Stocks Finish Higher

A drop in the trade deficit, tame wholesale inflation, and an upbeat Beige Book sparked some buying ahead of Intel's earnings report

Stocks finished higher Wednesday ahead of earnings releases from major tech companies after the close of trading. Favorable readings on trade and inflation also helped, along with the Federal Reserve's Beige Book which indicated that the economic recovery is continuing, with modest improvement in the labor market.

The Dow Jones industrial average was up 111.1 points, or 1.07%, to 10,538.37, fueled by traditional cyclicals like Alcoa (AA ) and Honeywell (HON ). The broader Standard & Poor's 500 index added 9.3 points, or 0.83%, to 1,130.52. The tech-heavy Nasdaq composite index gained 14.69 points, or 0.7%, to 2,111.13.

In breaking news, JP Morgan Chase (JPM ) says it will acquire Bank One (ONE ). The deal could be valued at about $60 billion, according to the Wall Street Journal. Both stocks were halted in after-hours trading.

Earnings season got into high gear Wednesday, with releases after the market close from widely-followed companies such as Intel (INTC ), Apple Computer (AAPL ), and Yahoo! (YHOO ). In general, expectations are high for corporate earnings, and stocks could sell off on any disappointments.

Intel reported earnings per share of 33 cents, above the consensus estimate of 25 cents. Intel says the EPS figure includes a 9-cents goodwill impairment charge and 9-cents tax benefit on divestitures. Revenue rose 22.1% from a year earlier to $8.74 billion, above the $8.65 billion forecast. The chip giant expects revenue in the first quarter to be between $7.9 billion and $8.5 billion.

Yahoo announced earnings of 11 cents per share, matching the consensus estimate, up from 8 cents the year before.

Apple Computer reported first-quarter earnings of 16 cents per share, excluding a 1-cent gain, beating the consensus estimate by 2 cents. Revenue rose 36.3% from a year ago to $2.01 billion, above the estimate. The company sees second-quarter EPS of 8 cents to 10 cents on revenue of about $1.8 billion.

On Thursday, a few large financial companies are scheduled to release results, including Bank of America (BAC ), FleetBoston Financial (FBF ), and Wachovia (WB ). In tech, Sun Microsystems (SUNW ) and Juniper Networks (JNPR ) are also reporting earnings.

Some deal speculation in the wireless telecommunications sector sparked buying in the group Wednesday. AT&T Wireless (AWE ) and Cingular -- a partnership between SBC Communications (SBC ) and BellSouth (BLS ) -- are close to a deal for a possible merger or acquisition, according to BusinessWeek Online.

Delta Air Lines (DAL ) reported a fourth-quarter loss of $2.69 per share, vs. $2.98 loss a year ago. Operating revenue rose 2.7% from a year ago to $3.4 billion. The company says that while in line with its expectations, the results were "disappointing." It will begin a complete reassessment of its business to ensure the company can stay competitive. Standard & Poor's Ratings Services lowered Delta's corporate credit rating to 'B+' from 'BB-'.

Rockwell Collins (COL ) shares rose after the company raised fiscal year 2004 EPS guidance to $1.50 to $1.60. Prudential upgraded the stock to overweight from neutral.

Plantronics (PLT ) shares jumped after the company reported fiscal third-quarter earnings of 37 cents, vs. 20 cents a year ago, on a 24% revenue rise. It sees EPS of 30 cents to 34 cents on $104 million to $108 million in revenue for the fourth quarter, and $1.19 to $1.23 EPS in fiscal 2004. JP Morgan raised estimates.

In economic news, the producer price index (PPI) rose 0.3% in December, driven by higher energy prices, leaving the growth rate from a year ago at 4%. The core PPI that excludes food and energy prices fell 0.1% last month, leaving the growth rate from a year ago at 1%.

The trade deficit fell to $38.01 billion in November from $41.58 billion in October.

Economic data coming on Thursday include weekly jobless claims, consumer price index, retail sales, and the Philadephia Fed manufacturing survey.

Treasury Market

Treasuries ended higher in price amid some short covering, says Informa/MMS. The favorable PPI and trade data had only modest impact on trading, says Informa/MMS, and reinforced the idea that the Federal Reserve will hold interest rates steady. The yield on the 10-year note settled at 3.99%.

The Fed's Beige Book, a survey of economic conditions across the U.S., was quite upbeat, according to Informa/MMS. It found that the economy has continued to improve since the previous release, with districts noting favorable conditions, some slow or modest growth.

In currencies, the dollar was higher against the euro amid the dip in the U.S. trade deficit, and as European Central Bank officials voice concern about the euro's recent rise.

World Markets

European stock markets finished higher. London's Financial Times-Stock Exchange 100 index rose 21.3 points, or 0.48%, to 4,461.4 as Britain's December unemployment rate remained unchanged at a 28-year low of 3% and jobless claims fell.

In Paris, the CAC 40 added 36.37 points, or 1.02%, to 3,612.55 as the ECB's Noyer says economic growth is taking off. Germany's DAX index was up 58.99 points, or 1.48%, to 4,055.21 on hopes for an improved economy and earnings. Bonds were lower as consumer prices rose 0.8% in December.

Asian markets finished mixed Wednesday. In Japan, the Nikkei 225 index rose 13.32 points, or 0.12%, to 10,863. In Hong Kong, the Hang Seng index fell 75.77 points, or 0.57%, to 13,320.88.

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