Stocks finished Thursday's session with heady gains as several companies including Internet portal Yahoo! (YHOO ) and health insurer Aetna (AET ) spurred a much-welcomed bargain hunting rally.
The Dow Jones industrial average added 247.68 points, or 3.40%, to 7,533.95. The tech-heavy Nasdaq composite index jumped 49.38 points, or 4.43%, to 1,163.49. And the broader Standard & Poor's 500-stock index tacked on 27.17 points, or 3.50%, to 803.94.
The strong performance could last into Friday, market watchers note. "This was a rally on good volume and good breadth. That's where it's different from other rallies," says Tony Dwyer, market strategist at Kirlin Holdings. Though the day's gains are certainly encouraging for downtrodden stock investors, Dwyer feels it's too soon to call a bottom.
The main course for investors Friday will be the earnings report from General Electric (GE ). "That could be the catalyst for more short covering," Dwyer says. Many Wall Street firms have already lowered estimates on the company and the markets are more likely to be greeted with a surprise to the positive side. "Anything better than total disaster is going to be taken positively," Dwyer notes. The company earlier forecasted EPS of $0.41 a share for the third quarter. GE expects earnings of $4.1 billion on revenue of $32 billion.
Investors analyzed a pile of retail sales updates for September from most major retailers. The news was not especially encouraging, with Wal-Mart (WMT ) and Target (TGT ) reporting sales figures in line with estimates. But the general merchandise giants were also cautious about the future.
Kohl's Corp. (KSS ) said sales at stores open at least a year fell 3.2% in September, on low mall traffic, and it warned that third-quarter earnings would be fall short of analysts' expectations.
Yahoo's earnings report was one of several that offered a bright spot. It reported net income of $28.9 million or $0.05 per diluted share, compared with a net loss last year. The company reported a 50% increase in revenues to $248.8 million.
In another piece of positive news, Aetna said it expected better than forecasted results for the third quarter. Earnings per share for the quarter will come in around $0.70, up from $0.35.
Shares in eye care products company Bausch & Lomb (BOL ) rose Thursday, one day after the company reported an upbeat earnings outlook. The company says it will beat third-quarter operating earnings estimates with help from a 10% rise in sales.
Meantime, fast-food company Yum! Brands (YUM ), which runs the KFC, Pizza Hut and Taco Bell chains, said Wednesday after the close that its third-quarter earnings rose 23% on sales at Taco Bell and its international business. However, sales at stores open a year or more climbed just 1%.
U.S. Treasuries fell in price as investors rotated into equities. Earlier, an update on U.S. import prices showed a jump of 0.7% in September, after a 0.3% gain in August. That's the biggest gain in 5 months, says economic research outfit MMS International. A 6.0% surge in petroleum prices was largely responsible. Without petroleum, import prices were up only 0.2%.
U.S. initial jobless claims tumbled 40,000 to 384,000 for the week ending Oct. 5 from an upwardly revised 424,000 the week prior, well below the 408,000 expected. The data should initially weigh on Treasuries and benefit stocks, says MMS International.
Wholesale trade data showed that inventories rose 0.2% in August after a 0.6% gain in July. Sales rose a stronger than expected 0.9% following an upwardly revised 0.7% gain. The surge in sales knocked the inventory to sales ratio (I/S) down a bit to 1.22 from 1.23.
On Friday, investors will get a crucial read on the stamina of the American consumer -- September retail sales. MMS expects that overall retail sales will drop 0.6%, while sales not including autos is seen rising 0.4%.
Investors will also digest the September producer price index Friday. Both the overall producer price index and the core index are expected to be unchanged in September. These figures should leave the overall index down 1.8% year over year and the core index down 0.4%, the lowest reading in the history of the series. These figures will take a back seat to retail sales data, MMS says.
European stocks finished higher, taking a lead from U.S. stocks. London's Financial Times Stock exchange index ended higher by 34.90 points, or 0.93%, to 3,777.30. Meantime, Germany's DAX index gained 135.31 points, or 5.21%, to 2,733.19. France's CAC index finished up 102.08 points, or 3.84%, to 2,758.53.
Asian stocks finished down Thursday. Tokyo's benchmark Nikkei 225 index fell 99.72 points, or 1.17%, to 8,439.62, which is a fresh 19-year low. Japan stocks continue to falter as worries over an economic crash persist. Hong Kong, the Hang Seng Index finished off 118.66 points, or 1.32%, to 8,858.69.