Reuters Finance News
Stocks Break 3-Day Losing Streak
Apr 25 4:48pm ET
By Chelsea Emery
NEW YORK (Reuters) - Stocks gained on Wednesday, snapping a three-session losing streak, after media giant Walt Disney Co. topped Wall Street's earnings forecasts and U.S. home sales climbed to a record, in a sign the sluggish economy still has pockets of strength.
"If you're looking for argument that the consumer isn't falling out of bed, just look at housing sales, which have done extraordinarily well," said Ed Cimilluca, who helps oversee $250 million for ING Furman Selz. "We might not be in the recession that all the Wall Street talking heads believe we are in."
The Nasdaq Composite Index <.IXIC> rose 43.20 points, or 2.14 percent, to 2,059.81, after being little changed through much of the trading session.
The Dow Jones industrial average <.DJI> surged 170.86 points, or 1.63 percent, to 10,625.20, as Disney, which beat earnings forecasts on strong results from its film and video units, helped lift the blue-chip measure with a gain of $2.23 to $30.81.
The broader Standard & Poor's 500 Index <.SPX> added 19.28 points, or 1.59 percent, to 1,228.75.
"There are signs that companies are managing their way through a terrible storm and it'll eventually blow over," said Joseph Besecker, who helps manage $1 billion for Emerald Asset Management. "We firmly believe that, while there are still clouds ahead, the worst is over. The market believes it, too."
Optimism initially was tempered after Wall Street house UBS Warburg soured on top telecommunications gear makers, including Cisco Systems Inc. , Nortel Networks Corp. and Juniper Networks Inc. , citing poor capital spending.
Cisco, was the Nasdaq's most-active stock and slipped 53 cents to $15.73, limiting gains in the tech-rich index. Nortel fell 36 cents to $15.16, but Juniper gained 86 cents to $57.86 after trading as low as $52.30 earlier in the session.
Money managers, fearful of missing out on a rally, started buying in the afternoon, and the Dow rallied more than 100 points in the final two hours of trading. More than two stocks rose for every one that fell on the New York Stock Exchange, a sign investors thought the gains were here to stay.
"More stocks are participating in the market's gain," Cimilluca said. "It's a healthy sign."
Wall Street has been on a hunt for any sign the economy is picking up steam after the U.S. Federal Reserve slashed interest rates four times this year. Last week's cut triggered a rally in the market, which had hit new two-year lows just three weeks ago.
The market, which had headed higher much of the month, declined in the past three trading sessions as investors struggle to determine the outlook for the world's most powerful economy.
Wall Street on Wednesday got a boost after the National Association of Realtors said U.S. March sales of existing homes rose 4.8 percent, well above Wall Street's expectations and the second-highest rate on record of sales of existing U.S. homes, helped by lower mortgage rates.
The Commerce Department also reported Wednesday that U.S. March sales of new homes rose 4.2 percent to a record annual rate of 1.021 million units.
Dow component and home improvement retailer Home Depot Inc. , up $1 at $46.02, got a lift from the strong housing data. Other housing stocks, like Champion Enterprises Inc. , also registered strong gains. Champion, a maker of prefabricated homes, rose 6.3 percent to $7.60, and American Home Mortgage Holding Corp. surged 19 percent to $9.79 after reporting quarterly profit that rose 40 percent from the previous quarter.
"The fact of the matter is, the economy is fine," said Larry Rice, chief investment officer at Josephthal Lyon & Ross. "Let's stop talking about recession. Basically, the economy looks OK, and we will probably get another rate cut at the Fed's next meeting anyway."
Still, some investors pointed out that durable goods data revealed persistent weakness in capital spending. That could mean more bad news ahead.
"I don't think the current rally is sustainable in the short term," said George Rodriguez, senior vice president at Guzman & Co. "Investors are moving cautiously and they will take profits whenever there is an opportunity."
Amazon.com Inc. gained 41 cents to $16.09. The online retailer posted a first-quarter loss that was in line with a recent forecast and affirmed it was on track for its first quarterly operating profit by the year's end.
Newport News Shipbuilding Inc. jumped $9.05 to $64.10 after General Dynamics Corp. said it would buy the rival shipmaker for $2.1 billion in cash, creating the only U.S. builder of aircraft carriers and submarines for the U.S. Navy. General Dynamics lost $1.38 to $72.73.
Tobacco giant Philip Morris Cos. Inc. jumped $2.75 to $50.70. An industry analyst said the Dow component may implement a cigarette price increase. After the market closed Philip Morris said it was raising prices for all its brands beginning Thursday.
Despite overall optimism, profit warnings still sent some shares lower. BMC Software Inc skidded $3.61 to $23.54. after the enterprise software maker warned that its earnings in the current quarter will be much lower than Wall Street's expectations as sales decline in the slowing economy. |
