Stocks Finish Higher Despite Soft Data

The market digested weak data on manufactruring conditions and jobless claims -- and some good news from the tech sector

U.S. stocks closed with moderate gains in Thursday's session, despite the release of a string of mostly weak economic statistics. Traders received disappointing numbers on weekly U.S. jobless claims, producer prices, and industrial production and capacity utilization. Some positive news from technology companies provided a boost to the major indexes, as did a survey of New York manufacturers.

The Dow Jones industrial average rose 65.3 points, or 0.75%, to close at 8713.10. The broader Standard & Poor's 500 stock index added 7.39 points, or 0.78%, to 946.67. The tech-heavy Nasdaq composite index was up 16.48 points, or 1.06%, to 1,551.38.

The event many traders anticipated in the technology sector Thursday came after the market close: the first-quarter earnings report for Dell Computer (DELL ). The PC maker posted earnings of $598 million, or 23 cents per share, in line with analysts' estimates and up from 17 cents per share for the same period in 2002. Revenue was $9.5 billion, up 18% from $8.1 billion. The company expects a 15% increase in second-quarter revenue. Dell closed the regular session down 0.2%, and moved lower by 1.6% in after-hours trading.

Thursday's session was dominated by economic news. The producer price index (PPI), a gauge of inflation at the wholesale level, declined 1.9% in April, following three months of consecutive increases. Excluding food and energy, the core PPI slipped 0.9%. The April decline in this index was the largest since a 1.2% drop in August, 1993, and was mainly attributable to lower prices for passenger cars, light trucks, and cigarettes, according to the Bureau of Labor Statistics.

Standard & Poor's chief economist, David Wyss, says the PPI report "will give the Fed more support for its stance of fighting deflation ... raising the odds of a June rate cut." Wyss says the drop in the core rate is "especially disturbing," and will focus attention on Friday's report on consumer prices.

Jobless claims came in slightly lower than expected at 417,000 for the week ending May 10, though the data still reflect a lingering softness in the labor market. This is the thirteenth week that jobless claims have been higher than 400,000. The prior week's figure was 430,000.

Meanwhile, more signs of weakness came from the business outlook survey from the Philadelphia Federal Reserve. The survey's index of general business activity improved from -8.8 in April to -4.8 in May, but below analysts' -4.0 estimate.

According to a Commerce Department report, business inventories rose 0.4% in April, vs. expectations for a 0.2% rise. Capacity utilization for total industry dropped to 74.4%, a rate nearly half a percent below that of March and almost 7% below its 1972-2002 average. Industrial production fell 0.5% in both April and March.

The Empire State Manufacturing Survey, a monthly assessment of manufacturers by the New York Federal Reserve Bank, arrived first in the morning, reporting a general business conditions index of 10.6 for May, a strong improvement compared to the April result of -20.2. Also according to the report, "for the first time in several months, the number of employees index was positive."

Friday's economic news flow will not be as heavy as Thursday's, though closely watched reports such as April readings on the consumer price index and housing starts, and the University of Michigan consumer sentiment index for May, are slated for release.

The sector got a lift from positive remarks made Wednesday by IBM Corp. (IBM ) CEO, Samuel Palmisano. Big Blue's chief told analysts at a meeting in Boston that investor demand for technology had stabilized compared to a year ago. IBM finished Thursday up 1.35%.

Software supplier Computer Associates (CA ) posted a narrower than expected fourth-quarter loss of 18 cents on a 4% revenue rise. The company sees a five to 10 cents per share loss in 2004. Computer Associates closed up 11.36%.

Circuit developer Analog Devices (ADI ) posted 19 cents per share on a 21% revenue rise. The shares closed higher by 3.65%.

And late Wednesday, financial software outfit Intuit(INTU ) posted quarterly earnings per share of $1.40, including gains from a $71 million sale of a Japanese unit, on 29% revenue rise. Intuit finished trading up 7.4%.

Discount chain Target's (TGT ) results came in short of analysts' expectations. The company reported income of 38 cents per share, the same as a year ago, and a 1.3% increase in first-quarter profit. Sales were up 7.6%. Target closed down 4% on Thursday.

Also reporting Thursday was Ann Taylor (ANN ), which posted 39 cents per share earnings in the first quarter, on 6.5% lower same-store sales. The stock closed down 1.3%.

Treasury Market

With plenty of economic data on Thursday, longer-dated Treasuries finished mostly where they began. Longer-dated issues continue to outperform the rest of the curve, with the the yield on the 30-year bond reaching a new record low at 4.34%. "A brief consolidation in this zone is likely Friday, says MMS International. Citing market sources, MMS adds "the long bond remains red hot in this disinflation/deflation environment. Investors are hungry for yield and continue to extend out, and not even an expected flood of corporate paper should dampen interest."

World Markets

European markets finished in positive territory Thursday.

Despite morning news that Germany's economy slipped into a recession in the first quarter of 2003, the DAX index continued to trade up 63.35 points in the afternoon, or 2.17% to close at 2,989.38. The German economy contracted by 0.2% quarter over quarter, with negative net exports as the key dampening factor, says MMS International.

In France, the CAC 40 index was up 1.15%, to close at 2,995.98. London's FTSE 100 index held above the 4,000 mark, up 0.91% to close at 4,011.10. Asian markets closed mixed. Japan's Nikkei 225 average shed 121.51 points, to close 1.47% lower, at 8,123.40. Exporters and high-tech companies such as Sony (SNE ), Nissan Motor, Advantest, and Nikon were down across the board, hurt by renewed strength in the yen.

In Hong Kong, the Hang Seng index finished up 0.25% to 9,126.07.

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