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Earnings reports push stocks higher; Dow gains 73

ENCOURAGING earnings news from major retailers and The Walt Disney Co. drew investors back into the stock market one day after a big drop.

The Dow Jones industrial average gained 73 yesterday after dropping 94 on Thursday.

Upbeat quarterly reports yesterday from Abercrombie & Fitch Co., J.C. Penney Co. and Disney offset worries about a disappointing consumer confidence report.

Disney said late Thursday that higher revenue at its cable, broadcast and movie studio divisions helped produce an 18 percent increase in its fiscal fourth-quarter profit. Abercrombie's results were better than expected, while J.C. Penney raised its profit and sales forecasts.

The market briefly stumbled in morning trading after a report found the mood of consumers darkened. The preliminary Reuters/University of Michigan consumer sentiment index for November came in at 66.0, down from 70.6 in October. That made investors nervous that cautious consumers wouldn't step up spending at the holidays.

Stocks rebounded after the sentiment report but later pared their gains as the dollar pulled off its lows of the day. The dollar's steady slide since March, due largely to record-low US interest rates, has encouraged investors to move money out of dollars and into higher-yielding assets like stocks and commodities.

Lawrence Creatura, equity market strategist and portfolio manager at Federated Clover Capital Advisors, said investors were able to look past the consumer confidence figure and instead focused on earnings reports from retailers because they are a more reliable indicator about the economy.

"It's probably safe to say that investors are rationally more focused on what consumers do rather than what they say," he said.

The Dow rose 73.00, or 0.7 percent, to 10,270.47. The Dow's drop Thursday broke a six-day winning streak, as oil prices tumbled on fresh signs of weak energy demand and a stronger dollar.

The broader Standard & Poor's 500 index rose 6.24, or 0.6 percent, to 1,093.48. The Nasdaq composite index rose 18.86, or 0.9 percent, to 2,167.88.

For the week, the Dow rose 2.5 percent, after jumping 3.2 percent last week. The two weeks have boosted the Dow's gain for the year to 17 percent.

The S&P 500 index rose 2.3 percent for the week, while the Nasdaq added 2.6 percent.

The ICE Futures US dollar index, which measures the dollar against other currencies, fell after rising for two days.

The dollar drove trading during the week, as it has for months. The biggest gain of the week came Monday when the Dow jumped 204 points as a falling dollar increased commodities prices and officials from the Group of 20 wealthy and developing nations signaled they would hold interest rates low to propel economic growth. The Dow rose each day except Thursday.

Randy Frederick, director of trading and derivatives at Charles Schwab, expects the ties between a weak dollar and stocks to continue.

"As long as interest rates stay low it's going to be difficult for the dollar to gain any strength," he said.

Analysts also say news about consumers will drive trading. Traders will be gathering fresh insight next week with a government report due Monday on retail sales in October as well as quarterly earnings reports from Gap Inc., Home Depot Inc., Saks Inc. and Target Corp.

Investors are worried that consumers won't be ready to spend more as the effects of government spending like the Cash for Clunkers program dissipate.

"The real concern is once the impact of the stimulus works its way through the system is there going to be a smooth handoff to the consumer?" said Jim Baird, chief investment strategist at Plante Moran Financial Advisors.

The latest batch of earnings reports gave some hope yesterday. Disney rose US$1.39, or 4.8 percent, to US$30.44 and posted the biggest advance of the 30 stocks that make up the Dow industrials.

Abercrombie jumped US$3.92, or 10.7 percent, to US$40.68, while J.C. Penney gained US$1.82, or 6.2 percent, to US$31.21.

Bonds mostly rose, pushing yields lower. The yield on the 10-year note fell to 3.43 percent from 3.45 percent late Thursday.

Three stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 3.9 billion shares, the lowest level in a month. Volume was 4.2 billion Thursday.

The Russell 2000 index of smaller companies rose 5.96, or 1 percent, to 586.28.


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