Stocks finished sharply higher Thursday -- marking the third straight day of gains for the major indexes-- as money shifted out of bonds and into stocks. News of a financial bailout package for troubled Brazil sparked buying, especially in financial shares. Retailers were mixed after releasing July sales and earnings updates.
The Dow Jones industrial average climbed 255.80 points, or 3.03%, to 8,712.02. The tech-heavy Nasdaq composite index added 35.62 points, or 2.78%, to 1,316.52, led by techs and biotechs. And the broader Standard & Poor's 500-stock index was up 28.69 points, or 3.27%, to 905.46.
In economic data due Friday, S&P MMS expects a small 0.2% gain in nonfarm productivity for the second quarter, with likely downward revisions for the prior three years to parallel the reductions seen in GDP last week.
Bank stocks rose Thursday, and helped drive the Dow to another triple-digit gain, on news the International Monetary Fund agreed to provide a $30-billion rescue loan to Brazil. The loan should help stabilize Brazil's shaky finances ahead of the country's upcoming presidential election. Citigroup (C ) and JP Morgan Chase (JPM ) were higher on this news since these banks have high exposure to the country.
Many retailers reported July sales figures on Thursday that were weaker than expected. Wal-Mart's (WMT ) sales rose 4.5% last month, a bit lower than the company projected. Still, the retail giant says it should meet or exceed the Street's estimate for the current quarter.
Other retailers that expect earnings to be higher than originally thought include Ann Taylor Stores (ANN ) and Urban Outfitters (URBN ). Another apparel retailer, Aeropostale (ARO ), says it will meet or exceed the current Street estimate, while arts and crafts chain Michaels Stores (MIK ) raised its earnings outlook.
However, electronics retailer Best Buy (BBY ) warned that second-quarter earnings will be weaker than expected because of weak consumer confidence, which resulted in flat same-store sales last month. The shares were sharply lower Thursday on the news.
On the earnings front, Univision (UVN ) shares were down after the broadcasting company reported second-quarter results on the low side of its projections and modestly lowered its outlook for rest of 2002, citing a softer economy and startup costs. Hispanic Broadcasting (HSP ) was lower in sympathy since it plans to be acquired by Univision.
Qwest Communications (Q ) reported a narrower second-quarter loss of $1.14 billion, or 13 cents per share, on a 17% drop in revenue. The telecommunications services provider lowered its outlook for the full year.
In economic data Thursday, the overall producer price index -- a measure of inflation at the wholesale level -- in July fell 0.2%, after a 0.1% gain in June. The core index (excludes food and energy) fell 0.3% following a 0.2% increase in June. Both figures were much weaker than expected, reflecting a very tame inflation environment, says S&P MMS. Weakness was seen in foods, alcoholic beverages, tobacco products and capital equipment.
S&P's Investment Policy Committee raised its recommended equity exposure to 60% from 55% and reduced bond exposure to 15% from 20%. "Since valuations are now at or below historic norms, that earnings are likely to increase in the coming quarters, and that the technical picture has improved, equities now have greater upside potential than downside risk," says the committee. It notes that it believes a market bottom has been established.
Treasuries finished lower in price as stocks gained ground. Unwinding of recent curve steepening trades dominated as players reassessed their aggressive Fed easing forecasts, says S&P MMS.
In other economic news, weekly jobless claims fell 15,000 to 376,000 in the week ended August 3. The four-week moving average fell 8,000 to 379,000, the lowest level in 17 months. However, continuing claims rose 51,000 to 3,532,000 in the week ended July 27 (reported with a one-week lag.) Overall, the improvement in initial claims during the week, alongside the rise in continuing claims, suggests that while the labor market remains weak, a sluggish recovery is in the works, says S&P MMS.
European markets were solidly higher, as the IMF $30-billion Brazil bailout bolstered the banking industry globally. In London, the FTSE 100 index ended with a gain of 146.10 points, or 3.57%, to 4,240.50.
In France, the CAC 40 was up 117.94 points, or 3.61%, to 3,388.45. And in Germany, the DAX Index jumped 213.72 points, or 6.17%, to 3,679.26.
In Asia, the markets finished higher. In Japan, the Nikkei lost 34.83 points, or 0.35%, to close at 9,799.57. Japan's major equity indices failed to keep early gains, as market heavy-weight technology shares sank on renewed concerned over their earnings. Gains in the Wall Street in Wednesday's session, despite no inspirational headlines, were not enough to support the Japan market.
In Hong Kong, the market was down 15.50 points, or 0.16%, to close at 9962.24.