Dow Climbs on Earnings News
Stocks closed mixed Thursday after earnings reports from General Motors and Merck pushed the Dow Jones industrial average up to a six-year high while the Nasdaq composite sagged along with EBay.
Dow component General Motors’ stock gained 10% after the automaker reported record revenue along with its sixth straight quarterly loss. Drug maker Merck, also a Dow component, reported an 11% jump in first-quarter profit.
Google’s first-quarter earnings, reported after the close of regular trading, sent the stock sharply higher in after-hours trading and pointed to greater investor enthusiasm today.
In economic news, new applications for unemployment benefits dropped by 10,000 to 303,000, according to the Labor Department. The figure was the best showing since the beginning of April, suggesting the labor market is maintaining decent momentum, but reviving the fear of wage inflation.
Oil futures retreated. A barrel of light crude fell to $71.95, down 22 cents from Wednesday’s record closing price.
“The message this week is pretty simple: People are looking for an excuse to buy stocks rather than sell stocks,” said Ryan Larson, equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. “A year ago, $70 oil would have been the death of us; today, the market is able to digest it and look for positives.”
The Dow rose 64.12 points, or 0.6%, to 11,342.89. That was the blue-chip index’s best close since it settled at 11,351.30 on Jan. 20, 2000.
Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 1.53 points, or 0.1%, to 1,311.46, and the Nasdaq composite index fell 8.33 points, or 0.4%, to 2,362.55.
The Russell 2,000 index of smaller companies fell 3.75, or 0.5%, to 774.67.
The Dow’s advance masked underlying weakness in the market. Declining issues led advancers by roughly 8 to 7 on the New York Stock Exchange.
Bond yields rose, with the 10-year Treasury note climbing to 5.04% from 5.02% on Wednesday. The U.S. dollar was higher against most major currencies, and gold futures fell $12.80 to $619.80 an ounce.
Economic data continued to point to moderating growth. The Conference Board, a private research group, said its index of leading economic indicators dropped to 138.4 in March from 138.5 the previous month. The declines within the index, a closely watched gauge of future economic activity, came after four consecutive months of rising readings.
The day’s earnings were, for the most part, strong.
“The market was relieved about the earnings coming out and mildly surprised about GM,” said Quincy Krosby, chief investment strategist at Hartford Financial Services Group Inc., the Connecticut-based insurance company.
In other market highlights:
* GM, the world’s No. 1 automaker, jumped $2.07, or 10%, to $22.64 for the best gain in the Dow average and the stock’s top performance since May 2005. Excluding some costs, first-quarter profit was 26 cents a share, compared with the average analyst estimate for a loss of 44 cents in a survey by Thomson.
GM trimmed losses in its North American auto operations and had a profit in Europe. GM’s net loss narrowed to $323 million.
* Merck, gained 60 cents to $35. The drug maker said first-quarter profit rose 11% to $1.52 billion on sales of the Zocor cholesterol drug, the Singulair allergy pill and vaccines. Excluding some items, Merck earned 78 cents a share. Analysts expected 72 cents in a Thomson Financial survey.
* Apple Computer, maker of iPod music players and Macintosh personal computers, climbed $1.98 to $67.63. Second- quarter net income was 47 cents a share, the company said late Wednesday, matching the average estimate of analysts surveyed by Thomson. Investors were relieved that Apple’s profit wasn’t held back by slowing iPod growth and the switch to Intel Corp. chips in the Mac, analysts said. The shares were down 8.7% this year before the report.
* EBay slid $3.58 to $36.77. The world’s No. 1 online auctioneer said sales this year might be as much as $5.9 billion, below the $5.96 billion estimated by analysts. Profit for 2006 may be 7 cents a share less than Wall Street forecasts.
* Juniper, the No. 2 maker of equipment that directs Internet traffic, fell $2.05 to $18.25. The company predicted second-quarter sales of $560 million to $570 million, trailing the $587.2-million estimate.
* Google, the most-used Internet search engine, rose $4.50 to $415 before reporting that profit jumped 60% in the first quarter. Excluding stock-based compensation, earnings were $2.29 a share and revenue minus ads sold on other websites was $1.53 billion. Analysts on average expected $1.97 a share and $1.44 billion, respectively, in a Thomson survey. The stock jumped above $448 in the after-hours market.
* Altria Group, parent of the world’s largest cigarette maker and Kraft Foods Inc., rose $1.08 to $70.04. The company said first-quarter net income jumped 34% to $3.48 billion, or $1.65 a share, citing a tax gain, acquisitions and higher prices for its Marlboro brand. The average estimate of analysts was $1.27, according to Thomson.
* United Technologies advanced for a second day, helping the Dow, after raising its forecast for 2006 profit and saying first-quarter earnings exceeded analysts’ estimates. United Technologies rose $1.41 to $64.21.
* Intel fell 11 cents to $19.45, extending its 2006 drop to 22%. First-quarter profit slid 38%, the biggest decline in more than four years, to $1.35 billion as the chip maker lost market share to Advanced Micro Devices.
