Stocks finished higher on Wednesday as investors brushed aside disappointing quarterly earnings from Intel (INTC), Yahoo (YHOO), Motorola (MOT), and General Motors (GM).
The Dow Jones industrial average rose 42.59 points, or 0.4%, to 10,689.15. The broader Standard & Poor's 500 index was up 5.85 points, or 0.48%, to 1,235.2 -- a new four-year high. The tech-heavy Nasdaq composite climbed 15.39 points, or 0.71%, to 2,188.57 -- also a fresh four-year high.
Small stocks also rallied to new highs, with the S&P SmallCap 600 index trading above the 350 mark for the first time since its inception on Jan. 3, 1994, reports Standard & Poor's. The S&P SmallCap 600 has posted positive returns for eight of the last ten years, and is currently up 6.5% for 2005.
In the energy markets Wednesday, August West Texas Intermediate crude oil settled down 74 cents a barrel at $56.72. A much smaller than expected draw in weekly crude inventories provided the selling momentum, though pre-expiry squaring of long positions added to the selling pressures, says Action Economics. The EIA reported a modest 900,000 barrel decline in crude stocks, while the market had been expecting a much larger 3.6 million barrels, reports Action Economics.
Next up on Thursday's economic calendar is the July Philadelphia Fed index, which is expected to rebound to 9.0 from June's lower-than-expected reading of a decline of 2.2. "We expect the factory surveys to remain at healthy levels through the remainder of 2005," says Action Economics.
Thursday's release of the June index of leading economic indicators (LEI) is expected to rise 0.5%. The big news with the report will be the revisions, which are largely based on changes in the contribution of the yield curve, alongside inclusion of a trend-adjustment, notes Action Economics. The revisions will leave a stronger tone to the LEI over the last year, says Action. Even the revised figures will still leave intact a sharp slowdown in 2005, notwithstanding the surge in June, says Action.
On Wednesday, investors focused on Fed Chairman Greenspan's semiannual testimony before Congress. In his prepared testimony, the Fed chief said the central bank must "continue to remove monetary accommodation" as he sees sustained economic growth ahead, says Action Economics. But he noted a handful of "significant uncertainties," which merit close scrutiny by the Fed. He will get just one more chance to clarify these views before the Senate on Thursday, notes Action Economics.
Some of the latest earnings news from a few bellwhethers was disappointing. Intel posted second-quarter earnings per share of 33 cents, vs. 27 cents a year ago, on a 15% revenue rise. The chipmaker sees third-quarter revenue of $9.6 billion to $10.2 billion.
Yahoo reported second-quarter earnings per share of 13 cents, vs. 8 cents, on a 51% revenue rise. The current quarter excludes a 38 cents gain related to investment sales.
Motorola posted second-quarter earnings per share from continuing operations of 38 cents, vs. 25 cents, on 17% sales rise. The cell phone maker sees 27 cents to 29 cents third-quarter EPS from continuing operations on sales of $8.9 billion to $9.1 billion.
General Motors posted a wider than expected loss of 56 cents per share (adjusted) on 1.6% lower revenue. The auto maker says its North American unit's financial performance was "very disappointing."
However, shares of Amgen (AMGN) jumped, after the biotech outfit posted second-quarter operating earnings per share of 88 cents, vs. 62 cents, much higher than analysts' forecast.
Other companies on Wednesday's earnings calendar include eBay (EBAY), Pfizer (PFE), and Qualcomm (QCOM).
Treasury yields were flat after Greenspan's testimony, with the 10-year note yield ending at 4.18%. "The bond market absorbed Greenspan's uncharacteristically mundane testimony with aplomb and yields have retreated from the day's highs," says Action Economics. "It's unlikely we'll hear anything new from Greenspan in tomorrow's testimony, and suspect the impact of the FOMC minutes, also due out tomorrow has been sharply eroded," says Action.
European stock markets finished mixed on Wednesday. London's FTSE 100 index was up 13.7 points, or 0.26%, to 5,215.2 amid signs that mortgage lending is leveling off. The Bank of England members are worried about economic growth; minutes showed policy makers voted 5-4 to leave rates unchanged at the July 7 meeting, while 4 wanted to ease.
Germany's DAX index added 13.96 points, or 0.29%, to 4,784.5. In Paris, the CAC 40 index lost 5.86 points, or 0.13%, to 4,418.39. Danone was higher in on persistent rumors PepsiCo will make a bid for the company.
Asian markets closed higher on Wednesday. In Japan, the Nikkei index rose 24.51 points, or 0.21%, to 11,789.35. Stocks in Tokyo rose on back of U.S. dollar strength and better-than-expected second-quarter GDP in China, reports Standard & Poor's MarketScope.
In Hong Kong, the Hang Seng index gained 34.96 points, or 0.24%, to 14,602.7, as the index pulled back from early highs.
China's second-quarter GDP unexpectedly rose to 9.5% year-over-year, edging up from 9.4% in the first quarter. S&P upgraded China sovereign rating to A-, and Hong Kong's to AA-.
H-Shares -- shares of mainland Chinese companies listed on the Hong Kong Stock Exchange -- outperformed as China's strong second-quarter GDP growth boosted sentiment, reports Standard & Poor's MarketScope.