U.S. stocks closed sharply higher Wednesday, extending a global advance on stronger-than-expected earnings and economic reports. The Nasdaq composite index led the way with a 3.5% jump after Intel's better-than-expected earnings report after the close Tuesday lifted sentiment in the technology sector.
Some of the buying was triggered by a greatly improved New York Fed Empire State manufacturing index. Traders also eyed reports showing a higher-than-expected increase in consumer inflation in June; and an as-expected decline in June industrial production.
In the minutes from the Federal Reserve's June 23-24 policy meeting released Wednesday, policymakers raised the Fed's economic growth outlook but worried about the labor market.
On Wednesday, the 30-stock Dow Jones industrial average finished higher by 256.72 points, or 3.07%, at 8,616.21.
The broad Standard & Poor's 500-stock index gained 26.84 points, or 2.96%, to 932.68.
The tech-heavy Nasdaq composite index jumped 63.17 points, or 3.51%, to 1,862.90.S&P MarketScope. noted a short squeeze Wednesday before Friday's Quadruple Witching expiration of futures and options.
Treasuries and the dollar fell. Gold futures soared. Oil rallied after the weekly U.S. inventory report showed crude oil stocks fell 2.8 million barrels.
Economic data released Wednesday gave speculators hope the recession is winding down, says S&P MarketScope.
The market was awaiting Thursday's reports on weekly initial jobless claims and the Philadelphia Fed index.
Shares of Intel Corp. (INTC) climbed Wednesday after the company's quarterly results and outlook blew past Wall Street forecasts on better-than-expected consumer demand for PCs, especially in Asia. Intel projected third-quarter revenue at $8.1 billion to $8.9 billion, compared with analysts' average forecast of $7.8 billion, according to Reuters Estimates.
Capital One Financial (COF) shares were solidly higher after the company released June default statistics on its credit card and auto trust portfolios. S&P says, specifically, U.S. credit card default rates totaled 9.73% in June, only a 3.4% sequential increase vs. a 9.9% sequential increase in the previous month.
American Express (AXP) shares also rose on news that its charge-card writeoffs will be lower than previously expected.
In economic news Wednesday, U.S. industrial production fell 0.4% in June, with capacity utilization dropping to 68.0%. Markets expected a -0.7% drop and 67.9% reading, respectively. May industrial production was revised up to -1.2% (previously -1.1%). Manufacturing production fell 0.6%, on a 2.6% decline in autos and a 4.9% drop in apparel and leather products. Manufacturing capacity utilizations fell to 64.6% from 64.9%. Utility production rebounded 0.8% from -1.3% in May. Mining fell 0.5%, after dropping 1.9% in May.
"The headline data aren't as bad as forecast, to provide some support to stocks and push bond yields higher," said S&P senior economist Beth Ann Bovino.
U.S. CPI rose 0.7% in June, while the core rate edged up 0.2%. There were no revisions to the 0.1% gains in May for both the headline and core figures. Energy prices surged 7.4% after a 0.2% increase in May, with gas up 17.3%. Food and beverage prices inched up 0.1%. Apparel price rebounded 0.7%. Housing costs were flat with owners' equivalent rent up 0.1%. Transportation costs climbed 4.2%, while commodity prices rose 1.8%.
"The headline figure is a little hotter than expected, though that was the risk after yesterday's PPI," notes Action Economics. "The data could keep upward pressure on Treasury yields, especially alongside the improvement in the Empire State index."
The U.S. Empire State manufacturing index improved to -0.6 in July after having fallen almost five points to -9.4 in June. The index is the highest it's been since April 2008. The employment index edged only slightly higher to -20.8 from -21.8 in June. New orders surged to 5.9 from -8.2, the best reading there since the recession began in December 2007. Prices paid jumped to 10.4 from -5.8, while prices received rose to -8.3 from -12.6. The 6-month general business conditions index slipped to 34.0 from 47.8, after having risen steadily since falling to -6.6 in February.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications increased 4.3% to 514.4 in the week ended July 10. The Mortgage Bankers seasonally adjusted index of refinancing applications increased 17.7% to 2,009.4. The refinance share of applications increased to 54.9% from 48.4% the previous week, but significantly lower than the peak of 85.3% in the week ended Jan. 9. The adjustable-rate mortgage share of activity increased to 5.0% in the latest week, up from 4.4% the previous week. Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.05%t, down 0.29 percentage point from the previous week, the lowest since the week ended May 22, but higher than the all-time low of 4.61% set in the week ended March 27.
The ABC News consumer comfort index rose one point to -51 in the week ended July 12 from -52 a week earlier. The survey showed 8% of respondents expressed confidence in the economy, the same as the week before. Also, 43% of those polled said their own finances were in good standing, up from 42% in the prior week. In assessing the buying climate, 22% of respondents said it was good, unchanged from a week earlier.
British unemployment hit its highest rate since January 1997 in the three months to May. But the the number of people claiming jobless benefit rose by much less than expected last month, data showed. The Office for National Statistics said claimant count unemployment rose by 23,800 in June, much less than analysts' forecasts for a rise of 40,500. Nonetheless, the claimant count rate rose to 4.8%, its highest since November 1997.
In earnings news Wednesday, Janus Capital Group (JNS) posted second-quarter earnings per share (EPS) from continuing operations of $0.10, vs. $0.40 one year earlier, on a 34% revenue decline and a narrowed operating margin. The company announced the resignation of CEO Gary Black, effective July 13. Tim Armour, a Janus director, has been named CEO on an interim basis. The company also commenced a public offering of $150 million of its common stock and $150 million principal amount of convertible senior notes due 2014.
Gannett Co. (GCI) reported second-quarter non-GAAP EPS of $0.46, vs. $1.04, on 18% lower total operating revenue. Wall Street was looking for EPS of $0.36.Yum Brands (YUM) posted second-quarter EPS of $0.50 (excluding a gain), vs. $0.45, as lower costs and expenses and a lower-than-expected tax rate offset a 7% total revenue decline. Wall Street was looking for EPS of $0.43. Despite the better-than-expected second-quarter results, the company maintains its 2009 EPS view of $2.10, excluding special items.
Altera Corp. (ALTR) posted in-line second-quarter EPS of $0.16 (including $0.04 tax-related expense), vs. $0.32, on a 22% sales decline. On a sequential basis, sales rose 6% and new products grew 16%. Altera sees third-quarter sales down 1%-5% sequentially, and gross margin of 65%, plus or minus 0.5%, with a tax rate of 13%-14%.
Wolverine World Wide (WWW) posted second-quarter adjusted EPS of $0.27, vs. $0.33, on a 3.1% revenue drop. Wall Street was looking for EPS of $0.26-$0.27. Due to its strong year-to-date performance, Wolverine now expects 2009 EPS of $1.55-$1.73, up from previous guidance of $1.50-$1.70, on reported revenue of $1.070 billion-$1.120 billion.