HERE COME THE BULLS. Stocks charged ahead Thursday as investors took a break from earnings worries after a reassuring update from software giant Microsoft (MSFT) and Street-pleasing reports from Dow bellwether General Electric (GE), Web portal Yahoo! (YHOO) and cell-phone and chip maker Motorola (MOT).
At 11:22 a.m. ET the Dow Jones Industrial Average was up 145.66 points, about 1.4%, to 10386.68. The Nasdaq Composite Index advanced 66.62, or 3.5%, to 2038.66. The S&P 500 index, which started the day at its lowest point since mid-April, rose 17.27 to 1197.45. Computer stocks, Internet companies and chip makers led the way, while biotechs, gold miners and tobacco merchants lagged. Other defensive sectors, such as energy and food and beverage stocks also fell.
Will the good day build into a profitable month and a solid quarter for stocks? The jury's out. "This could be the catalyst we needed for a sustainable rally," said Dan Ascani, director of research for the technical-analysis firm Global Market Strategists.
Not so fast, cautioned Richard Cripps, chief investment strategist for Legg Mason. "It's got to be some more fundamental earnings type news than we’ve seen here today," he said. "Motorola is likely up because the news was less negative than people thought. In Microsoft's case, the company actually increased revenue estimates. But we need some more of evidence of that before we can break out on the upside."
For now, the sudden shift from earnings warnings to optimistic forecasts is keeping profit-takers at bay.
Microsoft said revenues for the quarter ended in June would total $6.5 billion to $6.6 billion, about 3% above its previous estimate. Results from operations will be in line with previous guidance, though a $3.9 billion write-off of investments in cable and telecom firms will depress earnings to a penny a share. The maker of the Windows operating system also said it will let PC makers remove and add whatever program shortcuts they want on the desktop screens of the machines they sell, in line with an appeals court ruling that found Microsoft's previous efforts to control such changes an abuse of its monopoly. The stock gained 7% to $70.83 in early trading.
The good news wasn't confined to the tech sector. GE, the diversified powerhouse and the bluest of the blue chips, rose 4% after hitting its target with second-quarter earnings of 39 cents a share. That was 15% better than the year-ago number on a 3% drop in revenues to $32 billion, as strong sales of power plants and aircraft parts offset a slack appliance business. The company also announced that legendary Chief Executive Jack Welch will retire on Sept. 7.
Motorola reported a quarterly loss of 11 cents a share, a penny better than the consensus estimate. Sales of cell-phones dropped 25% and semiconductor sales plummeted 38% from the year-ago totals. In a conference call this morning, the company projected another loss of several cents a share next quarter, followed by a slight profit three months later. The stock leapt 12% to $17.61, but at least one analyst, Tim Luke of Lehman Brothers, said that was near the upper limit of its short-term range given the persistent weakness in Motorola's markets.
Yahoo also had something to shout about after producing earnings of a penny a share instead of the break-even results analysts were expecting. Revenue fell 33% to $182.2 million but beat forecasts calling for $175.1 million. The company doesn't expect the online advertising market to rebound for another year, but for now, investors didn't care. The stock rose 6%.
The day's red flags came courtesy of economic indicators. Initial jobless rose by 42,000 to 445,000 last week, the largest weekly total in nine years. Economists expected a drop to 390,000.
Job worries still haven't padlocked consumers' wallets, but the dollars are starting to flow from pricey department stores to discounters. That was the theme of monthly reports released today by leading retail chains, which showed sales growth accelerating to an annual rate of 2.5% to 3%, with price-conscious outlets leading the way. Walmart (WMT) posted 6.9% year-over-year gains, sending its stock up 3.5%. Meanwhile, women's clothing retailer AnnTaylor (ANN) reported a 12.3% same-store decline for the five weeks ended July 7. It didn’t matter, as the stock traded up 6%. The Standard and Poor's Retail Index gained 3.4%.
