Stocks Post Solid Gains
Stocks ended trading well higher Thursday. Investors mulled a mixed bag of earnings news, while looking past a weaker-than-expected read on the labor market. A $350 billion tax-cut agreement reached by the House and Senate lifted investor sentiment.
The Dow Jones industrial average was up 77.59 points, or 0.91%, at 8,594.02. The broader Standard & Poor's 500 stock index rose 8.45 points, or 0.92%, to 931.87. The tech-heavy Nasdaq composite index ticked ahead by 17.68 points, or 1.19%, to 1,507.55.
Major indexes showed continued resilience, after two losing sessions to start the week interrupted a two-month rally. "Certainly the tax cut is sparking some optimism in the market," says Fahnestock market strategist Alan Ackerman. Another major factor driving buyers, Ackerman says, is a possible rate cut by the Federal Reserve when it meets in June.
Art Hogan, market strategist at Jefferies and Co., says, "Over the last five weeks, the market has clearly found the path of least resistance to the upside," as investors focused on good news and hoped for a second-half economic recovery. "People don't want to miss this if this is the bottom."
Technology shares were aided by strength in Synposys (SNPS ). The chip design automation company reported better-than-expected quarterly earnings and increased guidance for the year.
Tobacco stocks again showed gains, a day after a Florida appeals court overturned a $145 billion verdict against Altria Group (MO ), parent of Phillip Morris USA. Several analyst upgrades of Altria and other tobacco companies followed the decision.
In earnings news, telecommunications equipment maker Ciena (CIEN ), posted a second-quarter loss on lower sales. The company also warned of continued lower sales.
Elsewhere, retailer Foot Locker (FL ) reported a higher quarterly profit, but said same-store sales shrunk 2.5%.
In other retail news, bookseller Barnes and Noble (BKS ) announced a quarterly loss, but it was smaller than expected thanks to an uptick in April sales.
On the economic front, initial jobless claims for the week ended May 17 rose 7,000 to 428,000. The rise was more than expected and marks the fourteenth consecutive week initial claims were above the 400,000 threshold. No other significant economic data was expected Thursday.
In commodities news, oil prices moved lower after the U.N. Security Council voted to lift sanctions on Iraq -- thus enabling a resumption in Iraqi oil exports.
With no economic reports or major earnings announcements expected to be released and a three-day weekend on the horizon, thin trading is anticipated in Friday's session. "Volume probably will be slower than [Thursday]," Hogan says.
Prices of U.S. Treasuries remained higher Thursday. Prices were supported by a weaker initial jobless claims than most expected. Also bolstering Treasuries, according to economic research firm MMS International, was a contrarian news report that suggested the Federal Reserve might cut rates.
Traders continued to mull Fed Chairman Alan Greenspan's Wednesday testimony before the Joint Economic Committee. "There is considerable room for debate about what actions, if any, the Fed will take, given that policy makers are still awaiting 'clean' data, which Greenspan said was still several weeks away," MMS notes.
Additionally, news of the U.S. closing its Norway embassy in response to threats from Al Qaeda could be adding to bullish momentum. "Though safe-haven demand really hasn't been apparent in several weeks, heading into tomorrow's shortened session and the long weekend, traders are hesitant to sell," notes MMS.
The bond market will end trading early on Friday, at 2:00 pm ET, and will be closed on Memorial Day.
European markets closed trading higher Thursday. London's FTSE index was up 54 points, or 1.37%, to 3,990.4. Among the biggest contributors to the advance in the FTSE were GlaxoSmithKline, BP-Amoco, Vodafone, and AstraZeneca. In Paris, the CAC-40 index gained 22.07 points, or 0.77%, to 2,903.27. In Frankfurt, the DAX index added 37.96 points, or 1.34%, to 2,865.21.
In Asia, stocks finished higher. Japan's Nikkei 225 index rose 33.15 points, or 0.41%, to 8,051.66. Bank stocks rose, while chip-related shares were mixed. Meanwhile, Hong Kong's benchmark Hang Seng index increased 71.69 points, or 0.79%, to 9,131.49.