Thursday, August 4, 2011

DJIA Targets 200-Point Day

NEW YORK—U.S. stocks traded near session highs, lifted by International Business Machines (IBM)' strong earnings and President Barack Obama's praise for $3.7 trillion deficit-reduction plan.

About an hour before the closer, the Dow Jones Industrial Average was up 208 points, or 1.7%, to 12593. The blue-chip index rose as much as 214 points in afternoon trading on Mr. Obama's comments.

IBM surged 5.2%, touching a fresh intraday record, and has accounted for about 66 points of the Dow's gains.

video   5:23 Goldman Sachs shares hit their lowest level in a year, and Bank of America swings to a loss, Deal Journal's Shira Ovide reports. (Photo: Getty Images.)

The president said the proposal, which would modify entitlement programs like Social Security and rework the tax code, represents a "very significant step" forward in deficit talks.

"There's no question that the political game of chicken over the deficit is weighing on investor minds," said Ted Weisberg, president of Seaport Securities. "Obama must've given the impression that this will one way or the other get resolved."

Investors were already in a positive mood thanks to encouraging earnings and a hint of housing optimism.

IBM shares surged a day after reporting second-quarter results that exceeded forecasts. The technology company posted strength in its hardware, software and services businesses, prompting a boost to its full-year earnings outlook. That lifted tech stocks and pushed the tech-heavy Nasdaq Composite up 58 points, or 2.1%, to 2823. The Standard & Poor's 500-stock index was up 21 points, or 1.6%, to 1327.

Technology was the best performing sector in the S&P 500, up 2.6% on the day. While tech stocks have been the biggest gainers so far this month, they have lagged the broader market over 2011. Japan's earthquake and tsunami in March have caused supply hitches, which prompted worries about global economic growth and dragged down tech stocks down more than other sectors in recent months.

The S&P 500's tech sector is up 5.2% this year, well behind energy's 14% rise and health care's 12% gain.

Despite renewed optimism prompted by IBM's strong results and how the rest of the tech sector may perform during earnings season, traders cautioned into getting overly bullish about the sector's prospects.

"One day doesn't make a bull market," Seaport's Mr. Weisberg said.

The broad market rally comes after stocks fell on Monday to the lowest close this month. For the moment, earnings and housing data are acting as a welcome distraction to concerns over European governments' finances and U.S. debt-ceiling negotiations that have roiled markets for weeks.

"Earnings have trumped everything else," said David Klaskin, chief investment officer at Oak Ridge Investments in Chicago. "There's no major negative news offsetting the fact that earnings were pretty good, which is why we're rallying."

Apple (AAPL) shares edged up 0.7% after hitting a new intraday record earlier in the day. The technology giant is expected to report earnings for its June quarter after the closing bell.

On the economic front, U.S. home construction rose in June to the highest level in five months, according to the Commerce Department. Still, construction remains well below what economists consider as healthy levels.

Home-builder stocks are getting a boost following the housing data. Lennar (LEN) rose 6.3%, D.R. Horton (DHI) jumped 5.9% and Toll Brothers (TOL) gained 3.8%.

Elswhere, Wells Fargo (wfc)'s second-quarter earnings rose 29% amid falling loan losses and strong demand for business loans. Shares climbed 4.3%.

Dow component Coca-Cola (KO)'s second-quarter earnings rose 18%, boosted by Coke's recent bottler acquisition and strong volume growth overseas. The stock rose 3.3%.

Bank of America (BAC) posted its third loss in four quarters, as mortgage-related issues continued to overshadow any improvements in other operations. Shares dropped 1.3%. The stock is down about 12% this month and closed Monday in single-digit territory for the first time since May 2009.

Goldman Sachs Group (GS) shed 1.3%. Its second-quarter profit of $1.05 billion was significantly lower than expectations, as difficult markets led the Wall Street bank to reduce risk taking to the lowest levels in five years.

Harley-Davidson (HOG)'s earnings more than doubled in the second quarter as retail sales of its new motorcycles rose in the U.S. for the first time since the fourth quarter of 2006. Shares rose 9.9%.

Write to Steven Russolillo at steven.russolillo@dowjones.com


View the original article here

No comments:

Post a Comment