Stocks rallied Thursday, picking up steam in the final hour amid light pre-holiday trading. Economic data eased inflation concerns and pushed Treasury yields down sharply, as company-specific news drove trading. Gold, biotech and transport stock groups led the advance.
The Dow Jones industrial average added 55.71 points to 10,889.44. The broader Standard & Poor's 500 index nudged higher by 5.33 points to 1,268.12. The tech-heavy Nasdaq composite index rose 14.83 points to 2,246.49.
In New York City, the three-day transit workers' strike ended, with subway service set to be restored Friday morning. Millions of commuters have been stranded. Trading volume was trending lower since the strike began Tuesday, says Standard
& Poor's MarketScope, though activity typically trails off ahead of the Christmas holiday.
In economic news Thursday, U.S. initial jobless claims fell 13,000 to 318,000 in the week ended Dec. 17, from a revised 331,000 the previous week. The market had expected a 4,000 drop. Meanwhile, the insured unemployment rate rose to 2.1% from 2%. The claims data are encouraging, but the turnaround in insured unemployment is a bit disturbing, says David Wyss, chief economist for Standard & Poor's.
The core November personal consumption expenditure index fell 0.4%. November personal income rose 0.3% after rising a revised 0.5% in October, as personal consumption expenditures rose 0.3%, vs. 0.2% in October. The report led Action Economics to reduce its fourth-quarter real consumption growth forecast from 1.0% to 0.6%, though its fourth-quarter GDP estimate will remain at 2.7%,
Gold was a big mover, climbing nearly 3% on speculative buying following a recent slide. The gains came despite the low levels of inflation shown by the PCE deflator.
In earnings releases, home furnishings retailer Bed Bath & Beyond (BBBY) fell 12% after posting third-quarter earnings per share of 45 cents, vs. 40 cents, on 3.1% higher same-store sales and 11% higher total sales.
BlackBerry manufacturer Research In Motion (RIMM) added 11% after posting third-quarter earnings per share of 61 cents, vs 46 cents, on a 53% rise in revenue. The company kept fourth-quarter revenue guidance of $590 million to $620 million, but says it expects subscriber additions to be lower than previously forecast.
Payroll services provider Paychex (PAYX) fell after posting second-quarter earnings per share of 30 cents, vs. 23 cents, on a 15% revenue rise. CIBC World downgraded the stock from outperform to sector perform.
M&A activity remained in focus Thursday, as CVS (CVS) confirmed it has been in talks with Albertson's (ABS) regarding a potential purchase of Albertson's stand-alone Sav-on and Osco drugstores. CVS shares nugded modestly higher. Albertson's fell amid separate reports that it terminated talks with a leading bidder for the company.
Also in deal news, Sanyo Electric (SANYY) climbed on reports that an investor group including Goldman Sachs (GS) will pay more than $2.5 billion for a stake in the Japanese electronics concern.
Among other stocks on the move, BioCryst Pharmaceuticals (BCRX) rose after receiving a verbal approval from regulators to conduct studies of an intravenous flu drug.
In auto manufacturing, General Motors (GM) dropped after an early rebound, following yesterday's weakness on news a major investor lowered his stake in the company.
Caterpillar (CAT) helped boost the blue-chip Dow industrial average after reportedly being named a top pick for next year by Credit Suisse First Boston (CSR).
Health insurer Humana (HUM) also rose, as the company expects enrollment in its Medicare plans to surpass 1.7 million on Jan. 1, 2006. By comparison, enrollment stood at 503,000 Medicare members at end of the third quarter of 2005.
PetSmart (PETM) rose as Goldman reportedly upgraded the pet supply retailer from in-line to outperform.
TIBCO Software (TIBX), which makes business process management software, gained after posting fourth-quarter earnings per share of 12 cents, vs. eight cents, on a 7% revenue rise.
In commodities, February West Texas Intermediate crude oil fell 28 cents to $58.28. Inventory data during the previous session showed a higher than expected 1.3 million barrel rise in crude stocks.
European markets finished mixed Thursday. In London, the Financial Times-Stock Exchange 100 index was up 9.6 points to 5,597. Germany's DAX index rose 1.05 points to 5398.28. In Paris, the CAC 40 index fell 0.45 points to 4751.96.
Asian markets eased. Japan's Nikkei 225 index fell 16.20 points to 15941.37 after hitting a five-year closing high Wednesday. In Hong Kong, the Hang Seng index slipped 38.89 points to 15,182.53. Korea's KOSPI index dropped 3.29 points to 1350.87.
The economic calendar Friday will feature reports on durable goods, consumer sentiment, and new home sales. But the data will have little impact as the markets should be in holiday spirits prior to the early close, says Action Economics, noting that bond bulls may have run out of steam.
The prices for 10-year Treasury notes rose to 100-16/32 for a yield of 4.43%, and 30-year bonds climbed to 111-10/32 for a yield of 4.61%. The market had little reaction to the second speech in two days by Richmond Federal Reserve Bank President Jeffrey Lacker, though some wire headlines from his speech appeared a little more hawkish on the surface, says Action Economics.