Stocks moved higher on Wednesday as investors psychology shifted to economic growth prospects and away from inflation concerns, says Standard & Poor's MarketScope. A spike in Treasury yields didn't appear to hurt sentiment for equities.
The Dow Jones industrial average rose 63.16 points, or 0.61%, to 10,469.93. The broader Standard & Poor's 500 index was up 11.09 points, or 0.92%, to 1,213.85. The tech-heavy Nasdaq composite index gained 27.19 points, or 1.29%, to 2,141.29.
December West Texas Intermediate crude oil was down 10 cents at $59.75 after the weekly energy inventory data. "A relatively bearish EIA inventory report weighed on the entire complex through much of the session, though fund buying erased a good chunk of losses into the close," says Action Economics.
A few economic reports are coming Thursday. The October ISM non-manufacturing "business activity" index is expected to rebound to 57.0 from September's weaker-than-expected reading of 53.3.
September factory orders are expected to drop 0.9%, while shipments increase 0.3%. Inventories are expected to be unchanged, which would leave the I/S ratio at 1.17 from 1.18. The durable goods data has set the tone, which saw relative weakness in orders relative to shipments, says Action Economics.
Thursday's release of third-quarter nonfarm productivity is expected to rise 2.4% following a 1.8% gain in the second quarter. "The data are consistent with a still-strong secular trend in productivity, though we are clearly seeing a cylical moderation from the peak growth clips registered through the 2002-2004 period of 4%-4.5% and corresponding upside pressure on unit labor costs," says Action Economics.
Investors focused on the positive news from companies on Wednesday. In particular, transportation stocks surged after Bear Stearns upgraded its stance on airlines. The Philadelphia Semiconductor index (SOX.X) also moved higher.
Time Warner (TWX) posted third-quarter EPS of 19 cents, vs. 11 cents, on a 6.1% revenue rise. The media giant increased its stock buyback program by $7.5 billion to total of $12.5 billion over the next 21 months.
Electronic Arts (ERTS) shares jumped after the video game software maker posted better-than-expected results for its second quarter.
Electronic Data Systems (EDS) posted third-quarter earnings per share of 2 cents, vs. 30 cents loss (GAAP) a year ago, on a 3% revenue rise. The company agreed to sell A.T. Kearney to a group of the firm's officers. EDS sees 55-60 cents 2005 EPS (adjusted for divestiture of Kearney) on revenue of $19.9-$20.1 billion.
On the downside, Symantec (SYMC) was sharply lower in premarket trading after the security software maker posted quarterly results and forecast its sales target for the December quarter would fall below Wall Street's expectations.
Mercury Interactive (MERQE) shares plunged after the company says CEO Amnon Landan, CFO Douglas Smith, and general counsel Susan Skaer resigned due to a probe into improper granting of stock grants. The company says it is not in a position to provide third-quarter results. S&P cut its opinion on the stock to sell on the news.
Sun Microsystems (SUNW) posted a first-quarter loss per share of 4 cents, the same as a year ago (GAAP basis), despite a 3.7% revenue rise.
In merger news, Johnson & Johnson (JNJ) said that if terms of its agreement to aquire Guidant (GDT) can't be renegotiated, the deal could be called off. Guidant has been struggling with recalls and investigations surrounding its defibrillators.
There were no major economic reports on Wednesday.
Treasury yields spiked, amid a delayed bearish reaction to the Fed's rate hike and statement and ahead of Greenspan's JEC testimony and Friday's payrolls, says Action Economics. The 10-year note yield rose to 4.61% -- a seven-month high.
European stock markets finished mixed on Wedneday. London's Financial Times-Stock Exchange 100 index was up 14.3 points, or 0.27%, at 5,358.63.
Germany's DAX index rose 32.28 points, or 0.66%, to 4,954.83. In Paris, the CAC 40 index lost 5.1 points, or 0.12%, to 4,429.65.
Asian markets finished higher on Wednesday. In Japan, the Nikkei 225 index rose 26.92 points, or 0.19%, to 13,894.78. The cautious tone in the afternoon likely reflected some profit taking as the two major indices reached their highest levels in over four years, says Standard & Poor's MarketScope. Market sentiment has been positive amid optimism about growth in the economy and corporate earnings.
In Hong Kong, the Hang Seng index gained 25.22 points, or 0.17%, to 14,597.48. The U.S. Federal Reserve's 25 basis point increase in the federal funds rate target had been largely digested by the Hong Kong market, although some property issues did suffer modest losses, says Standard & Poor's MarketScope. Local rates tend to track the Fed's course, leaving stocks vulnerable to U.S. rates. CNOOC extended gains after posting strong third-quarter results. Gains in large-cap names China Unicom and HSBC Holdings also contributed to the Hang Seng's rise.