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Stocks rise as optimism builds about earnings
Source: Agencies |
January 15, 2010, Friday
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THE Dow Jones industrial average closed above 10,700 for the first time in 15 months yesterday as investors bet that stronger results would revive a disappointing start to the corporate earnings season.
The stock market's advance was uneven, with technology stocks rising ahead of quarterly earnings from chip maker Intel Corp. and financials climbing before a profit report from JPMorgan Chase & Co. due Friday. Safe havens like utilities and consumer staples stocks fell.
The Dow industrials rose 30 points, while broader indexes posted bigger advances.
The gains came after SAP, a major business software maker based in Germany, said its fourth-quarter revenue fell less than forecast. That provided some reassurance that companies are becoming more willing to invest in technology. Investors are also watching closely to see whether companies can bolster their earnings with solid revenues instead of just continuing to cut costs.
Anticipation that corporate earnings reports would turn around following a weak showing by aluminum maker Alcoa Inc. on Monday helped investors look past a mixed bag of economic news. Intel's revenue and earnings came in far ahead of analysts' expectations after the closing bell.
The government said businesses increased their inventories by a larger-than-expected amount in November. The gain is a welcome sign for the economy and suggests that businesses are feeling more confident that sales will pick up. It was the second straight month that stockpiles rose after 13 months of declines.
The positive news on inventories helped offset weaker reports on retail sales and initial unemployment claims.
The Commerce Department said business inventories rose by 0.4 percent in November, double the increase economists expected. Earlier, it said retail sales fell 0.3 percent in December. Economists polled by Thomson Reuters had been expected an increase.
Dave Stepherson, portfolio manager at Hardesty Capital Management in Baltimore, said the retail sales report was disappointing, but not terribly surprising because of uncertainty still surrounding the job market.
"You're not going to get one until you get the other," Stepherson said. "It's sort of a catch-22."
The Labor Department reported workers seeking unemployment benefits for the first time rose by 11,000 last week, more than the 3,000 economists had expected. The jump was due partly to typical seasonal layoffs in the retail, manufacturing and construction industries.
Investors are becoming accustomed to seeing jagged indicators on the economy and have generally not lost their cool on the occasional poor economic report. However analysts widely believe that there will need to be a meaningful pickup in job creation if a 10-month stock rally is to continue.
"The economy has already shown signs of improvement and in investors' minds the question is how much of that is already priced into the market," said Brian Lazorishak, portfolio manager at Chase Investment Council in Charlottesville, Virginia.
The Dow rose 29.78, or 0.3 percent, to 10,710.55. The broader Standard & Poor's 500 index rose 2.78, or 0.2 percent, to 1,148.46, and the Nasdaq composite index rose 8.84, or 0.4 percent, to 2,316.74.
Demand for the safety of government debt rose following the economic reports and strong demand at a Treasury Department auction of US$13 billion in 30-year bonds. Treasury prices rose, pushing yields lower. The yield on the benchmark 10-year note fell to 3.75 percent from 3.80 percent late Wednesday.
SAP rose most of the day but ended down 23 cents to US$50.16. Intel rose 52 cents to US$21.48 and gained 2 percent in after-hours electronic trading following the release of its results.
JPMorgan rose 44 cents to US$44.69.
The dollar was mixed again other major currencies. Gold rose modestly.
Crude oil fell 26 cents to US$79.39 per barrel on the New York Mercantile Exchange.
Three stocks rose for every two that fell on the New York Stock Exchange. Volume, which has been light since late 2009, fell to 887.4 million shares compared with 969.7 million Wednesday.
The Russell 2000 index of smaller companies rose 2.87, or 0.5 percent, to 646.43.
The stock market's advance was uneven, with technology stocks rising ahead of quarterly earnings from chip maker Intel Corp. and financials climbing before a profit report from JPMorgan Chase & Co. due Friday. Safe havens like utilities and consumer staples stocks fell.
The Dow industrials rose 30 points, while broader indexes posted bigger advances.
The gains came after SAP, a major business software maker based in Germany, said its fourth-quarter revenue fell less than forecast. That provided some reassurance that companies are becoming more willing to invest in technology. Investors are also watching closely to see whether companies can bolster their earnings with solid revenues instead of just continuing to cut costs.
Anticipation that corporate earnings reports would turn around following a weak showing by aluminum maker Alcoa Inc. on Monday helped investors look past a mixed bag of economic news. Intel's revenue and earnings came in far ahead of analysts' expectations after the closing bell.
The government said businesses increased their inventories by a larger-than-expected amount in November. The gain is a welcome sign for the economy and suggests that businesses are feeling more confident that sales will pick up. It was the second straight month that stockpiles rose after 13 months of declines.
The positive news on inventories helped offset weaker reports on retail sales and initial unemployment claims.
The Commerce Department said business inventories rose by 0.4 percent in November, double the increase economists expected. Earlier, it said retail sales fell 0.3 percent in December. Economists polled by Thomson Reuters had been expected an increase.
Dave Stepherson, portfolio manager at Hardesty Capital Management in Baltimore, said the retail sales report was disappointing, but not terribly surprising because of uncertainty still surrounding the job market.
"You're not going to get one until you get the other," Stepherson said. "It's sort of a catch-22."
The Labor Department reported workers seeking unemployment benefits for the first time rose by 11,000 last week, more than the 3,000 economists had expected. The jump was due partly to typical seasonal layoffs in the retail, manufacturing and construction industries.
Investors are becoming accustomed to seeing jagged indicators on the economy and have generally not lost their cool on the occasional poor economic report. However analysts widely believe that there will need to be a meaningful pickup in job creation if a 10-month stock rally is to continue.
"The economy has already shown signs of improvement and in investors' minds the question is how much of that is already priced into the market," said Brian Lazorishak, portfolio manager at Chase Investment Council in Charlottesville, Virginia.
The Dow rose 29.78, or 0.3 percent, to 10,710.55. The broader Standard & Poor's 500 index rose 2.78, or 0.2 percent, to 1,148.46, and the Nasdaq composite index rose 8.84, or 0.4 percent, to 2,316.74.
Demand for the safety of government debt rose following the economic reports and strong demand at a Treasury Department auction of US$13 billion in 30-year bonds. Treasury prices rose, pushing yields lower. The yield on the benchmark 10-year note fell to 3.75 percent from 3.80 percent late Wednesday.
SAP rose most of the day but ended down 23 cents to US$50.16. Intel rose 52 cents to US$21.48 and gained 2 percent in after-hours electronic trading following the release of its results.
JPMorgan rose 44 cents to US$44.69.
The dollar was mixed again other major currencies. Gold rose modestly.
Crude oil fell 26 cents to US$79.39 per barrel on the New York Mercantile Exchange.
Three stocks rose for every two that fell on the New York Stock Exchange. Volume, which has been light since late 2009, fell to 887.4 million shares compared with 969.7 million Wednesday.
The Russell 2000 index of smaller companies rose 2.87, or 0.5 percent, to 646.43.
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