The major indexes streaked higher on Tuesday thanks to upbeat corporate results, with strong profits from Dow component Verizon Communications (VZ) helping drive the blue-chip market gauge back over the psychologically important 10,000 mark.
The Dow Jones industrial average closed up 123.22 points, or 1.24%, at 10,085.14. The broader Standard & Poor's 500 index finished ahead 10.76 points, or 0.99%, at 1,094.83. The tech-heavy Nasdaq composite gained 30.08 points, or 1.64%, to 1,869.10.
Looking ahead, Wednesday brings another full slate of earnings reports. Among the companies reporting: consumer products outfit Avon Products (AVP), power generator Dynegy (DYN), lodging chain Hilton Hotels (HLT), and insurance giant MetLife (MET).
Meantime, economic news is expected to be scant on Wednesday. Among the major reports: orders for big ticket items in June are seen rising 3% vs. a 1.8% decline in the previous month.
Before Tuesday's rally, stocks had sold off in the previous two sessions as investors fretted that corporate earnings growth will taper off in the second half of 2004.
But on Tuesday, earnings and economic news bolstered a view that the U.S. economy is healthy. The Conference Board's headline consumer confidence index rose sharply to 106.1 in July from an upwardly revised 102.8 in June, according to Informa Global Markets. The figure was well above market expectations for a small rise and follows modest improvement in other consumer sentiment polls this month, Informa says.
Meantime, U.S. new home sales dipped by less than expected, suggesting continuing strength in the housing sector. New home sales fell 0.8% in June, to a 1.326 million annualized pace. May sales were revised to a 1.337 million annual pace, from the first report of 1.369 million pace. "This report makes clear that there is plenty of life left in the real estate sector," Informa says.
Earnings news was mostly positive. Verizon, the No. 1 U.S. phone company, posted stronger second-quarter profits as growth in its wireless business offset declines in its traditional local phone business.
Lockheed Martin (LMT), the defense contractor, reported a 22% percent rise in quarterly profits thanks to demand for military planes and government information technology services.
T. Rowe Price (TROW), the investment firm, posted higher quarterly earnings on strong sales of its funds.
Burlington Northern Santa Fe (BNI), the second largest U.S. rail group, announced 24% higher quarterly profits thanks to sharp growth in industrial and other cargoes.
Medco Health Solutions (MHS), which provides pharmacy benefits, posted higher second-quarter profits on growing demand for generic drugs and mail-order prescriptions.
U.S. Steel (X), the biggest steel outfit in the U.S., reported a second-quarter profit vs. a year-ago loss thanks to rising demand and prices for steel.
Reuters Group (RTRSY), the U.K. information and news outfit, announced expectation-topping profts for the first half, but analysts were concerned about the lack of rebound in revenue growth in its core business.
DuPont (DD), the second largest U.S. chemicals maker, posted lower quarterly profit after charges for job cuts and the sale of its carpet and textiles business.
Treasuries closed lower in price Tuesday afternoon after the release of better-than-forecast reports on consumer confidence and new home sales. The Treasury's inaugural 20-1/2 year TIPS offering was poorly received, although indirect bidder participation remained strong. The results also suggest inflation may not be a big worry currently, says economic research outfit Action Economics.
European stock markets closed higher on Tuesday. London's Financial Times-Stock Exchange 100 index was up 37.90 points, or 0.88%, to 4,324.40 as Prudential, Britain's second-biggest insurer, was higher as second-quarter earnings rose from the year-earlier period. Aviva and Royal & Sun Alliance Insurance Group were also higher. Glaxo was higher after second-quarter profits were higher than expected.
Germany's DAX index added 61.49 points, or 1.64%, to 3,814.08 as Munich Re, which fell to a 14-month low yesterday, was higher in short covering and bargain hunting. Allianz, and Hanover Re were also higher. DAB Bank was higher after saying second quarter profit rose 47%. Merck KgaA was lower after net income rose to 363 million euros, less than 365 million expected. Puma AG was higher after second quarter earnings per share rose 48%.
In Paris, the CAC 40 index advanced 32.49 points, or 0.92%, to 3,565.10, as PSA Peugeot Citroen was higher after saying first half profit decline was less than expected. France Telecom, a loser in the previous 4 sessions, was up on short covering, after reporting its first half operating profit rose 14%. Alten was higher after saying its first half sales rose 17%. Imerys was higher after its second quarter earnings rose 17%.
Asian markets finished lower on Monday. Japan's Nikkei 225 index lost 128.01 points, or 1.15%, to close at 11,1031.54, led lower by tech stocks. Selling was fueled by continued concerns over a gloomy sector outlook. Computer-related stocks trended lower, with Advantest down 3.59% while Tokyo Electron dropped 2.97%. Honda Motor fell 1.37% despite posting a 9.5% year-over-year rise in global car output in June. But UFJ Holdings edged up 0.67% after the Financial Times reported that Mitsubishi Tokyo Financial Group is likely to ask other Mitsubishi group firms to join a bailout of beleaguered bank UFJ Holdings.
In Hong Kong, the Hang Seng index eased 18.51 points, or 0.15%, to close at 12,301.32, helped by gains in property stocks on hopes that housing prices and rents will rise.