Wall Street continues its rally
Wall Street had its second straight late-hour rally Thursday, again propelling the Dow Jones industrials up more than 100 points after solid readings on corporate earnings and the job market reduced investors’ anxiety about a tight credit market.
Trading was volatile again, but not to the extreme seen last week. The Dow and the Nasdaq composite index mostly stayed in positive territory for much of the session.
Profits from companies such as Nokia came in better than expected, and the Labor Department said jobless claims rose last week by a slightly smaller number than economists predicted, suggesting that the labor market might be holding up. The earnings and unemployment-claim data helped steady a market that has seen stability in short supply.
The government’s highly anticipated July employment report is due before the start of trading today.
“Something that has kept consumers spending is that unemployment is very low,” said Janna Sampson, director of portfolio management at OakBrook Investments. “Even if they’re being pinched a little bit by oil prices or the inability to borrow, people will spend if they have a job. If we see employment weakening, that’s really, really negative.”
But with the market jumpy about rising mortgage defaults leading to losses and tougher lending standards, it was impossible to tell whether the market’s two-day advance, which has lifted the Dow 250 points, would stick. In the latest indication that the lending climate is still deteriorating, Accredited Home Lenders Holding, a San Diego-based nonbank mortgage lender, said Thursday that its business was in jeopardy, and its stock plummeted 35%. But in late trading the shares recovered that loss and more after the company said it “was proceeding as planned” to be acquired by a private equity firm.
The Dow surged 100.96 points, or 0.8%, to 13,463.33. The Standard & Poor’s 500 index picked up 6.39 points, or 0.4%, closing at 1,472.20, while the Nasdaq composite index advanced 22.11 points, or 0.9%, to 2,575.98.
The Russell 2000 index of smaller-company shares rose 6.07 points, or 0.8%, to 783.99.
Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange.
With Thursday’s rally, the Dow’s decline from its record high reached July 19 was trimmed to 3.8%. The S&P; 500 is down 5.2% from its peak, which also was reached July 19.
The junk bond market continued to stabilize. The yield on an index of junk issues tracked by KDP Investment Advisors fell to 8.54% from 8.63% Wednesday.
Treasury bond yields eased. The 10-year T-note slipped to 4.77% from 4.79% on Wednesday.
The dollar was mixed against other major currencies after the European Central Bank and the Bank of England, which recently had been raising short-term interest rates, kept their key rates steady Thursday, as expected. More rate boosts overseas could further injure the dollar, which is near multiyear lows against the euro and the pound.
Crude oil futures climbed 33 cents to $76.86 a barrel on the New York Mercantile Exchange but remained well below Tuesday’s record close of $78.21. Gold prices rose.
The Dow has seen triple-digit swings become the norm in recent weeks as investors have received a series of unpleasant reports about the mortgage and corporate lending markets. Stocks have been upended by concerns about not only the fallout from mortgage defaults but also the availability of credit to fund the merger deals that have helped power Wall Street higher this year.
Another reason for the market’s volatility is that the Dow rose to the 14,000 mark so quickly, said Jack A. Ablin, chief investment officer at Harris Private Bank. He has predicted that the Dow will end the year at 14,000. “From that perspective, the market got a little ahead of itself,” he said.
Ablin added, however, that late-hour surges are heartening. “Movements in the last half-hour are generally smarter money. It’s usually program trading, institutional buying or selling,” he said.
In other economic data, U.S. factories saw demand for their goods rise in June by 0.6%, up from a 0.5% drop in May but lower than expected.
Several major earnings reports came in strong Thursday.
Nokia, the biggest cellphone maker in the world, said its second-quarter profit more than doubled on strong sales. U.S. shares of the Finnish company soared $2.49, or 8.8%, to $30.90.
Profit at Lear, a maker of auto parts, surpassed Wall Street projections, despite the possibility of distractions from a failed buyout bid led by billionaire investor Carl Icahn. Lear picked up 78 cents, or 2.3%, to $34.15.
CVS Caremark rose $1.25, or 3.5%, to $36.79 after the drugstore chain posted better-than-expected quarterly results.
Other stocks up sharply on earnings reports included mutual fund research firm Morningstar, up $9.77, or 20%, to $58.68; defense contractor Alliant Techsystems, up $5.71, or 5.5%, to $109.76; and casino firm Las Vegas Sands, up $6.63, or 7.7%, to $92.31.
Meanwhile, a takeover deal lifted the market’s spirits -- at least for the time being. Fiserv said it had agreed to buy CheckFree for about $4.2 billion in cash, driving up CheckFree’s shares $8.57, or 23%, to $45.40. Fiserv rose 31 cents to $49.50.
Not all company news was positive Thursday: Nortel Networks tumbled $1.25, or 5.8%, to $20.49 after reporting quarterly results that disappointed investors. Also, Clorox plunged $4.49, or 7.3%, to $57.14 after releasing worse-than-expected projections for later in the year.
Beazer Homes shares, battered Wednesday by rumors the company would file for bankruptcy protection, surged $1.56, or 14%, to $13.04 after hedge fund giant Citadel Investment Group said it had nearly doubled its stake in the builder, to 5.7% of shares outstanding as of July 24.
Other builders also rebounded. KB Home jumped $1.36, or 4.3%, to $32.72, Hovnanian rose $1.31, or 11%, to $13.26 and Ryland Group gained $1.66, or 4.9%, to $35.68.
Overseas, key stock indexes climbed 0.7% in Japan, 2.5% in Shanghai, 0.8% in Britain, 0.8% in Germany and 0.5% in France. Hong Kong stocks edged lower.
