Stocks Move Broadly Upward
A wave of encouraging earnings reports sparked a broad rally on Wall Street on Tuesday, lifting the Standard & Poor’s 500 index to a fresh four-year high and nearly putting the Nasdaq composite index in the black year to date.
But some downbeat reports after the close of regular trading threatened the bullish mood.
Better-than-expected second-quarter earnings from companies including Merrill Lynch, Manpower and Precision Castparts helped push the S&P; 500 up 8.22 points, or 0.7%, to 1,229.35, the highest since July 3, 2001.
It was the index’s eighth gain in nine sessions.
The Dow Jones industrial average rose 71.57 points, or 0.7%, to 10,646.56, its best level since March.
The tech-dominated Nasdaq surged 28.31 points, or 1.3%, to 2,173.18, its highest close since Dec. 31, when it ended at 2,175.44.
The advance left the Nasdaq index down 0.1% this year. The Dow is down 1.3% while the S&P; 500 is up 1.4%.
Indexes of smaller stocks resumed their recent rally. The S&P; 400 index of mid-size stocks jumped 1.1% to a record 712.32. It is up 7.4% this year.
Winners swamped losers by more than 2 to 1 on the New York Stock Exchange and on Nasdaq, as trading volume picked up after a lull the previous two sessions.
IBM was a key catalyst for the rally. The computer giant late Monday reported quarterly earnings well above expectations. The stock jumped at the opening of trading Tuesday, and although it couldn’t hold on to its initial gains, it finished up $1.89 to $83.70.
Profit news from other companies helped to keep the market moving ahead. Shares of brokerage firm Merrill Lynch, for example, rose $1.31 to $57.98 after the company said second-quarter operating earnings were $1.14 a share. Analysts had expected $1.08.
Manpower, the temporary-help company, soared $5.63 to $48.02 on its report that profit was 70 cents a share. Analysts were expecting 64 cents.
Precision Castparts, which makes aerospace parts, jumped $6.96 to $87.15. The company earned $1.15 from operations in the quarter, compared with Wall Street’s average estimate of $1.06.
Market bulls have been counting on robust profit gains to bring more investors in from the sidelines after a rocky first half for stock prices overall.
“You’re going to see earnings meet or beat expectations,” said Jason Graybill, who helps manage $500 million at Abner, Herrman & Brock Inc. in Jersey City, N.J. “The economy is really strong.”
Of the 91 companies in the S&P; 500 that have reported earnings, 82% have matched or exceeded analysts’ estimates, according to data compiled by Bloomberg.
But after regular trading ended, Internet giant Yahoo disappointed investors by missing analysts’ revenue expectations and barely matching earnings expectations.
The company’s shares, up $1.15 to $37.73 in regular trading, plunged to $33.90 after hours.
Rival Google, which jumped $10.36 to a record $309.90 in regular trading, retreated to $303.65 after hours.
Intel also slid in after-hours trading on its profit report, even though it beat expectations.
Wall Street will face another barrage of earnings reports today. Many investors also will be tuned in to Federal Reserve Chairman Alan Greenspan’s testimony on the economy before a House committee. He will testify before a Senate panel on Thursday as well.
Greenspan is expected to reiterate that the Fed believes the economy remains on a solid growth track. In recent weeks, that belief has been good for stocks but bad for bonds.
On Tuesday, Treasury bond yields edged lower after rising for most of the last week. The 10-year T-note ended at 4.19%, down from a 10-week high of 4.22% on Monday.
In other trading, near-term oil futures added 14 cents to $57.46 a barrel in New York.
Among the day’s market highlights:
* International Paper, the world’s largest forest products company, rose $1.56 to $32.22 after announcing a restructuring plan that includes the possible spinoff or sale of at least three of its businesses.
The company’s plan may have helped revive interest in commodity producers. Copper miner Phelps Dodge rose $3.49 to $104.68; fertilizer producer Potash gained $3.07 to $103.91; paper and lumber giant Georgia-Pacific jumped $1.58 to $33.66.
* Peabody Energy, the largest U.S. coal producer, surged $4.85 to $60.25. The company said second-quarter profit more than doubled as record demand from utilities spurred gains in prices and shipments.
* Johnson & Johnson added 42 cents to $65.02. The maker of thousands of products ranging from Band-Aids to birth-control pills said second-quarter profit excluding some items was 93 cents a share, up 13% from a year earlier. Analysts expected earnings of 91 cents.
* On the downside, Avon Products plunged $5.30 to $31.30. The world’s largest direct-seller of cosmetics said second-quarter earnings rose, but the company cut its annual profit forecast to as low as $2.03 a share from a previous range of $2.12 to $2.17 because of falling sales in China.
* Home builders rallied again, lifting William Lyon Homes $7.10 to $118.50, KB Home $1.70 to $84 and Centex $1.04 to $78.35.
