Stocks finished in rally mode in a continuation of late-day gains on Wednesday after the Federal Reserve left interest rates unchanged. The Dow was boosted Thursday by components Procter & Gamble (PG), which reported favorable quarterly results, and industrial cyclicals 3M (MMM), United Technologies (UTX) and Alcoa (AA). Intel Corp. (INTC) also was a big gainer amid positive comments from an analyst.
The other major stock indexes also rallied for the second straight session as investors anticipated an economic recovery. The Dow Jones industrial average added 157.14 points, or 1.61%, to 9,920.00. The Nasdaq Composite index climbed 20.59 points, or 1.08%, to 1,934.03. The broader Standard & Poor's 500 index was higher by 16.96 points, or 1.52%, to 1,130.20.
On Friday morning, investors will get an update on employment. S&P MMS expects January payrolls to decrease 60,000, and the unemployment rate to rise to 5.9% from 5.8%. The workweek is expected to hold at 34.2 hours, while hourly earnings are seen rising 0.3%. Another 100,000 decline in manufacturing jobs is expected to account for most of the weakness.
The Street will also dissect the latest earnings from media giant Disney Co. (DIS), which were reported after the closing bell. While down from 2001 levels, Disney's fiscal first quarter profits per share of $0.15 and reveunes of $7 billion beat analysts' consensus expectations.
Among tech earnings to watch Friday, Computer Sciences (CSC) reported results for its fiscal 2002 third quarter in line with the company's forecast. The company said results were driven by revenue growth from its U.S. government activities, global commercial outsourcing engagements and financial services activities.
On Thursday, shares of P&G led the Dow index higher after it reported a rise in quarterly earnings before restructuring charges. The results represent the consumer products company's first increase in sales in about a year.
The latest positive comments on tech giants Intel and Oracle (ORCL) helped support the tech sector. Merrill Lynch says it expects a new product at chipmaker Intel to boost profits. Noting that the launch of Intel's new 0.13 micron Northwood chip would improve profit margins, the firm raised its intermediate-term rating to "strong buy".
Meanwhile, Oracle management made optimistic comments that it expects the software industry will turn around by spring. It also said that its current quarter results would reflect a bottom.
The Fed's decision Wednesday to keep its benchmark interest rate at 1.75%, ending a record 11 rate cuts in 2001, also cheered Wall Street. The FOMC maintained its easing bias, keeping the door open for additional rate cuts if necessary. The decision not to cut rates signals that the central bank sees the U.S. in recovery mode.
Accounting doubts lingered, but were less pronounced Thursday after an announcement late Wednesday about Tyco International (TYC), one of the companies hit hard by accounting concerns. S&P issued a statement indicating that Tyco provided satisfactory answers to accounting questions asked by the credit rating agency. Buying of the shares by executives also supported Tyco stock.
U.S. Treasuries finished mostly lower Thursday, particularly on the short end, following the release of the minutes from the Dec. 11 FOMC meeting. Traders didn't like the statement in the meeting minutes that suggested the last cut in December was an "insurance" move, MMS says. That wording suggests it can be quickly taken back. Gains in the Dow also added to the negative tone.
MMS sees a chance that the payrolls data could be stronger-than-expected on seasonal factors. If this is the case, the report would keep shorter-dated Treasuries under pressure Friday.
On the data front Thursday, the Chicago Purchasing Managers index, a regional gauge of manufacturing health, rose in January to a seasonally adjusted 45.1 from a revised 41.5 in December, indicating the pace of decline slowed.
The employment cost index (ECI) rose 0.9% in the fourth quarter compared to a 1% gain in third quarter, slightly below the median 1.0%. On a year-over-year basis, employment costs rose 4.1%, as expected. Wages and salaries gained 0.8%, in line with third quarter, while benefit costs eased to a gain of 1.2% from 1.6%.
U.S. initial claims rose 30,000 to the 390,000 level in the week ended Jan. 26. Overall, initial and continuing claims remain well below the peaks seen in late September and early November, suggesting that deterioration in the labor market may be coming to an end.
In December personal income rose 0.4%, after an upwardly revised unchanged figure in November. Spending fell 0.2% after a revised 0.3% decline.
European markets ended higher amid news the U.S. central bank left interest rates unchanged. French telecom gear maker Alcatel led gains. In London, the Financial Times-Stock Exchange 100 index ended up 75.50 points, or 1.48%, to 5,164.80. In France, the Paris CAC 40 finished higher by 54.60 points, or 1.24%, to 4,461.87. Germany's DAX index gained 55.41 points, or 1.10%, to 5,107.61.
Asian markets ended mixed. Japan's Nikkei 225 index added 78.32 points, or 0.79%, to 9,997.80. Hong Kong's Hang Seng index dived 31.66 points, or 0.29%, to 10,725.30.