The major indexes closed higher, staging an impressive rally in the last hour of trading as bargain hunters moved in to buy stocks battered over the past few sessions. Overall, the market held up well despite the onslaught of lackluster second-quarter results, including a gloomy report from chemical giant DuPont Co. (DD).
Second-quarter corporate earnings reports continue to disappoint despite the Federal Reserve's best efforts to jump-start growth. But, at mid-day investors took comfort in some positive reports from local telephone company SBC Communications (SBC). The company said second-quarter profits, excluding one-time charges, were driven by effective cost controls and strength in wireless and data services.
Arthur Hogan, chief market analyst at Jefferies & Co. says the session's earlier gains was mostly a slight recovery from a short-term oversold scenario as bargain hunters move in. "We've just been selling relentlessly, especially this week," he says.
But with the absence of positive news for the market, the analyst says conviction is lacking. Hogan points out that trading volume has been "relatively unimpressive" over the last six or seven trading days. "The same concerns we have for the last six months and certainly for the last six days are still out there," Hogan says. He adds that recent weakness in the market was "sort of a second quarter earnings and economy related meltdown we had over the last couple of weeks."
Number 1 U.S. chemical company and Dow index component DuPont reported a steep drop in profits that met Wall Street's lowered estimates. But, the company said demand for chemicals and plastics was low and will worsen amid a challenging economic environment.
Among other stocks in the news Wednesday, Pharmacia Corp. (PHA) said second-quarter profits rose 20% due to cost savings from a recent merger and strong sales of cancer, incontinence and arthritis products.
The Dow Jones Industrial Average added 163.58 points, or 1.60%, to close at 10,404.70. The tech-heavy Nasdaq Composite gained 24.79 points, or 1.27%, to 1,984.03. The broader S&P 500 Index added 18.79 points, or 1.60%, to 1,190.44.
Treasuries ended sharply lower as stocks rallied. In economic news, existing home sales fell 0.6% in June to a 5.33 million unit annual pace, in line with analysts' expecations. Sales remain relatively firm thanks to stable low mortgage rates. The data comes on the heels of a recent 3.0% jump in housing starts.
European markets closed lower as investors worried about the slowing European economy. In London, the Financial Times 100 slipped 44.50 points, or 0.84%, to close at 5,275.70. In France, the CAC 40 Index fell 82.43 points, or 1.70%, to 4,773.17. Germany's DAX Index was lower by 80.50 points, or 1.42%, to end the session at 5,582.76.
In Japan, the Nikkei 225 nudged higher by 8.36 points, or 0.07%, to close at 11,891.61. Meanwhile, Hong Kong markets were closed as the region was buffeted by a typhoon. By Amy Tsao and Alan Hughes in New York