Stocks finished higher on Thursday as June-quarter earnings from Apple Computer (AAPL) and Advanced Micro Devices (AMD) beat expectations. Plus, June consumer prices were unchanged and June retail sales climbed 1.7%, supporting the bulls' outlook for steady economic growth alongside contained inflation, reports Standard & Poor's MarketScope.
The Dow Jones industrial average rose 71.5 points, or 0.68%, to 10,628.89. The broader Standard & Poor's 500 index was up 3.21 points, or 0.26%, to 1,226.5 -- its highest closing level in four years. The tech-heavy Nasdaq composite gained 8.71 points, or 0.41%, to 2,152.82.
Crude oil prices settled down a sharp $2.21 at $57.80 a barrel. Natural gas losses got the ball rolling, as the EIA reported a larger than expected build in inventories, which in turn weighed on heating oil, and ultimately crude oil prices, says Action Economics. Hedge funds were heavy sellers, says Action.
There are a number of economic reports coming out Friday. The producer price index, a measure of wholesale prices, is expected to rise 0.4% in June, while the core index increases 0.1%.
The preliminary reading for the University of Michigan's July consumer sentiment index is expected at 95.5, vs. June's final reading of 96.0. The rebound in oil prices back to all-time highs during the survey period suggests some downside risk again, "but the recent swings are little more than month-to-month noise," says Action Economics.
June industrial production is forecast to be up 0.4%. Action Economics sees capacity utilization jumping to 80.0% from 79.4%. Manufacturing strength is expected to be led by a hefty 6% surge in vehicle production, while utilities are expected to surge 3.5% on the back of the heat wave through most of the country following the cool weather in May.
May business inventories is seen rising 0.4%, while sales drop 0.1%. And the New York Fed "Empire State" Index for July is expected to drop to 10.0 from June's reading of 11.7.
Action Economics notes that traders are more focused on next week's main event: Federal Reserve Chairman Alan Greenspan's testimony about monetary policy on Wednesday and Thursday. "This report is expected to be key in providing directional clues to the market through the summer," says Action Economics.
Companies on Friday's earnings calendar include General Electric (GE) and First Data (FDC).
In economic news Thursday, U.S. retail sales surged 1.7% in June, and excluding autos sales rose 0.7%, following a 0.3% decline and a flat reading, respectively, in May (revised from -0.5% and -0.2%). As expected, auto sales were up 4.8% after falling 1.3% in May. Non-auto sales strength was broad based, with gas station sales up 1.9% and general merchandise sales up 1.2%, reports Action Economics.
An inflation gauge showed tame prices. The June overall consumer price index (CPI) was flat in June, the core rose 0.1%, following a drop of 0.1% and gain of 0.1% in May, respectively. On a year-over-year basis, the overall CPI slipped to a 2.5% growth rate from 2.8% previously; the core growth rate eased to 2.0% from 2.2%.
And first-time jobless claims rose 16,000 to 336,000 in the week ended July 9 from 320,000 the prior week (revised from 319,000).
Robust reports from two tech heavyweights boosted earnings sentiment. After the market close Wednesday, Apple posted third-quarter earnings per share of 37 cents, vs. 8 cents one year earlier, on a 75% revenue rise. The company expects fourth quarter revenue of about $3.5 billion and EPS of 32 cents. The shares rose.
Also after Wednesday's closing bell, AMD reported earnings per share of 3 cents, vs. 9 cents a year ago, on flat sales of $1.26 billion. The company expects microprocessor sales growth to exceed normal seasonal patterns.
Southwest Airlines (LUV) was up after the airline reported a rise in second-quarter earnings to 20 cents, from 14 cents a year ago, on 13% higher total operating revenue. It says based on current cost trends, expects third-quarter unit costs, excluding fuel, to be in line with second-quarter unit costs.
Delta Air Lines (DAL) shares rose after the carrier reportedly raised its maximum one-way transcontinental fare by $100 in response to high oil prices.
Among other stocks moving, Dow component General Motors (GM) was up over 3% on an upgrade by Lehman Brothers.
Other companies on Thursday's earnings calendar included UnitedHealth Group (UNH), Marriott International (MAR), and Genzyme (GENZ).
Bond prices fell, and yields moved higher, on signs of economic strength indicated by the large gain in retail sales, while inflation was tame in the CPI report. The 10-year yield rose to 4.18% -- a two-month high.
European stock markets finished higher on Thursday. London's FTSE 100 index was up 13.8 points, or 0.26%, to 5,259.7.
Germany's DAX index rose 19.38 points, or 0.41%, to 4,699.27. Among stocks on the move, Infineon was higher in reaction to U.S.-based AMD's reporting higher earnings. Sixt rose after the company raised its forecast for 2005 pretax profit after strong revenue and earnings growth in the first half. Arques was up on a higher earnings report.
In Paris, the CAC 40 index gained 27.26 points, or 0.63%, to 4,370.88. STMicroelectronics rose in reaction to AMD's surprisingly strong earnings. Xilam Animation was higher after reporting higher third-quarter revenues.
Asian markets finished higher on Thursday as better-than-expected June-quarter earnings from U.S. bellwethers Apple and AMD boosted sentiment for the global technology sector, reports Standard & Poor's MarketScope.
In Japan, the Nikkei index rose 104.42 points, or 0.9%, to 11,764.26. Adding to the positive tone in the region, Bank of Japan Governor Toshihiko Fukui said the country is coming out of its economic lull. Large-cap tech plays such as Sony and Matsushita Electric were among the market leaders for the day.
In Hong Kong, the Hang Seng index surged 184.24 points, or 1.29%, to 14,491.54 in a broad-based rally. Capping market gains, CNOOC tumbled 2.5% on news it may raise its bid for Unocal by including a $2.5 billion sweetener for Unocal shareholders, reports Standard & Poor's MarketScope.