Bonds rallied alongside stocks, sending yields lower. The yield on the 10-year Treasury note fell to 5.27% from 5.29% on Wednesday, while 30-year bond yielded 5.67%, down from 5.69% a day earlier
At 11:22 a.m. ET the Dow Jones Industrial Average was up 145.66 points, about 1.4%, to 10386.68. The Nasdaq Composite Index advanced 66.62, or 3.5%, to 2038.66. The S&P 500 index, which started the day at its lowest point since mid-April, rose 17.27 to 1197.45. Computer stocks, Internet companies and chip makers led the way, while biotechs, gold miners and tobacco merchants lagged. Other defensive sectors, such as energy and food and beverage stocks also fell.
Will the good day build into a profitable month and a solid quarter for stocks? The jury's out. "This could be the catalyst we needed for a sustainable rally," said Dan Ascani, director of research for the technical-analysis firm Global Market Strategists.
Not so fast, cautioned Richard Cripps, chief investment strategist for Legg Mason. "It's got to be some more fundamental earnings type news than we’ve seen here today," he said. "Motorola is likely up because the news was less negative than people thought. In Microsoft's case, the company actually increased revenue estimates. But we need some more of evidence of that before we can break out on the upside."
For now, the sudden shift from earnings warnings to optimistic forecasts is keeping profit-takers at bay.
Microsoft said revenues for the quarter ended in June would total $6.5 billion to $6.6 billion, about 3% above its previous estimate. Results from operations will be in line with previous guidance, though a $3.9 billion write-off of investments in cable and telecom firms will depress earnings to a penny a share. The maker of the Windows operating system also said it will let PC makers remove and add whatever program shortcuts they want on the desktop screens of the machines they sell, in line with an appeals court ruling that found Microsoft's previous efforts to control such changes an abuse of its monopoly. The stock gained 7% to $70.83 in early trading.
The good news wasn't confined to the tech sector. GE, the diversified powerhouse and the bluest of the blue chips, rose 4% after hitting its target with second-quarter earnings of 39 cents a share. That was 15% better than the year-ago number on a 3% drop in revenues to $32 billion, as strong sales of power plants and aircraft parts offset a slack appliance business. The company also announced that legendary Chief Executive Jack Welch will retire on Sept. 7.
Motorola reported a quarterly loss of 11 cents a share, a penny better than the consensus estimate. Sales of cell-phones dropped 25% and semiconductor sales plummeted 38% from the year-ago totals. In a conference call this morning, the company projected another loss of several cents a share next quarter, followed by a slight profit three months later. The stock leapt 12% to $17.61, but at least one analyst, Tim Luke of Lehman Brothers, said that was near the upper limit of its short-term range given the persistent weakness in Motorola's markets.
Yahoo also had something to shout about after producing earnings of a penny a share instead of the break-even results analysts were expecting. Revenue fell 33% to $182.2 million but beat forecasts calling for $175.1 million. The company doesn't expect the online advertising market to rebound for another year, but for now, investors didn't care. The stock rose 6%.
The day's red flags came courtesy of economic indicators. Initial jobless rose by 42,000 to 445,000 last week, the largest weekly total in nine years. Economists expected a drop to 390,000.
Job worries still haven't padlocked consumers' wallets, but the dollars are starting to flow from pricey department stores to discounters. That was the theme of monthly reports released today by leading retail chains, which showed sales growth accelerating to an annual rate of 2.5% to 3%, with price-conscious outlets leading the way. Walmart (WMT) posted 6.9% year-over-year gains, sending its stock up 3.5%. Meanwhile, women's clothing retailer AnnTaylor (ANN) reported a 12.3% same-store decline for the five weeks ended July 7. It didn’t matter, as the stock traded up 6%. The Standard and Poor's Retail Index gained 3.4%.
Bonds rallied alongside stocks, sending yields lower. The yield on the 10-year Treasury note fell to 5.27% from 5.29% on Wednesday, while 30-year bond yielded 5.67%, down from 5.69% a day earlier
