Stocks climbed to finish at session highs Tuesday as investors chose to focus on positive news, including analyst upgrades of Dow member McDonald's (MCD) and several semiconductor stocks.
Investors seemed to shake off concerns that weighed on the market earlier in the session -- U.S. dollar weakness and high expectations for third-quarter earnings.
The Dow Jones industrial average added 59.63 points, or 0.62%, to 9,654.61. The broader Standard & Poor's 500 index added 4.90 points, or 0.47%, to 1,039.25. The tech-heavy Nasdaq composite index gained 14.39 points, or 0.76%, to 1,907.85.
Salomon Smith Barney raised its rating on fast-food giant McDonald's to "buy", after a survey of franchisees suggested that September "may have been the best month for U.S. same-store sales in the last five years."
Analyst actions gave chips a boost. UBS upgraded its rating on Advanced Micro Devices (AMD) to "neutral" from "reduce", and raised its price target to $12 from $5. On Altera (ALTR), the firm raised its rating to "buy" from "neutral."
First Albany upped its rating on Applied Materials (AMAT) to "neutral" from "underperform", citing expectations for better sales in the near future.
Dollar weakness weighed on stocks and bonds alike. The currency sank to a three-year low vs. the Japanese yen and the euro spiked to a four-month high of $1.18 vs. the U.S. currency. European Central Bank president Wim Duisenberg fueled the dollar's decline, by calling it "unavoidable" that the value of the greenback will fall to support the U.S.'s current account deficit.
Tuesday also brings the first major companies to report actual earnings for the quarter. Investors are hopeful that earnings will rise in the quarter, but whether stocks have priced in the better outlook remains to be seen.
PepsiCo (PEP) net income rose to $1.08 billion, or 62 cents a share. The results were in line with consensus estimates.
On Wednesday, Wall Street could find reason to cheer following the much awaited results from aluminum maker and Dow industrials component Alcoa (AA), which is traditionaly first of the of the blue-chips to report earnings each season.
After the close Tuesday, Alcoa announced earnings per share of the third quarter of 33 cents -- 3 cents better than consensus expectations.
In upcoming economic news Wednesday, economic research group MMS International expects wholesale sales to rise 0.4% in August, while inventories are pegged to expand 0.2% following an unchanged reading in July. The similar sized gains in sales and inventories would leave the inventory to sales (I/S) ratio unchanged at a historically lean 1.21.
More earnings are due as the week progresses. Yahoo! (YHOO), Costco (CSCO), and Genentech (DNA) report earnings Wednesday. Abbott Laboratories (ABT) and Juniper Networks (JNPR) are set to release results on Thursday, followed by General Electric (GE) Friday.
Increased supply of issued debt and weakness in the dollar were too potent a combination for Treasuries Tuesday, and yields shot higher as a result. Borrowers rushed to beat the Treasury's scheduled sales of $16 billion in 5-year notes on Wednesday and $9 billion in 9.75-year TIPS on Thursday. Longer dated Treasuries underperformed for the most part as dealers made room for the new supply. The yield on the 10-year note rose nearly 9 basis points to 4.25%.
Dallas Fed President McTeer will address the Money Marketeers in New York later Tuesday night. Kansas City Fed's Hoenig will discuss "Monetary Policy and the Economic Outlook" at an economic forum. "Neither is likely to sound the all clear [on the economy] just yet" says MMS.
Weekly jobless claims data arrive on Thursday, before Friday's producer price index and trade data come out. Monthly retail sales data are due Thursday.
European stock markets finished mostly lower amid worries that the rising euro would make exporters' goods unattractive in dollar-based markets. London's Financial Times-Stock Exchange 100 index reversed course, adding 1.90 point, or 0.04%, to 4,272.00.
In Paris, the CAC 40 finished down 26.61 points, or 0.81%, to 3,254.75. Germany's DAX index stumbled 49.13 points, or 1.44%, to 3,355.78.
Asian markets finished mixed. In Japan, the Nikkei 225 index gained 80.19 points, or 0.75%, to 10,820.33, amid optimism about the country's recovery prospects. In Hong Kong, the Hang Seng index fell 10.56 points, or 0.09%, to 11,723.92.