Major U.S. stock indexes finished higher Thursday, aided by a late surge in energy issues after oil futures jumped to a one-year high of $77.55 per barrel in late New York trading.
The Dow industrials slipped back below the 10,000 level, then pushed back above it, one day after closing above that psychologically significant mark for the first time in a year.
Trading was choppy throughout the day as third-quarter earnings at Citigroup (C) and Goldman Sachs (GS) disappointed some investors, a day after major indexes rallied to new 2009 highs on a positive third-quarter report from JPMorgan Chase (JPM).
Along with the bank earnings, Thursday's market action followed reports on jobless claims, consumer prices, and manufacturing in the New York and Philadelphia areas, which overall were better than expected.
On Thursday, the 30-stock Dow Jones industrial average ended higher by 47.08 points, or 0.47%, at 10,062.94. The broad Standard & Poor's 500-stock index was up 4.54 points, or 0.42%, at 1,096.56. The tech-heavy Nasdaq composite index added 1.06 points, or 0.05%, to 2,173.29.
Treasuries and the dollar index eased. Gold futures retreated.
Oil futures were up after government data showed a steep, unexpected drop in U.S. gasoline and distillate inventories.
Tech firms Google (IBM), IBM Corp. (IBM) and Advanced Micro Devices (AMD) issued their results after the market's close Thursday.
Google posted a $1.64 billion profit, the most money the 11-year-old company has made during any three-month period, vs. a $1.29 billion profit one year earlier. Revenue climbed 7% to $5.94 billion. Both the earnings and revenue topped analyst estimates.
IBM's sales fell 7%, but net income was up 14%. The company raised its full-year 2009 earnings guidance to at least $9.85 per share from previous guidance of $9.70 per share.
AMD posted a third-quarter loss, but its sales declined by less than what Wall Street analysts had forecast.
Financial issues lagged in Thursday's regular session. In the wake of the Goldman and Citi earnings reports, the S&P Other Diversified Financial Services index fell 1.96%, while the Investment Banking & Brokerage index was down 1.79%.
Among other industry groups on the move in Thursday's session, the S&P Airlines index fell 4.30% after Southwest Airlines (LUV) posted a third-quarter loss per share of 2 cents when including charges, with revenue dropping nearly 8% year-over-year.
The S&P Oil & Gas Refining & Marketing index jumped 7.41% on the move in crude oil prices to one-year highs.
The market's expectations for bank earnings increased after JPMorgan set a high bar Wednesday with a surprisingly strong profit that helped propel the Dow Jones industrials past the 10,000 mark for the first time in a year.
Goldman Sachs said it earned $3.19 billion, or $5.25 per share, in the third quarter. Profits were boosted by increased activity in fixed income, commodities and currency trading. But revenue from its investment banking operations fell sharply from the previous quarter, reflecting slow activity in dealmaking. Goldman also said it set aside about $5.35 billion for compensation and bonuses, more than in the third quarter a year ago.
Citigroup, meanwhile, reported a slightly smaller loss per share than expected but said its credit losses remain elevated.
Bank earnings are a particular focus for investors, as a healthy banking system is integral to a strong economy, and the best indication that the market has recovered from the financial devastation of last fall.
On Wednesday, the Dow jumped 144 points to close at 10,015 -- its biggest gain since Aug. 21 and highest close since Oct. 3 last year. Broader stock indexes also rallied to 2009 highs.
As of Wednesday's close, the Dow was up 53% since hitting a 12-year low in March, while the S&P 500 index was up 61.4% and the Nasdaq composite index was up 71.2%. The earnings reports from major corporations are the key to keeping the market's rally going. Investors want to see companies grow their profits through sales and not just cost-cutting, which would signal that consumers and businesses are becoming more comfortable spending again.
Overseas, Japan's Nikkei stock average jumped 1.8%, while Hong Kong's Hang Seng index rose 0.5%. In afternoon trading, Britain's FTSE 100 fell 0.4%, Germany's DAX index was down 0.4%, and France's CAC-40 lost 0.2%.
The Associated Press reported Thursday that a U.S. House of Representatives panel voted Thursday to regulate for the first time privately traded derivatives, the kind of exotic financial instruments that helped bring down Lehman Brothers and nearly toppled American International Group. The 43-26 vote by the House Financial Services Committee, was a first major step for President Barack Obama's plans to overhaul federal regulations governing the nation's financial institutions.
In economic news Thursday, the Philadelphia Fed's index slipped to 11.5 in October after climbing 10 points to 14.1 in September as the pace of expansion slowed a tad. Nevertheless, notes Action Economics, this is the third consecutive month the index has been in positive territory since September-November 2007, reflecting growth in the region's manufacturing industries. The employment index improved to -6.8 from -14.3. New orders rose to 6.2 from 3.3. Prices paid rose to 21.3 from 14.9, while prices received rose to -4.3 from -10.6. The 6-month ahead general business activity index slipped to 39.8 from 47.8, with the employment index dipping to 7.4 from 20.5.
"Despite the dip in the headline index, it wasn't a bad report for the region's manufacturing activity," says Action Economics.
Initial jobless claims fell 10,000 to 514,000 in the week ended October 10. Markets expected a slight increase in claims to 525,000. Continuing claims dropped 75,000 to 5,992,000 in the week ended October 3, which is the third consecutive decline and pushing the insured unemployment rate to 4.5% from 4.6% the prior week.
The New York Fed's manufacturing survey surged to 34.6 in October from 18.9 the month before and much higher than the 17.5 that markets had expected. The employment index jumped 18 points to 10.4 in October, while new orders climbed to 30.8 from 19.8. Moreover, the 6-months ahead general business conditions index rose to 55.7 from 52.3 in September, and the fourth consecutive increase.
The headline consumer price index (CPI) rose 0.2% in September, as expected, and tamer than the 0.4% increase the month before. The core CPI, excluding food and fuel, also rose 0.2%, which was a bit stronger than the 0.1% rate that markets had expected.
The headline reading is down 1.3% over last September; the core rate is up 1.5%, an still within the Fed's comfort zone. Energy prices decelerated to a 0.6% pace after surging 4.6% the month before. Advances in lodging away from home (+1.5%), medical care (+0.4%), used cars (+1.6%) and public transportation (+2.1) increased the core index. Housing costs remain subdued, with the homeowners equivalent rent measure edging down 0.1% from a 0.1% increase previously.