After starting the session on a weak note, stocks finished higher on Wednesday thanks to a big drop in oil prices. Investors brushed aside weak earnings from Amazon.com (AMZN), Newmont Mining (NEM), and other companies, and a surprising drop in durable goods orders. Defensive groups such as health care and rate-sensitive groups including thrift and mortgage rose, while cyclical and energy groups fell.
The Dow Jones industrial average rose 47.67 points, or 0.47%, to 10,198.8. The broader Standard & Poor's 500 index was up 4.64 points, or 0.4%, to 1,156.38. The Nasdaq composite index added 2.99 points, or 0.16%, to 1,930.43.
In the energy markets Wednesday, June West Texas Intermediate crude oil ended down $2.59 at $51.61 per barrel after a report showed a surge in inventory. Crude stocks rose a whopping 5.5 million barrels on the latest reporting week, according to EIA data. The Street had been looking for a modest build of 400,000 barrels, notes economic research outfit Action Economics.
Next up on Thursday is the release of first-quarter gross domestic product, which is forecast to show a gain of 3.5%. Action Economics says that while nominal growth should remain healthy, the inflation bite will be evident by an increase in the price index to 2.9% (median forecast is 2.6%), from 2.3% in the fourth quarter. The record trade deficits in January and February imply that trade will subtract 1.4% from overall growth, notes Action Economics. Growth in consumption and fixed investment is all expected to slow from recent trends, while inventories provide another sizable boost, says the research outfit.
"The most important takeaway is that weakness on the quarter was back-loaded, which implies that the second quarter has a subdued trajectory as well," says Action Economics.
Earnings reports also continue to flow heavily on Thursday. On the earnings calendar are big-name companies such as Microsoft (MSFT), Nextel Communications (NXTL), Gateway (GTW), Aetna (AET), Bristol-Myers Squibb (BMY), Comcast (CMCSA), Exxon Mobil (XOM), Kellogg (K), Procter & Gamble (PG), and Wendy's (WEN).
In economic news Wednesday, durable goods orders plunged 2.8% in March after a 0.2% declines in February (revised from up 0.3%, and January was also revised a bit lower). Orders for computers and electronics rose 2.2%, while transportation orders were down 7.8%. Excluding transportation, orders dropped 1.0% after a 0.2% decline in February. Nondefense capital goods orders excluding aircraft declined another 4.7% after a 2.5% drop in February.
Earnings news also moved many stocks on Wednesday. Verizon (VZ) led the Dow average higher after the telecom giant posted earnings per share of 63 cents, vs. 43 cents a year ago, on a 6.6% operating revenue rise.
Boeing (BA) shares rose after the aircraft maker reported first-quarter earnings per share of 66 cents, vs. 77 cents a year ago, as significantly higher non-cash expenses for share-based plans, deferred compensation, and pensions offset a 1% revenue rise.
After Tuesday's market close, Amazon.com reported first-quarter earnings per share of 18 cents, vs. 26 cents a year ago, as a $56 million income tax expense offset a 24% sales rise. The online retailer sees second-quarter revenue rising to $1.675 billion to $1.825 billion, but it thinks operating income may decline to $50 million to $80 million. Amazon shares dropped.
One of the big losers in tech was InfoSpace (INSP), which fell more than 27% after the company reported higher first-quarter results, but issued disappointing guidance for the second quarter.
Newmont Mining shares fell after it posted first-quarter EPS of 19 cents, vs. 20 cents a year ago, on 14% lower revenue.
Other companies that reported results Wednesday were Colgate-Palmolive (CL), ConocoPhillips (COC), LSI Logic (LSI), Pulte Homes (PHM), Siebel Systems (SEBL), and Starbucks (SBUK).
Treasury prices climbed, and yields collapsed, after a drop in durable goods orders rekindled fears that the "soft patch" in the economy had resumed, says Action Economics. It also set off a scramble to lower advance first-quarter GDP forecasts due tomorrow. Yields rebounded from session lows, however, after the 2-year auction failed to inspire much foreign demand, the price of oil plunged below $52 on a large EIA crude oil stock build, and equities bounced back into the green, reports Action Economics. The yield on the benchmark 10-year note fell to 4.24%.
In the currency market, the U.S. dollar was whipped around in North American trade, moving lower initially on the back of a much weaker than expected durable goods report, then rebounding on profit taking and position squaring ahead of upcoming key U.S. data on Thursday and Friday, reports Action Economics.
European stock markets finished lower on Wednesday. London's Financial Times-Stock Exchange 100 index was down 56.1 points, or 1.16%, to 4,789.4 on some disappointing earnings reports. Kingfisher was sharply lower after the company reported sales dropped 6% in the first quarter at stores open a year or more.
Germany's DAX index lost 44.74 points, or 1.06%, to 4,189.02 following news that GfK's index of consumer confidence in Germany fell for the first month in eight after oil prices surged and the jobless rate rose to a post-World War II record. GfK also halved its forecast for household spending growth this year to 0.4%. Siemens AG dropped after saying it may struggle to increase earnings this fiscal year after a fourth straight loss at the mobile-phone unit dragged down second-quarter profit.
In Paris, the CAC 40 index fell 65.36 points, or 1.64%, to 3,927.68 following a report showing manufacturers' confidence in France dropped to the lowest in 18 months in April.
Asian markets finished lower on Wednesday. In Japan, the Nikkei 225 index fell 30.41 points, or 0.28%, to close at 11,005.42 due to overnight losses in the U.S., as well as poor earnings outlook issued by domestic firms. Major automaker Honda Motor lost 1.73% after its earnings warning for 2005 and 2006 as a result of stiff competition in China. NEC Electronics fell 4.11% after the firm reported a 41% fall in group operating profit last business year, and said it expects further decline in 2005 and 2006. Cosmetics firm Shiseido shed 3.25% after it forecast lower-than-expected profit for this year.
In Hong Kong, the Hang Seng index lost 19.94 points, or 0.14%, to close at 13,839.64.