Stocks Advance on Earnings Reports

Stocks mostly pushed ahead Wednesday, sending key indexes up modestly to new highs for the year, amid some upbeat corporate earnings reports.

Growing optimism about the U.S. economy also helped the dollar, halting the euro’s latest rally, traders said.

Both the Dow Jones industrial average and the Standard & Poor’s 500 rose for a fifth straight session. The Dow added 11.77 points, or 0.1%, to 8,793.12, while the S&P; was up 1.74 points, or 0.2%, to 953.22.

The Nasdaq composite posted its fourth straight advance, rising 6.55 points, or 0.4%, to 1,563.24.

Trading was heavy, suggesting that more investors are eager to get into the market, some analysts said.

For the S&P; index, Wednesday’s close was the highest since August; for Nasdaq it was the best close since June.

The market had rallied sharply Tuesday, with the Dow soaring nearly 180 points, after the Conference Board reported that consumer confidence continued to improve in May.

On Wednesday, some investors were disappointed by a government report showing that durable goods orders to factories fell 2.4% in April from March.

Still, analysts say many investors remain focused on the idea that business will improve starting this summer, thanks to the lowest interest rates in a generation and the tax cuts that President Bush signed into law Wednesday.

“The market is really looking forward and the consensus is that we’re going to see a strong economic recovery in the second half,” said Keith Keenan, vice president of institutional trading at Wall Street Access, a New York-based brokerage.

Some better-than-expected corporate earnings reports helped to buoy investor sentiment. Krispy Kreme climbed $2.32 to $34.18 after the doughnut chain posted quarterly profit up 48%.

Other stocks rallying on strong profit reports included home builder Toll Bros., up $1.05 to $28.50, and retailer Costco Wholesale, up $1.43 to $37.35.

Overall, corporate earnings began to rebound a year ago, and continued to rise for the blue-chip S&P; 500 firms in the first quarter despite the weak economy. That has raised hopes for a substantial jump in earnings if and when the economy picks up steam.

Many analysts say the market rally since mid-March has been surprisingly broad-based, and that its steady pace suggests it has staying power.

“The bears say that we are near a significant decline, but you can’t tell it from the most important of all indicators, the chart action itself which continues to be very constructive,” said Steve Todd, publisher of the Todd Market Forecast newsletter in Mission Viejo.

On Wednesday, rising stocks outnumbered losers by 19 to 14 on the New York Stock Exchange and on Nasdaq, as volume rose from Tuesday’s high levels.

In currency trading, the euro pulled back, falling to $1.177 from $1.185. Traders said a stronger U.S. economy could revitalize the battered dollar.

Also, many traders are focusing on the likelihood that the European Central Bank will cut interest rates when policymakers meet next week. Lower European rates could make euro-denominated bonds less appealing.

In other markets, Treasury bond yields were little changed, while gold and oil prices dipped.

Among Wednesday’s highlights:

* Toll Bros.’ earnings report helped to lift the builder sector. Lennar gained $2.52 to $65.78, Centex rose $2.28 to $77.68 and KB Home surged $3.05 to $60.32.

* Brokerage stocks rose on hopes the market rally will continue. Merrill Lynch added 92 cents to $42.92, Bear Stearns gained $2.08 to $75.70 and Ameritrade jumped 40 cents to $7.91.

* In the retail sector, Target was up $1.25 to $35.25, Best Buy rose $1.28 to $37.60 and Ann Taylor gained 93 cents to $24.50.

But AutoZone fell $3.67 to $83.74 after the auto parts retailer said fiscal third-quarter earnings grew 23%, in line with estimates. The stock has risen from $59 in January.

* Among Southland-based issues, shoemaker K-Swiss reached a 52-week high, rising $1.49 to $32.76. The stock is up 51% this year.

* Delta Air Lines slumped $1.15 to $12.88. Delta sold $300 million in notes that may be convertible into new shares -- which could dilute current holders’ stake in the firm.

Other airlines also slid. Continental fell 53 cents to $10.97 and Northwest was down 28 cents to $8.98.

* European markets were sharply higher. The German market jumped 1.6% and the British market gained 2%.

Market Roundup, C6-7