Stocks ended Thursday's session with modest gains, as lower housing starts and an unimpressive Philadelphia Fed index did little to inspire a headlong rush into equities ahead of Friday's option expiration. Telecom and retail stocks were higher, while drug and biotech shares fell.
The Dow Jones industrial average gained 45.50 points, or 0.44%, to 10,289.21, led by SBC Communications (SBC), General Electric (GE), and Wal-Mart (WMT).
Meanwhile, the Nasdaq Composite rose 4.88 points, or 0.28%, to 1,730.44 on selective buying in techs. And the broader Standard & Poor's 500 index added 7.16 points, or 0.66%, to 1,098.23.
On Friday, the University of Michigan consumer sentiment survey and the trade report will be released. S&P MMS expects the Michigan consumer sentiment to stay steady at 93.0 for the May preliminary reading. Even after the decline in April, the overall sentiment still would remain well above the September trough of 81.8.
MMS expects the goods and services trade deficit to widen in March to the $32.0 billion area, from the $31.5 billion gap reported for February and the $28.2 billion deficit in January. By the estimates, the widening will result from both a small drop in exports of 0.3% and a small increase in imports of 0.2%. Traders will keep an eye on the dollar's reaction to this report.
No major companies are expected to report earnings Friday, but a few well-known names reported results after Thursday's market close. Dell Computer (DELL) shares were rising in after-hours trading after it reported first quarter earnings of $0.17 per share, a penny higher than the consensus estimate. Revenues rose 0.5% from a year ago to $8.07 billion, above expectations. The PC maker sees second quarter earnings of $0.18 per share, vs. the current consensus estimate of $0.17 per share.
Analog Devices (ADI) reported second quarter (pro forma) EPS of $0.13, a penny above the consensus forecast. Revenues were $413 million, also beating expectations. The chipmaker expects third quarter EPS of $0.15 and sales of $445 million.
On Thursday, the Philadelphia Federal Reserve index, a regional survey on manufacturing activity, dipped to 9.1 in May from 12.3 in April, below forecasts. New orders dropped to 10.2 from 12.8. Prices paid surged to 19.7 from 7.5, but this is likely a function of the run-up in energy costs. Employment rose to 5.1 from -3.5. Of note, the 6-month outlook on capital expenditures fell to 10.5 from 16.3.
April housing starts fell 5.4% to a 1.555 million pace, while building permits rose 0.3% to a 1.634 million pace. Despite the decline in housing starts, the housing market remains healthy, says S&P MMS.
Meanwhile, weekly initial jobless claims unexpectedly rose 2,000 to 418,000, suggesting the job market is not turning around quickly.
Retail stocks were notably higher on earnings news. Retail giant Wal-Mart continued to rise after its strong results yesterday, and news today that it is seeking to buy Franklin Bank of California. Tuesday's stronger than expected report on retail sales has been supporting retail stocks this week.
Department store chain Dillard's (DDS) ended Thursday's session with solid gains after reporting better-than-expected results.
The IPO of teen clothing company Aeropostale (ARO) soared as specialty retailers across the board showed high relative strength. The offering of 12.5 million shares of the clothing chain were priced at $18 Wednesday night, above the expected range of $15 to $17.
Telecom stocks were also on the rise Thursday on likely bargain hunting, according to S&P MarketScope. However, drug and biotech shares fell on a host of negative news. Homebuilders were also down on the weak housing data.
In the tech sector, Intuit (INTU) reported third quarter EPS of $0.75 a share, three cents above the consensus forecast. Revenues rose 28% to $545.2 million. Based on strong third quarter performance, the software maker raised the low end of its 2002 guidance ranges for EPS and revenues.
At an analyst meeting Wednesday, IBM's (IBM) new CEO said the company is comfortable with $4.16 earnings per share on revenue of $83 billion for 2002. The company would not comment on previously rumored headcount reductions. IBM ended Thursday's session with a modest gain.
U.S. Treasuries finished higher in price, sending yields lower. The slightly softer than expected economic data helped kickstart the curve out of the gate. Short covering and bargain hunting after losses over the previous few days also helped the push higher, says S&P MMS.
European stock markets were lower, led by tech stocks which fell victim to profit taking in the wake of big gains over the previous three sessions. In London, the Financial Times-Stock Exchange 100 ended with a loss of 10.60 points, or 0.20%, to 5,248.50.
In Germany, the DAX Index fell 26 points, or 0.52%, to 5,046. And in France, the CAC 40 lost 4.91 points, or 0.11%, to 4,466.36.
In Asia, the markets ended mixed. In Japan, the Nikkei gained 95.72 points, or 0.82%, to close at 11,738.69. Stocks gained momentum in the afternoon on the back of a continued inflow of money from domestic pension funds, which sent the bank, telecom, and other market heavy-weight sectors higher. In Hong Kong, the Hang Seng lost 5.59 points, or 0.05%, to close at 11,832.77.