Stocks Get Boost From Upbeat Earnings News
Key stock indexes reached four-year highs, or better, Thursday as investors, unfazed by oil prices nearing $60 a barrel, welcomed a raft of robust earnings reports.
Strong profit reports from automaker DaimlerChrysler and drug giant Bristol-Myers Squibb, as well as upbeat forecasts from the likes of latte-purveyor Starbucks, fueled investors’ confidence in the stability of the economy. They also helped Wall Street look past a slight increase in first-time jobless claims and another sharp rise in crude prices, which climbed 83 cents to $59.94 a barrel in New York trading.
In a sign that the midsummer rally is reaching into many corners of the market, indexes that track small and mid-size companies hit all-time highs Thursday, as did the broad New York Stock Exchange composite index.
“The market is going to continue this near-term rally,” Barry Hyman, equity strategist at Ehrenkrantz King Nussbaum, told Bloomberg News. “Earnings are the story. That is the ultimate driver of stocks.”
The Standard & Poor’s 500 index climbed 6.93 points, or 0.6%, to 1,243.72, its highest close since June 12, 2001. The tech-heavy Nasdaq composite index gained 12.22 points, or 0.6%, to 2,198.44 for its best showing since June 8, 2001. The Dow Jones industrial average rose 68.46 points, or 0.6%, to 10,705.55, its highest level since March 15.
Winners topped losers by almost 3 to 1 on the NYSE and by nearly 2 to 1 on Nasdaq. Trading was brisk.
With one trading day left in the month, the S&P; 500 is up 4.4% for July and the Dow has gained 4.2% -- putting both on track toward their best monthly performances since December 2003. Nasdaq has rallied 6.9% this month.
The market’s reaction to second-quarter earnings was notable given the response to first-quarter results in April, when stocks took a tumble.
“This time around, we’re seeing a strong reaction to very positive reports,” said Todd Salamone, director of trading at Schaeffer’s Investment Research. “A lot of economic questions are still out there, but it looks like with these earnings, people are thinking that we’ll be OK through the third quarter, at least.”
Of the 352 companies in the S&P; 500 that have released quarterly earnings, 70% have beaten expectations, the highest rate since the first quarter of 2004, according to estimates compiled by Thomson Financial.
Meanwhile, first-time claims for jobless benefits last week were 310,000, according to a Labor Department report. That was higher than the previous week but less than the 318,000 economists expected in a Bloomberg survey.
Bonds gained ground after the previous session’s sell-off, with the yield on the 10-year Treasury note falling to 4.19% from 4.26% on Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
Among Thursday’s market highlights:
* The NYSE composite gained 51.34 points to 7,516.78, the Russell 2,000 index of smaller stocks added 8.16 points to 683.04 and the S&P; mid-cap index rose 6.51 points to 722.25 -- all record highs.
* Starbucks climbed $2.33 to $52.68 after the largest U.S. coffee-shop chain said it expected 2005 per-share profit of $1.19 to $1.20, up from a previous forecast of $1.17 to $1.19. Its third-quarter results beat the average analyst estimate in a Thomson survey.
* DaimlerChrysler surged $4.29, or 9.8%, to $48.26 after the company posted slightly improved earnings and Chief Executive Juergen Schrempp announced that he would leave by the end of the year.
* Bristol-Myers rose 7 cents to $25.17. The firm posted a 91% surge in second-quarter income on strong sales of new drugs.
* Health insurer Aetna added $3.78 to $78.40 after the company reported a 43% jump in quarterly profit thanks to higher membership levels, cost cutting and strong underwriting results.
* Shares of UnitedHealth Group, the No. 2 medical insurer, added $1.50 to $52.92. On Wednesday, No. 1 insurer WellPoint raised its 2005 earnings forecast and said it expected medical costs to increase less this year. WellPoint advanced $3.40 to $70.50.
