Stocks Rise Modestly
Stocks ended a quiet session with a moderate gain Wednesday on strong earnings news and a decline in the trade deficit.
Wall Street rebounded from Tuesday’s losses after Circuit City Stores reported that its earnings jumped 65%. The electronics retailer’s news, coming off an upbeat earnings report from Alcoa early in the week, raised expectations for the coming flood of corporate profit reports.
But gains in the broad market were limited as investors worried that high energy and commodity prices and benchmark interest rates near 5% would hurt economic growth, analysts said.
“So far we’ve had pretty strong earnings reports, and of course, that helps,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “But the reason why we are not seeing investors more enthusiastic about stocks is that oil is once again near $70 and interest rates are on the rise.”
Near-term crude futures, which in recent days have hit levels not seen since Hurricane Katrina hit the Gulf Coast, took a breather, slipping 36 cents to $68.62 a gallon in New York trading. And near-term gold futures, after again making a run for $600 an ounce, fell back. The April contract rose to $600, then lost ground and closed at $597.50, up $2.30 for the day.
The Commerce Department reported that the trade deficit fell to $65.7 billion in February, down from January’s record of $68.7 billion, as the imbalance with China dropped to the lowest level in nearly a year. But the overall deficit is still on pace to top last year’s record shortfall of $723.6 billion.
In other economic news, the Mortgage Bankers Assn.’s weekly home purchase index decreased by 4.7% and the refinance index dropped by 6.6%.
Investors were also watching events overseas. Nervousness about Iran’s nuclear capabilities contributed to Wall Street’s decline Tuesday, when the Dow Jones industrial average fell more than 51 points.
On Wednesday, the Dow gained 40.34 points, or 0.4%, to 11,129.97; the Standard & Poor’s 500 index rose 1.55 points, or 0.1%, to 1,288.12; and the Nasdaq composite rose 4.33 points, or 0.2%, to 2,314.68. The Russell 2,000 small-stock index rebounded 0.8% after losing 3.2% in the previous four sessions.
Winners outnumbered losers by slim margins on the New York Stock Exchange and Nasdaq.
The yield on the 10-year Treasury note climbed to 4.98% from Tuesday’s close of 4.93% as investors awaited more data on the U.S. economy’s strength.
Financial markets will be closed Friday in observance of Good Friday.
In other highlights:
* Circuit City rose $2.04, or 8.3%, to $26.65 after its fiscal fourth-quarter earnings soared on strong sales and improved supply management. Rival Best Buy gained 30 cents to $56.90.
* An index of home builders’ stocks lost almost 2% on higher interest rates and the weak housing reports. Lennar fell $1.13 to $59.65, D.R. Horton slipped 99 cents to $33.06 and Centex lost $1.13 to $61.60.
* Energy companies’ shares, following the retreat in oil prices, were the biggest drag on the S&P; 500. Chevron fell 79 cents to $58.67 and Exxon Mobil slipped 54 cents to $61.46.
* Bausch & Lomb lost more ground, falling $3.42 to $45.61, as retailers continued to pull its contact lens solutions from their shelves and the company said the source of an increase in fungal infections linked to one of its cleaners remained a mystery.
* Gannett fell $1.06 to $57.76 after the newspaper publisher reported an 11.5% decline in quarterly profit as it began expensing stock options and recording costs from its new newspaper partnership in Detroit.
* In Japan, the Nikkei 225 index slumped 1.5% to 17,162 even though the Bank of Japan said it would keep official short-term interest rates near zero, awaiting more signs of economic recovery. Policymakers last month had signaled that they would begin tightening credit this year, but that they would move slowly.
