Stocks Surge on Earnings Strength

Thursday morning's big earnings included Caterpillar(CAT Quote), which said first-quarter earnings tripled and blew away estimates. It earned $412 million, or $1.16 a share, up from last year's $129 million, or 37 cents a share. Analysts were predicting earnings of 70 cents a share. Its shares closed up $3.02, or 3.7%, to $84.10.

AT&T (ATT Quote) said first-quarter net income fell 47% amid fierce competition in the telecommunications market. It earned $304 million, or 38 cents a share, down from $571 million, or 73 cents a share, in the same quarter last year. Its shares closed 56 cents, or 3%, to $18.03.

Merck (MRK Quote) reported a 5.3% drop in first-quarter net income, but beat Wall Street's consensus estimate by a penny and reaffirmed its full-year guidance. The drugmaker said it earned $1.62 billion, or 73 cents a share, down from last year's $1.71 billion, or 76 cents a share. Its shares ended up 24 cents, or 0.5%, to $46.74.

Viacom (VIAB Quote) said its first-quarter net income was $711 million, or 41 cents a share, up from $443 million, or 25 cents a share, one year earlier. Excluding a tax gain, Viacom earned $570 million, or 33 cents per share. The First Call forecast was for 31 cents a share. Its shares closed down 13 cents, or 0.3%, to $41.02.

KLA-Tencor (KLAC Quote) beat estimates for its third quarter but lowered its full-year guidance. Its stock closed down $2.18, or 4.5%, to $46.14.

Newly added Dow component American International Group (AIG Quote) said it earned $2.66 billion, or $1.01 a share, in the first quarter compared with $1.95 billion, or 74 cents per share, a year earlier. Excluding various items, AIG earned $1.08 a share, 2 cents better than forecasts. Its shares finished up 50 cents, or 0.7%, to $73.70.

The session also received a boost from eBay's (EBAY Quote) results, reported after Wednesday's closing bell. The Internet auctioneer said its quarterly profits nearly doubled. Its stock finished up $7.81, or 10.4%, to $82.59.

Before the rally took hold, investors seemed to be again weighing strong earnings against economic data that once again raised concerns of inflation. The government said the producer price index gained 0.5% in March, compared with a 0.1% jump in February, lending credence to inflation concerns of late. Economists expected the index would rise only 0.3%. Excluding food and energy prices, the so-called core index increased 0.2%, up from Wall Street's consensus estimate of 1%.

Meanwhile, initial unemployment claims declined less than expected in the week ended April 17, totaling 353,000 compared with the previous week's revised 362,000. Economists had predicted claims would drop to 340,000.

After Thursday's closing bell, Microsoft (MSFT Quote) said third-quarter net income excluding charges handily beat the consensus estimates, while the software giant also guided second-quarter results above Wall Street's prediction.

Also, Amazon (AMZN Quote) swung to a profit in its first quarter as the online retailer's aggressive pricing and free-shipping incentives boosted sales. It earned $111 million, or 26 cents a share, compared with last year's loss of $10 million, or 3 cents a share. Shares were down 1.4% in after-hours trading after gaining $3.14, or 6.9%, to $48.86 during the day's session.

Before Friday's opening bell, first-quarter earnings announcements are due from more than 20 companies, including Ericsson (ERICY Quote), expected to swing to a profit of 15 cents a share; International Paper (IP Quote), expected to match last year's earnings of 14 cents a share; Schlumberger (SLB Quote), expected to earn 27 cents a share, up from last year's 26 cents a share; Weyerhaeuser (WY Quote), expected to report earnings of 56 cents a share, up from last year's 19 cents a share; and Xerox (XRX Quote), expected to say it earned 15 cents a share, up from last year's 13 cents a share.

Also, a report on durable goods orders in March will hit the airwaves at 8:30 a.m. EDT. Economists have produced an average estimate that orders rose 0.7%, down from the 2.5% jump reported in February.

In overseas markets, London's FTSE 100 closed up 0.7% at 4572, and Germany's Xetra DAX jumped 0.8% to 4059. In Asia, Japan's Nikkei was down 0.5% to 12,168, while Hong Kong's Hang Seng was up 0.3% to 11,980.