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Stocks Close Higher on U.S. Data, Easing Eurozone Fears

NEW YORK ( TheStreet) -- Stocks ended in positive territory Thursday in the face of ongoing eurozone debt worries, following better-than-expected U.S. economic data.

The Dow Jones Industrial Average ended up 113 points, or 1%, at 11,894. Thursday's rebound followed a 389 point loss in the prior session, which marked the Dow's biggest decline in seven weeks as well as its sixth-largest drop in the year. Leading the equities gains Thursday were the energy and healthcare sectors.

The S&P 500 index was up 11 points, or 0.9%, at 1240.

The tech heavy Nasdaq ended up 4 points, or 0.1%, at 2625. Apple (AAPL) kept a check on the index as its shares fell close to 3%. The reason behind the loss wasn't immediately clear, although some media cited worries about competition from new tablets and smartphones.

"Stocks are breathing after yesterday's selloff, but headline risk is tremendous," said Vincent Lanci, founder and managing partner of Echobay Partners.

The market got a boost as yields on 10-year Italian bonds fell from euro era highs. The European Central Bank was reportedly buying up bonds in an effort to keep a cap on rising yields. While intervention by the ECB is not viewed as a sustainable long term solution, investors were relieved to see the bank step in after yields topped 7% on Wednesday.

"The focus is on whether or not the plan to contain bond yields is going to work," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Everybody knows that the problem here is focusing on whether Italy can sustain the debt load that it has. It's a force to be reckoned with." Adding to hopes that Italy could stem its borrowing costs was a vote on an economic bill scheduled for the upcoming weekend that would make way for the departure of Prime Minister Silvio Berlusconi.

Meanwhile, Greece named an interim prime minister take over after the departure of Prime Minister George Papandreou putting to rest weeks of political maneuvering. However, the country still faces a struggle to pass austerity measures needed to secure a bailout package from Europe. "Greece was small positive, but pretty much as was expected," noted Pado.

Fresh headlines from Europe were threatening to wipe away Thursday's rally. Dow Jones Newswires sounded the alarm that Austria could be the next European country to suffer a credit rating downgrade when they cited comments from Bernhard Felderer, chief economist of the Austrian think-tank The Institute for Advanced Studies. Rising French bond yields also weighed on investors, although an affirmation by Standard & Poor's of France's credit rating abated some concerns. Earlier, the rating agency had accidentally disseminated an incorrect message suggesting that France's pristine credit rating had been downgraded, a mistake it attributed to a technical glitch.

Still, "the 'false' or incorrect S&P press release on France may provide a harbinger of what may be in the pipeline," warned John Canally, economist and investment strategist for LPL Financial.

"Another dose of solid US economic data this morning, which clearly showed that the U.S. and global economies were not in recession, were a lift today. But the driver today, as it was yesterday, is the ebb and flow of concerns surrounding Europe and specifically Italy," Canally added.

"The volatility has gotten so expected that nobody's yelling and screaming or thinking twice about a 400 point decline," Pado of Cantor Fitzgerald agreed. "The market can move 100 points on one line from the press. We're just going to have to live with these wild swings."

European stocks lost momentum, finishing mixed. London's FTSE closed down 0.3% while Germany's DAX edged up 0.6%. Overnight, Asian stocks followed the decline in U.S. stocks. Japan's Nikkei Average finished down 2.91% and Hong Kong's Hang Seng plummeted 5.25%.

U.S. economic data from the morning added to the modestly positive news flow out of Europe. The Labor Department's read on initial jobless claims dropped 10,000 to 390,000 for the week ended Nov. 5, marking a seven-month low in weekly claims. The figure was more encouraging than the rise to 400,000 that economists expected, even though the prior week's tally was upwardly revised to 400,000.

The U.S. trade deficit narrowed in September to its lowest level in 2011, suggesting a small boost to third quarter economic growth. The trade gap shrank to $43.1 billion from a revised $44.9 billion in August as exports rose to a record high. Economists expected the gap would widen to $46 billion from the originally reported $45.6 billion in August.

Also giving a boost to stocks was a better than expected quarterly report from tech bellwether Cisco (CSCO - Get Report). The company gained 5.9% after posting earnings of 43 cents per share and reporting revenues that rose 4.7% year-over-year to $11.3 billion despite sluggish corporate spending. Analysts surveyed by Thomson Reuters were looking for earnings of 39 cents a share and revenue of $11.03 billion in the period.

In other corporate news, Green Mountain Coffee Roasters (GMCR) plunged 39.9%. The company missed fourth quarter revenue expectations by a wide margin despite growing the top line by more than 90% on a year-over-year basis. Revenues total of totaled $711.9 million for the quarter, helped by strong sales for K-Cup portion packs, but were still 6% below the average forecast of $760.5 million in revenue.

Cambridge, Mass-based business software maker Pegasystems (PEGA - Get Report) plummeted 21.2%. The software company reported third-quarter adjusted earnings that were less than half of what Wall Street was looking for, even as sales in its service and maintenance businesses doubled. Profit for the quarter came in at 15 cents a share, well below a forecasted 31 cents in earnings a share.

Kohl's (KSS) rose 2.2% after the company increased its earnings outlook for 2011. The department store chain's fiscal second-quarter profits rose 20% because of growing sales and a boost in margins from private and exclusive brands.

Gold for December delivery lost $32 to finish at $1,759.60 an ounce. In other commodities, the December crude oil contract added $2.04 to end at $97.78 a barrel.

The euro rebounded to $1.36 after dropping about 2% yesterday. The dollar index slipped by 0.4%. The ten-year U.S. Treasury note added 1/32, diluting the yield to 2.057%.

-- Written by Andrea Tse and Chao Deng in New York.

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GMCR $91.67 -0.30%
AAP $155.87 0.00%
CSCO $27.96 0.00%
PEGA $26.34 0.04%
AAPL $95.03 0.21%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

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