Stocks Surge on Earnings
Stocks snapped back Thursday from their recent slide, rallying on the strength of surprisingly robust earnings from a range of U.S. companies.
The Dow Jones industrial average climbed nearly 144 points and the technology-heavy Nasdaq index rose almost 2% on heavy trading volume as Caterpillar, Yum Brands, Qualcomm and other firms topped Wall Street profit forecasts.
The healthy numbers deflected investors’ concerns about a possible hike in interest rates by the Federal Reserve this summer or fall.
“It’s pretty hard not to be impressed with the earnings season this quarter,” said Shelly Meyers, portfolio manager at Pacific Global Investment Management in Glendale. “Companies of all sizes and across industry sectors are beating the estimates. This is a big party, not a small event.”
The Dow index surged 143.93 points, or 1.4%, to 10,461.20 in the biggest one-day gain since March 25.
The broader Standard & Poor’s 500 index rallied 15.84 points, or 1.4%, to 1,139.93. The Nasdaq composite climbed 37.28 points, or 1.9%, to 2,032.91.
Winners swamped losers by more than 3 to 1 on the New York Stock Exchange and by 2 to 1 on Nasdaq.
The index gains erased losses from earlier this week, when traders pushed stocks down in the wake of Fed Chairman Alan Greenspan’s warning that the central bank would have to raise interest rates eventually.
The Dow closed at its highest level since April 12, although it remains about 3% below its peak for the year, reached Feb. 11.
Thursday’s rally was paced by the companies issuing robust earnings reports or rosy guidance for the rest of the year.
Caterpillar boosted the Dow, climbing $3.02 to $84.10 after the construction equipment maker said its first-quarter net income tripled from a year ago. Fellow index component Boeing rose $1.42 to $42.27 after saying it would top forecasts when it reports next week.
In the Internet sector, EBay shot up $7.81 to $82.59 a day after beating analysts’ first-quarter sales and earnings forecasts and raising its 2004 guidance.
Other big gainers on earnings strength included Yum Brands, the owner of Pizza Hut, KFC and Taco Bell, which rallied $3.40 to $39.50; hotel chain Marriott International, which climbed $3.50 to $47.87; and cellphone chip maker Qualcomm, which rose $2.04 to $67.88.
Software giant Microsoft rose 50 cents to $25.95 in advance of its surprisingly strong report issued after Thursday’s trading.
There were disappointments as well, including chip equipment maker KLA-Tencor, which sank $2.18 to $46.14 after saying orders in the current quarter were soft. Appliance maker Maytag lost $1.34 to $29.28 and athletic shoe company Reebok International slumped $3.86 to $38.11.
On the economic front, wholesale food prices climbed in March, lifting the producer price index 0.5%, the Labor Department said.
“The economy is improving, but we’re seeing inflationary pressures start to emerge,” said Steve Colton, manager of the Phoenix-Oakhurst Growth & Income fund in Scotts Valley, Calif. “It’s a balancing act at this point.”
As bond traders considered when -- and how dramatically -- the Fed might move to keep inflation from stifling the recovery, they pushed Treasury yields down modestly in Thursday’s action. The yield on the benchmark 10-year Treasury note eased to 4.38% from 4.42% on Wednesday.
Among other highlights:
* Industrial shares gaining on optimism about the economy included Deere, up $3.33 to $74.85; Ingersoll-Rand, up $2.32 to $72.17; and Illinois Tool Works, up $3.89 to a record $89.39.
* Coca-Cola slid 67 cents to $51.46 after Morgan Stanley downgraded the stock, citing concerns about valuations and the company’s succession plan.
* ITT Educational Services zoomed $4.29 to $40.85 after thumping analysts’ first-quarter profit estimates.
* Ascential Software dropped $4.94 to $18.11 after reporting lower-than-expected quarterly revenue.
* Gasoline futures prices hit record highs on continuing supply concerns. Near-term futures rose 4.77 cents to $1.18 a gallon in New York trading.
