Upbeat Results Lift Stocks
Stocks made a modest advance Wednesday as strong earnings from Yahoo and United Technologies helped investors briefly set aside worries over inflation and rising oil prices.
The day’s gains extended Wall Street’s rally from Tuesday, when stocks surged on indications that the Federal Reserve may soon end its string of interest-rate hikes as the pace of economic growth appears to slow.
But while investors received another round of upbeat first-quarter earnings reports, a bigger-than-expected jump in the “core” consumer price index last month renewed their inflation concerns and left them wondering whether the Fed might respond by extending its program of rate increases.
Meanwhile, crude oil futures rose 82 cents, to $72.17 a barrel. Gold futures prices climbed to a fresh 25-year high, adding $12.60 to $632.60 an ounce. Continued strength in commodities could soon pose an issue for inflation, said Peter Cardillo, chief strategist and market analyst for S.W. Bach & Co.
“Oil prices hold the key: We can’t continue to have oil prices rise without impacting prices and economic activity,” Cardillo said. “Somewhere along the line it will have a negative impact.”
The Dow Jones industrial average gained 10 points, or 0.1%, to 11,278.77. The Dow jumped 194.99 points Tuesday, its biggest one-day advance in a year.
Broader stock indicators also moved higher, with the Standard & Poor’s 500 index adding 2.28 points, or 0.2%, to 1,309.93. The Nasdaq composite index rose 14.74 points, or 0.6%, to 2,370.88 -- a five-year high -- boosted by anticipation of earnings from Apple Computer and Intel after the bell.
The yield on the 10-year Treasury note increased to 5.02%, from 4.98% Tuesday, after the consumer price report renewed concerns about inflation and the possibility of continued interest-rate increases.
Consumer prices gained 0.4% last month after a 0.1% increase in February, the Labor Department said. Excluding food and energy, the consumer price index rose 0.3%, the most in a year. Economists had expected the core rate to climb 0.2%, according to the median forecast in a Bloomberg survey.
But solid first-quarter earnings are helping keep stocks afloat in the face of higher oil prices and interest rates, said William Lefkowitz, equity strategist for vFinance Investments. Companies’ results have so far been better than forecast, which bodes well for the market and should help it ultimately move up.
“Without a major pullback today, it’s really a bullish sign for the market,” Lefkowitz said. “With oil up and a strong CPI reading, I thought the market should have gone down.”
In other market highlights:
* Apple posted higher quarterly earnings that beat analyst estimates, but its revenue fell short of targets. Apple closed down 57 cents at $65.65 but surged to $68.55 in after-hours trading.
Intel’s profit dropped 38% amid a modest decline in sales, but its results still managed to meet Wall Street’s predictions. Intel, which closed at $19.56, up 17 cents, climbed to $19.77 after hours.
* Yahoo, owner of the most-visited U.S. website, gained $2.24, or 7.2%, to $33.54 for the third-largest advance in the S&P; 500 and its biggest rally since April 2004.
Yahoo reported first-quarter earnings late Tuesday that showed a 19% gain when excluding a $71-million charge for stock options, which must now be reported as an expense under new accounting rules. Google, the most-used Internet search engine, rallied $6.26 to $410.50.
* United Technologies jumped $3.90, or 6.6%, to $62.80 for the top performance in the Dow average. Its first-quarter profit rose 18% to $768 million, or 76 cents a share. Analysts expected 73 cents a share, according to Thomson Financial. The company also raised its 2006 profit forecast.
* Energy shares in the S&P; 500 advanced 1.5% for the top gain among 10 groups in the index. Valero Energy climbed $1.54 to $68.99.
* Motorola slid $1.59, or 6.6%, to $22.49. The mobile-telephone maker reported that profit margins shrank to 8.9%, the narrowest in two years.
* Amgen lost $2.67 to $68.30. The biotechnology company said late Tuesday that first-quarter sales were $3.22 billion, less than the analyst estimate of $3.34 billion in a survey by Thomson. The company’s Enbrel drug, used to treat arthritis and the skin disease psoriasis, faced more competition.
* Coca-Cola added 39 cents to $41.69. The company said first-quarter profit rose 10% to $1.11 billion, bolstered by gains in Asia and Latin America. Excluding one-time items, earnings were 49 cents a share, 1 cent higher than the average analyst estimate in a Thomson survey.
* IBM lost $1.45 to $81.86 even after the No. 1 computer-services provider said profit last quarter rose 22% to $1.71 billion, or $1.08 a share, as it cut jobs.
