Investors Thursday weighed JPMorgan's strong results against a decline in the Philly Fed index and a possible CIT bankruptcy
U.S. stocks closed higher Thursday as price drops earlier in the session led to late bargain hunting. Tech stocks gained ahead of earnings reports from IBM (IBM) and Google (GOOG) due after Thursday's close.
Financial stocks, however, underperformed, weighed down by money woes at CIT Group (CIT).
The firming in the market followed news of a 2-point rise in the National Association of Home Builders' housing market index. Earlier in the session, investors fretted over a mixed bag of earnings reports and economic data, which included factory activity in the Mid-Atlantic region and jobless claims.
Investors weighed a jump in second-quarter profits at JPMorgan Chase, disappointing results from Nokia (NOK), and a possible CIT Group bankruptcy.
On Thursday, the 30-stock Dow Jones industrial average finished higher by 95.61 points, or 1.11%, at 8,711.82. The broad Standard & Poor's 500-stock index gained 8.06 points, or 0.86%, to 940.74. The tech-heavy Nasdaq composite index added 22.13 points, or 1.19%, to 1,885.03.
Treasuries rose. The dollar index fell. Crude futures were mixed. Gold fell.
JPMorgan Chase & Co.'s (JPM) second-quarter earnings rose 36% on strong investment-banking results, with the profit smashing analysts expectations like Wall Street titan Goldman Sachs Group did Tuesday, the WSJ reported. Investment banking and a boom in mortgage refinancing were expected to help large U.S. banks offset rising losses from bad loans, but investors are looking for whether troubled loans will continue to rise and whether the refinance boom can last. Credit-loss provisions fell 3.6% from the first quarter for J.P. Morgan. Although its mortgage and credit-card businesses are being hurt badly by rising unemployment and the recession, its traditional Wall Street businesses are booming.
After nearly a week of intense negotiations with Obama Administration officials, small business lender CIT Group surprised Wall Street late on July 15 with news that there was "no appreciable likelihood" of immediate government aid and that it was "evaluating alternatives." With its own lenders pulling funding and its small business borrowers drawing down credit lines as fast as they could, CIT's inability to secure government help leaves the New York-based firm with few options other than bankruptcy.
American International Group (AIG) announced that it will accelerate steps to position American Life Insurance Company (ALICO) as an independent entity and seek an initial public offering and public listing in New York, depending on market conditions and subject to regulatory approval.
Nokia (NOK), the world's biggest maker of mobile phones, dropped as much as 9% in Helsinki trading after posting second-quarter earnings per share (EPS) of €0.15, vs. €0.37 one year earlier, on a 25% sales drop. Nokia also cut its forecast for market share and profitability because of competition in high-end handsets.
Former Treasury Secretary Henry Paulson will testify on the Bank of America-Merrill Lynch merger Thursday.
In economic news Thursday, builder confidence in the market for newly built, single-family homes notched up two points in July to its highest level since September 2008, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI rose two points to 17 in July as builders saw an improvement in current sales conditions but continued to express concerns about the future.
The Philadelphia Fed index slipped to -7.5 in July after climbing over 20 points to -2.2 in June. The index had risen for four straight months since hitting a cycle low at -41.3 in February. It was at -16.3 a year ago. The employment index dropped to -25.3 from -21.8 (-7.3 a year ago). But the new orders rose to -2.2 from -4.8 (-12.1 last year). Prices paid fell to -3.5 from -13.0 (75.6 last year), while prices received rose to -21.5 versus -16.6 (28.8 last year). The 6-month outlook saw the general business activity index fall to 51.9 from 60.1 in June (18.0 a year ago), while the capital expenditures index rose to 2.4 from 1.7 (9.2 last year).
First-time U.S. jobless claims fell another 47,000 to 522,000 in the week ended July 11. Action Economics says auto retooling distortions, exacerbated by the bankruptcy of General Motors Corp. and Chrysler this spring, as well as the July 4 holiday, have made for significant distortions in the claims data. Continuing claims plunged a record 642,000 to 6,273,000 after climbing 191,000 to a revised 6,915,000 in the week of July 4 (was 6,883,000).
Thge Treasury Dept. reported that foreigners sold another $66.6 billion in net U.S. assets in May, after selling a revised $38.0 billion in April (was $53.2 billion).
China's second-quarter GDP growth accelerated to +7.9% year-after-year, after its 6.1% rise in the first quarter was the slowest in quarterly data back to 1992. It was slightly better than median projection for +7.8%, after the consensus outlook had creeping up over the past several weeks on continued encouraging data and statements from Chinese officials increasingly optimistic about attaining target annual growth of 8.0% in 2009.
A split among Federal Reserve officials widened last month: Depending on who is doing the forecasting, economic growth will either remain stalled next year or will accelerate to the fastest rate since 1999. Minutes from the Fed's June meeting show central bankers are less certain than they were in April over how the economy will emerge from the worst recession in a half century. Policy makers have differing assessments of how quickly credit markets will heal, and how effective a $787 billion fiscal stimulus and $1 trillion expansion of the Fed's balance sheet will be, according to the FOMC's minutes released yesterday.
In earnings news Thursday, Marriott International (MAR) reported second-quarter EPS from continuing operations of $0.10, vs. $0.41, on flat total revenues. The company reported adjusted second-quarter EPS of $0.23.
Baxter International (BAX) posted second-quarter EPS of $0.96, vs. $0.85, on a 7% rise in U.S. sales and a 9% rise in international sales (excluding foreign currency translation).
Harley-Davidson (HOG) reported second-quarter EPS of $0.08, vs. $0.95, on a 27% revenue drop. The company cut its 264,000-273,000 2009 motorcycle shipment forecast to 212,000-228,000, or 25%-30% fewer than 2008. Harley will implement further reduction this year of about 700 positions in its hourly production workforce; it will also reduce non-production, primarily salaried headcount by about 300 additional positions.
East West Bancorp Inc. (EWBC) posted a second-quarter loss per share of $1.83, vs. a $0.41 loss, on 13% lower interest and dividend income. The current-quarter loss includes a $151.4 million provision for loan losses and $37.4 million other than temporary impairment on investment securities.