Stocks Post Biggest Jump in Two Months
Thursday July 12 5:38 PM ET
By Chelsea Emery
<<NEW YORK (Reuters) - Stocks racked up their biggest gains in more than two months on Thursday, after technology bellwethers Microsoft Corp. and Motorola Inc. infused Wall Street with hope that corporate profits may be near a rebound.
A broad range of industry groups powered ahead in active trading as investors flocked back into stocks after a bruising round of earnings warnings sent the leading market indexes to a 12-week low on Tuesday.
``Microsoft beat forecasts and Motorola said second-half sales are expected to rise. That hopefully signals that things aren't going to get worse and it's what is going to propel the market going forward,'' said Robb Parlanti, portfolio manager for Turner Investment Partners, which oversees $10 billion.
Yahoo! Inc., one of the most visited Web sites, and Motorola, the world's No. 2 mobile phone maker, late Wednesday posted results that inched past analysts' lowered estimates. Conglomerate General Electric Co. on Thursday added fuel to the fire when it reported record profits.
Even bad news couldn't shake the market. Investors looked past a U.S. government report that the number of Americans lining up to receive first-time unemployment benefits last week reached its highest level since 1992. Worries that a three-year economic slump would leave Argentina unable to pay its debt also rolled off Wall Street.
The technology-rich Nasdaq Composite Index leaped ahead 103.70 points, or 5.26 percent, to end at 2,075.74. It was the biggest percentage gain for the index since April 18, according to market research firm MarketHistory.com.
The blue-chip Dow Jones industrial average jumped 237.97 points, or 2.32 percent, to 10,478.99. The broader Standard & Poor's 500 Index gained 27.96 points, or 2.37 percent, to 1,208.14. The indexes saw their biggest percentage gains since May 16, MarketHistory.com said.
Advancing stocks beat out declines by a two-to-one margin on the Nasdaq and a five-to-three ratio on the Big Board in active trading. More than 1.87 billion shares were traded on the Nasdaq, more than June's average daily volume of 1.75 billion shares. About 1.39 billion shares changed hands on the New York Stock Exchange (news - web sites).
Microsoft jumped $5.10 to $71.60 after the world's largest software maker lifted its quarterly revenue forecast, boosting investor optimism that a profit rebound could follow. Still, the company also warned of a first-ever $2.6 billion investment loss.
General Electric added another dose of cheer to the market, climbing $2.39 to $47. The world's largest company, in terms of market capitalization, posted record profits as strength in its gas turbine and aircraft engine manufacturing operations helped offset weaker results from units hurt by the economy.
Gains in Microsoft and GE provided about one-fifth of the Dow's gain.
Yahoo! rose $1.23 to $18.26 after the Internet media giant reported quarterly results that were in line with lowered Wall Street expectations. Yahoo! also maintained its earnings and revenue guidance for the full year.
Motorola climbed $2.48 to $18.15. Late Wednesday, Motorola posted a quarterly loss that scraped by lowered expectations, but said the semiconductor industry should rebound next year.
Profits for companies in the S&P 500 are expected to fall 18 percent in the second quarter from the year-ago period, according to Thomson Financial/First Call. However, analysts see brighter days ahead. Profits are expected to slip in the third quarter by 7 percent, but analysts expect an earnings bounce of 4 percent in the last quarter, First Call said.
Not all portfolio managers were so optimistic, however.
``The bar's been lowered and some companies managed to fall over it,'' said Alex Motola, portfolio manager for Thornburg Investment Management, which oversees $4.5 billion. ``The economy has been propped up by the consumer and the jobless claims number indicates potentially declining consumer confidence. It's pretty worrying.''
The U.S. Labor Department (news - web sites) said initial jobless claims for the week ended July 7 rose by 42,000 to 445,000, far exceeding the slight decrease in claims that Wall Street economists had expected.
Argentina's blue-chip MerVal stock index swooned on doubts that spending cuts announced by the government would win political support, traders said. The country, is struggling to convince investors that it has a credible plan for keeping up payments on its $128 billion debt.
``I think we are trading in a bit of an economic void and people want to say that things don't matter, but they do matter. The global news is really still decaying and we don't live in a void,'' said Donna Van Vlack, director of trading at Brandywine Asset Management, which oversees $7 billion. ``So I am loving seeing this, but not believing it.''
Drugmakers fell, including Merck & Co., which slid $1.36 to $61. Wall Street turns to stocks of pharmaceutical firms as safe havens because they generally have steadier earnings growth than high-flying tech firms.
``A lot of people had gone to those types of stocks for safety, but if your goal is to compete with the market, you need to draw money out of the safe stocks and put it into stocks that are growing faster,'' Motola said.>> |
