Upbeat Earnings Forecasts Lift Stock Indexes
Wall Street continued its recent rebound as stocks closed broadly higher Monday on optimism about corporate earnings.
The market shook off a rise in Treasury bond yields triggered in part by concerns that the Bank of Japan may slow its purchases of U.S. government debt.
The Dow Jones industrial average rallied 116.66 points, or 1.1%, to 10,329.63, the second triple-digit gain in three sessions.
The broader Standard & Poor’s 500 index rose 14.41 points, or 1.3%, to 1,122.47, and the technology-heavy Nasdaq composite surged 32.55 points, or 1.7%, to 1,992.57.
Winners topped losers by more than 5 to 2 on the New York Stock Exchange and by nearly that much on Nasdaq.
After slumping for most of March -- hurt by economic concerns and fears of terrorism -- the market has revived in recent sessions as some investors have focused on what are expected to be strong first-quarter earnings, analysts said.
Nasdaq is up 4.8% over the last four sessions, though it still is down 0.5% year to date. The S&P; 500 index Monday moved back into positive territory for the year: It’s up 1%.
First-quarter operating earnings of the S&P; 500 companies are expected to rise 16.6% from a year earlier, according to analyst estimates tracked by Thomson First Call in Boston.
“I think the market was oversold over the past month, and we’re now seeing that cash that’s been on the sidelines coming in,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
Sentiment about earnings was helped Monday as companies such as heavy-equipment maker Caterpillar gave upbeat outlooks. Caterpillar affirmed that it expected profit to rise 40% in 2004. The stock, one of 30 issues in the Dow, jumped $2.04 to $79.48, the highest since Feb. 17.
San Diego-based wireless technology company Qualcomm leaped $3.85 to $65.61, its highest close since 2001, after brokerage Schwab Soundview raised its rating on the shares to “outperform” from “neutral,” citing the company’s growth outlook.
Takeover activity also helped bring buyers into the market. Biotech shares rose after Amgen said it would pay $1.3 billion for rival Tularik.
After regular trading ended, soft drink titan PepsiCo said first-quarter earnings would beat expectations. The company also raised its quarterly dividend 44% and said it might buy back up to $7 billion worth of stock over three years. The stock gained $1.15 to $52.21 before the announcement.
Los Angeles-based California Pizza Kitchen also gave an upbeat first-quarter earnings forecast after regular trading ended. The stock, which added 30 cents to $19.55 in regular trading, rose to $20.45 in after-hours activity.
Stocks were resilient in the face of higher bond yields. The yield on the benchmark 10-year Treasury note ended at 3.89%, up from 3.83% on Friday, and is at its highest level since March 4.
London’s Financial Times newspaper said the Japanese government might no longer intervene aggressively to stop the yen from strengthening. Japan’s robust economic recovery means the government is less fearful that a stronger yen could slow the economy by hurting exports, the Financial Times said, citing unnamed sources.
The Bank of Japan has been selling yen for dollars over the last year. It has invested many of those dollars in U.S. Treasury debt. If that demand slowed, it could cause U.S. interest rates to rise, experts say.
The dollar fell to 105.46 yen in New York from 105.90 on Friday and is near the three-year low of 105.37 reached Feb. 12.
Some analysts, such as David Robin, an interest rate strategist at Fimat USA in New York, said they doubted that the Bank of Japan would stop selling yen.
“Even if they are going to, why would they tell anybody?” Robin told Bloomberg News. A Japanese government official denied the Financial Times report.
The bond market also may have been clipped Monday by expectations that U.S. employment data for March, to be reported Friday, would show a large net gain in new jobs.
