U.S. stocks closed with moderate to sharp gains on Thursday, with investors adopting a bullish tone with hopes of a second-half economic recovery. Also helping sentiment: the release of minutes from the May 6 meeting of Federal Reserve policymakers that said there was only a remote possibility of deflation, according to Standard & Poor's MarketScope.
The Dow Jones industrial average gained 67.50 points, or 0.74%, to finish at 9,079. The broader Standard & Poor's 500 index added 10.50 points, or 1.07%, to close at 985.82. The tech-heavy Nasdaq composite index gained 31.35 points, or 1.92%, to close at 1,634.01. The market was led by a broad strength in technology with Internet software, wireless services, IT consulting and semiconductor equipment stocks higher, says S&P's MarketScope.
The major indexes recovered from Wednesday's decline after the Fed cut the benchmark Fed funds rate by 25 basis points to 1% -- the lowest level in decades.
"You're getting a reflexive uptick from the [market's] move down [Wednesday]," says A.C. Moore, chief market strategist at Dunvegan Associates. "Leading up [to the Fed cut], markets were consolidating, and became oversold, and are at an oversold position now."
In economic news Thursday, first-time jobless claims fell 22,000 to 404,000 in the week ended June 21. This is the nineteenth week that jobless claims have been above 400,000, and continued claims rose to 3.74 million, up from 3.69 million – "not quite as encouraging as lagging labor markets continue to prove to be relatively stagnant," says economic research outfit MMS International.
The rise in U.S. gross domestic product for the first quarter was revised to 1.4%, down from 1.9%, and was a bit slower than expected. Contributing to the adjustment was a downward revision to business inventories, and gross private investment. But the GDP revision did reveal a sizable downside inventory, that will bode well for the second-quarter GDP outlook, says MMS.
In company news Thursday, Lehman Brothers (LEH ) may buy Neuberger Berman (NEU ) for $2.8 billion to diversify beyond the bond business, and to help attract wealthy investors. Lehman closed 2.5% lower, while Neuberger gained 6.5%.
Circuit City (CC ) has reportedly rejected an $8 per share offer by the Carlos Slim Helu Group, which holds a stake in the company. Circuit City closed 8.3% higher.
American International Group (AIG ) rose 1% on news of its agreement to buy General Electric's (GE ) GE Edison Life Insurance Company in Japan, and GE's U.S. auto and home insurance business for as much as $2.2 billion. GE shares closed mostly unchanged.
AMR (AMR ), parent of American Airlines, surged 20% after reporting a positive cash flow from its operations in May, due to reduced costs, and improved unit revenues. The company says it expects similar results in June if the favorable environment continues. Credit Suisse First Boston has upgraded the stock to 'outperform.' Other airline stocks were trading higher with the positive news.
CNET Networks (CNET ) closed 17% higher after an upgrade to 'outperform' from 'underperform' by Citigroup. The firm's analyst thinks that the company's consensus estimate of 10% revenue growth in 2004 is probably too low, and should be 20%.
Nextel Communications (NXTL ) finished 7.3% higher, after saying it is achieving improved customer satisfaction, continuing to scale capital spending, and is on track to meet or exceed its 2003 guidance.
The Federal Trade Commission has cleared a transaction to combine Dreyer's Grand Ice Cream (DRYR ), and Nestle's U.S. ice cream business. After the transaction, Nestle will own about 67% of the fully diluted equity of Dreyer's Holdings. Dreyer finished the day 1.2% higher.
3Com (COMS ) shares lost 0.7% after the company reported fourth-quarter revenues of $175 million, a 36% increase on Thursday. The company's net loss was approximately $38 million, or 11 cents per share, compared to a loss of 5 cents per share in the same quarter last year.
Playtex Products (PYX )lost 13% on Thursday, after announcing lower-than-expected second-quarter earnings of 8 cents to 10 cents per share. The company's sales are down by about 10% compared to one year ago, and the company sees its fiscal 2003 revenues 5% to 6% lower than they were last year.
Friday's major economic release is the University of Michigan consumer sentiment index.
Treasuries prices moved lower Thursday. The market was "tarred [Wednesday] and feathered Thursday" in the wake of confusion over the Fed's policy statement, says MMS International.
The biggest U.S. debt deal in history, a $17 billion debt offering by General Motors (GM ), preoccupied traders trying to meet strong demand, while crowding out government paper.
The dollar was higher vs. other major currencies on Thursday, while gold prices continued their slide.
European markets closed mixed, but mostly lower on Thursday. London's FTSE 100 index was lower by 27.3 points, or 0.67%, to close at 4,040.60. U.K. building supply giant, Hanson PLC, disappointed traders by announcing that its first half profits would be lower than last year. The company has suffered from higher pension costs, poor currency conversions, and asbestos claims against its U.S. subsidiaries.
In Paris, the CAC-40 index finished down 5.1 points, or 0.17%, at 3,103.56. Fiat announced that it will shed more than 12,000 jobs in an effort to cut costs.
In Frankfurt, the DAX index rose by 42.40 points, or 1.33%, to close at 3,241.22.
Asian markets finished slightly down on Thursday. Japan's Nikkei 225 index lost 8.85 points, or 0.10%, to finish the day at 8,923.41.
Hong Kong's benchmark Hang Seng index fell 22.88 points, closing at 9,606.11.