Strong Earnings Boost Indexes
Stocks struggled higher on Tuesday, lifting the Dow Jones industrial average within striking distance of 10,000 for the first time since May 2002, as a strong start to earnings season eased worries that the market’s rally has been overly optimistic.
In currency trading, the dollar had a wild ride, rallying early in the day and then sinking later on comments by President Bush that were interpreted as a warning to Japan about currency intervention.
On Wall Street, the Dow rose 48.60 points, or 0.5%, to 9,812.98, its first close above 9,800 since May 31, 2002. The Standard & Poor’s 500 index added 4.13 points, or 0.4%, to 1,049.48, also its highest close since May 2002.
The Nasdaq composite rose 9.66 points, or 0.5%, to 1,943.19, its best finish since Jan. 28, 2002.
Winners led losers by 4 to 3 on the New York Stock Exchange and by 5 to 3 on Nasdaq in moderate trading.
Johnson & Johnson led the Dow’s advance, rising $1.14 to $50.93 after the drug and medical products maker posted a 20% gain in third-quarter profit, beating most analyst estimates. Other big names that topped expectations for the just-ended quarter included Merrill Lynch and Bank of America.
Key indexes were modestly in the red early in the session, then turned higher by midafternoon.
Investors appear to have fallen into two camps lately. One argues that share prices already take into account a strong third-quarter showing and are unlikely to go much higher. But another faction contends that a validation of third-quarter forecasts will boost expectations for the current quarter and 2004, fueling further market gains.
“We rallied into earnings season ... so you walked in having already built-in great expectations,” said Bryan Piskorowski, market analyst at Wachovia Securities. To extend the rally, he said, “you pretty much have to hit every [number] this quarter.”
Tuesday’s reports, at least, offered an encouraging start.
Merrill Lynch reported a 50% jump in third-quarter earnings. Although the results topped most forecasts, Merrill shares fell 82 cents to $58.07; the stock had risen 10% this month.
“Merrill was the number that everybody latched on to today,” Ed Peters, chief investment officer at PanAgora Asset Management Inc. in Boston.
Bank of America rose 76 cents to $82.50 after posting strong results. But another company that beat forecasts, Delta Air Lines, fell 96 cents to $13.74, despite reporting a smaller-than-expected loss of $168 million.
Intel rose 28 cents to $31.08 in advance of its quarterly report. After the close, the world’s largest semiconductor company reported that third-quarter profit doubled to $1.7 billion on strong demand for personal computers. The results beat Wall Street expectations by 2 cents a share, and Intel was up more than 2% in after-hours trading.
In currency markets the dollar jumped as high as 110.24 yen, then slumped to close at 108.85 in New York. Traders said Bush’s comments Tuesday that the marketplace should determine currency values helped drive the dollar down because he was thought to be chastising Japan, which has sought to control the yen’s rise.
In other highlights:
* Bond prices fell as investors shifted money into stocks. The yield on the benchmark 10-year Treasury note, which moves in the opposite direction of its price, climbed to 4.35% from Friday’s close of 4.25%. The bond market was closed Monday for Columbus Day.
* Media stocks advanced after Gannett said third-quarter earnings rose on advertising gains at its flagship newspaper, USA Today. E.W. Scripps, owner of the Cincinnati Post, said an increase in advertising at its cable networks contributed to a 14% gain in earnings. Gannett rose 98 cents to $80.92, and E.W. Scripps climbed $4.89 to $92.88.
* Westlake Village-based United Online plunged $5.48 to $25.44 on reports that AOL Time Warner will launch a lower-cost version of its Internet access service to stem defections.
Market Roundup, C8-9
