAC-40 rose 3.8%, Britain’s FTSE 100 gained 2.8%, and Germany’s DAX index was up 5.4%.
Market Roundup, C7-8
