Stocks shot sharply higher Thursday, sparked by short-covering and bargain hunting. All it took for investors to shed their dour mood of the past few sessions was some relatively positive earnings news from tech titans Microsoft Corp. (MSFT ), Yahoo (YHOO ) and Motorola (MOT ).
The tech-heavy Nasdaq Composite was the big winner on the day, rocketing higher by 104 points, or 5.26%, to 2,075.69. Advancing shares led decliners on the Nasdaq by a margin of 25-12.
Blue chips joined in the fun as well. The Dow Jones Industrial Average gained 238 points, or 2.3%, to 10,478.99 on strength in Microsoft, IBM Corp. (IBM ), Caterpillar (CAT ) and Wal-Mart (WMT ). Breadth on the New York Stock Exchange was solidly positive, with 19 shares rising for each 12 shares declining.
The broader S&P 500 Index gained 27.96 points, or 2.37%, to 1,208.14. The industries making the biggest contributions to the "500" were software & services, semiconductors, electrical equipment and commercial equipment groups.
Larry Rice, chief investment officer for Josephthal & Co. says today's upside represents a technical bounce from slightly oversold conditions. He also says tech bulls are "groping" for good news amid the wreckage. "Keep in mind that each downturn is led out by another sector," he notes. "If we're looking for tech to lead us out of this thing, people are going to be disappointed."
The strategist says he is more concerned about what kind of progression will occur in the market into the third quarter. "There's no reason for this market to break down into new lows and there's certainly no reason for it to break into new highs."
On the economic front, jobless claims for the week of July 7 rose 42,000 to 445,000, which was lower than expected. This lends ammunition to the argument that the Federal Reserve will continue to cut interest rates. Standard & Poor's MMS says while the data should be encouraging to the bond market, seasonals related to the annual auto retooling were likely a main factor behind the unexpectedly strong gain in the weekly series.
Investors kept a close eye on the unfolding credit crisis in Argentina. Economic Minister Cavallo announced spending cuts Wednesday night to address the country's budget deficit and avoid default on its debt. But an investor conference call failed to restore faith that the country could restore its balance sheet without sparking social unrest. Argentina's Merval stock index tumbled 15% Thursday.
Among Thursday's stocks in the news, General Electric (GE ) reported second quarter earnings of $3.897 billion, or $0.39 per share, on revenues of $31.97 billion. The results were in line with Wall Street estimates.
Treasuries ended higher on flight-to-quality buying. With heightened fears of another emerging market crisis, the market is now increasing the potential for another Fed easing, including an intermeeting rate cut.
European markets closed higher. The Financial Times 1000 was up 89.70, or 1.66%, to 5481.60. In France, the CAC 40 Index was up 46.75, or 0.95%, to 4961.43. Germany's DAX Index was higher by 81.21, or 1.40%, to 5883.01.
Asian equities ended with gains. In Japan, the Nikkei gained 402.84 points, or 3.36%, to close at 12407.95. In Hong Kong, the Hang Seng Index added 132.30, or 1.06%, to end at 12660.20.
By Alan Hughes in New York