Stocks Close Higher

Semiconductor shares paced the advance, showing strength ahead of Intel's mid-quarter update

Stocks finished Thursday's session with gains as a rally in tech shares led the broader market higher. Blue chips were restrained, however, by weakness in financials as investors bought into semiconductor and other high-tech sectors. Sentiment was positive ahead of Intel's (INTC ) mid-quarter update, which many see as a barometer on the health of the chip industry. Shares of the tech bellwether gained roughly 4% ahead of the news.

After the close of trading, the chipmaking giant said it expects that revenue, gross margin percentage and expenses for the second quarter will be within the previous expectations and slightly below the midpoint of the ranges provided on April 17. At that time, the company said it expects second quarter revenues to come in between $6.2 billion and $6.8 billion, with gross margins to be 49%, "plus or minus a couple of points," which is down from 51.7% in the first quarter.

Arthur Hogan, chief market analyst at Jefferies & Co., noted that the market was in a holding pattern ahead of Intel's report. "Intel may lower guidance a bit and sales forecasts, but hopefully has some nice things to say about inventory capacity issues," he says. In the meantime, the analyst says the market is drifting in a sort of upward direction, which is a good thing. "We gave back a little bit yesterday but nothing shocking either on relatively low volume. I expect today to be more of the same."

The spate of earnings pre-announcements continued. Among Thursday's confessors, Broadcom Corp. (BRCM ) forecast second-quarter revenues 32%-35% lower than first-quarter revenues of $318 million, which is below analyst estimates. Also, Swift Transportation (SWFT ) expects second quarter earnings to fall short of the consensus estimate of $0.16 per share, citing continued soft freight demand.

There is an underlying bullishness lately, with the market essentially shrugging off bad news such as negative earnings pre-announcements and disappointing sales reports from the retailers fronts.

Among other stocks in the news Thursday, Pacific Sunwear (PSUN ) posted a 9.8% May same-store sales decline, and a 10% total sales rise. The retailer sees $0.13-$0.17 second quarter EPS.

The Dow Jones Industrial Average gained 19.85 points, or 0.18%, to 11090.09. The Nasdaq Composite ended up 46.25 points, or 2.09%, to 2263.98. The broader S&P 500 index is up 6.93 points, or 0.55%, to 1276.96.

Treasury Market

Treasuries ended lower. Traders took profits after decent gains over the past few sessions. Bullish data put a bid in Treasuries earlier in the session after a larger than expected rise in initial jobless claims. Claims increased 13K to 432K, the highest level since September 1992. Wholesale inventory data unexpectedly rose 0.3%, indicating that inventory overhang is still a concern. Treasuries initially gained on the data, but profit taking quickly took over.

World Markets

European markets closed mixed. In London, the Financial Times 100 closed up 46.80 points, or 0.79%, to 5948.30. France's CAC 40 Index lost 43.10 points, or 0.78%, to end the session at 5453.39. In Germany, the DAX Index lost 9.38 points, or 0.15%, to 6183.06.

Asian markets ended higher. In Tokyo, the Nikkei closed up 0.8% at 13,277.51, and the TOPIX 0.3% at 1,309.86. Core private machinery orders rose 6.3% MoM in April, far beating expectations of just under 1%. In Hong Kong, the Hang Seng gained 127.42 points, or 0.94% to close at 13703.43.

Today's Headlines

China and the United States said the row over a crippled U.S. spy plane held on Hainan Island was basically over after the two sides agreed on how it should be dismantled and shipped out: Reuters.

A Los Angeles jury has ordered tobacco giant Philip Morris to pay more than $3 billion to a lifelong smoker with lung cancer who argued the company failed to warn him about the health risks: wires.

Software giant Microsoft said consumer affluence and increased government spending would spur its Asian sales to jump 27% in the financial year ending June 30: Reuters.

Rolling blackouts could threaten over a quarter of the refining capacity in California and Washington this summer, possibly boosting gasoline prices: WSJ.

By Alan Hughes in New York

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