Stocks Gallop to Close

Apple, Google and Intel help propel the Nasdaq. All three major indices advanced as traders digested another round of economic data. Frank Curzio recaps the action in The Real Story.
By Sarina Penn ,

Updated from 4:11 p.m. EDT

Wall Street blazed into the close Thursday as traders registered a delayed reaction to the

Federal Reserve's

rate-cut decision, while pushing to the backburner mixed economic data and disappointing corporate earnings.

The

Dow Jones Industrial Average

soared 189.87 points, or 1.48%, to 13,010, and the

S&P 500

climbed 23.75 points, or 1.71%, to 1409.34, putting it just past resistance at around 1400.

The best performer was the tech-heavy

Nasdaq Composite

, which was up 67.91 points, or 2.81%, at 2480.71 as big-caps

Intel

(INTC) - Get Report

,

Apple

(AAPL) - Get Report

and

Google

(GOOG) - Get Report

advanced.

Breadth was positive to start out the new month. Some 2.19 billion shares changed hands on the

New York Stock Exchange

, and roughly 2.33 billion traded on the Nasdaq, as winning issues outran decliners by roughly a 3-to-2 margin on both.

The upswing represents a marked recuperation from Wednesday, when the major indices erased their gains after the Fed eased its benchmark lending rate by another quarter-point and, for some observers, seemed to leave the door at least slightly open to further cuts.

"Yesterday was a short-term reaction, perhaps a myopic reaction, to what the Fed was doing," said Matt King, chief investment officer with Bell Investment Advisors.

Art Hogan, chief market analyst with Jefferies, agreed. Today's rally, he said, "is the actual reaction, not the knee-jerk reaction. The Fed is neutral now, and they weren't before, and I think that's the realization today."

The central bank, in its statement, removed language stating that risks remain weighted to the downside, instead saying that its months-long rate-easing campaign "should help to promote moderate growth over time and to mitigate risks to economic activity." The Fed also said it would continue to monitor inflation carefully amid spiking commodities prices.

"Unfortunately, on the day of the Fed statement, a lot of times you need to be spoon-fed exactly what they mean," Hogan said. "So people think, 'It is what we want, it is what we expect,' but then they freeze and say, 'is it enough?' They second-guess it, and then suddenly the market's closed. But once it's over, they'll sit down and ponder, they'll have a glass of wine and realize, 'That

is

exactly what we wanted."

Indeed, the Dow, S&P and Nasdaq all clambered well past the intraday highs they reached on Wednesday just before the Fed-spurred selling.

"Long-term, we think

the Fed decision is definitely a positive," said King. "We were getting concerned the Fed was cutting too aggressively, that we were getting too much stimulus fiscally and monetarily."

Hogan added, "The door's not open to another rate cut. Not at all. But obviously the Fed isn't going to come out and say exactly what they're going to do next time."

In the currency market, the dollar was likewise recovering from the previous session's losses. The dollar surged by 1.1% against the euro to settle at $1.5458, while also firming against the pound and the yen. The dollar index, which stacks the greenback against a basket of other major currencies, jumped 1.1%.

Meg Browne, senior currency strategist with Brown Brothers Harriman, doesn't believe the dollar rally is based in a shift in sentiment, either.

"The market really got what it wanted. What we've had over the past couple of days was shorter-term players getting in a day or two ago and then getting out," she said, specifically referring to the greenback's action against the euro.

"Our view is that the Fed really is paused now, and what the market will react to is whether data point to not just a possible

economic contraction in the second quarter, but a sharp contraction. Today's data doesn't really give us that."

Among today's reports was the Institute for Supply Management's nationwide manufacturing survey, which indicated that factory activity in April was unchanged from the prior month. The ISM index came in at 48.6, indicating a slight contraction, though that's a bit better than the 48 figure economists had expected. The index's break-even point is at 50.

The Labor Department said the number of people filing for unemployment benefits last week spiked by 35,000 from the prior week's revised data to 380,000. That's 20,000 more claims than economists were expecting. The report comes a day before the government releases its always important monthly report on job growth and the unemployment rate. On Wednesday, ADP said private employers added 10,000 workers to their payrolls in March, a stronger result than economists had predicted.

Meanwhile, March personal spending was 0.4% higher than the prior month and was slightly ahead of what was expected. Personal income rose 0.3%, compared with a 0.5% climb in the prior month. Also, March construction spending slid a steeper-than-anticipated 1.1% sequentially, reversing a revised 0.4% uptick in February.

Browne added that fundamentals on the euro side have also helped ease some of the dollar's pain as several eurozone countries suffer economic slowdowns. Though the process will be slow, she said, eventually the European Central Bank will be forced to cut its own interest rates amid that deceleration, which would be a boon for the greenback.

As the dollar strengthened, crude oil sank 94 cents to $112.52 a barrel, though the nationwide average for gas prices at the pump hit another record high of $3.623 a gallon, according to AAA. Gold futures shed $14.20 to $850.90 an ounce.

Among companies, Dow component

Exxon Mobil

(XOM) - Get Report

was a laggard after its first-quarter earnings missed analysts' projections, despite surging 17% to $10.89 billion.

Revenue, though sharply higher, was also on the light side, and the stock fell 3.6%.

Tyco International

(TYC)

roughly doubled its adjusted first-quarter profit to $326 million, or 67 cents a share, and was well ahead of the average analyst estimate from Thomson Financial. Still, shares were off 2.4%.

Las Vegas Sands

(LVS) - Get Report

, a casino-resort operator, dropped 5.6% after swinging to a first-quarter loss and posting an adjusted profit that was far lower than anticipated.

Pharmacy chain

CVS Caremark

(CVS) - Get Report

said same-store sales rose 3.9% as first-quarter earnings climbed to 55 cents a share, in line with expectations. Shares started lower but finished up 1%.

Elsewhere,

Starbucks

(SBUX) - Get Report

climbed 2.6% even though the coffee giant said 2008 earnings should come in lower than last year's 87 cents a share. For the first quarter, the company posted a bottom line that met Wall Street targets, though sales were a bit short.

Cable provider

Comcast

(CMCSA) - Get Report

tacked on 8.6% on a first-quarter profit of 19 cents a share that matched the consensus, even as income sank 12.5% amid declining subscription numbers.

Treasury prices were backing off from an early climb. The 10-year note was down 9/32 in price to yield 3.76%, and the 30-year bond lost 15/32 in price, yielding 4.50%.

As for overseas bourses, many markets were closed for the May Day holiday. Tokyo's Nikkei 225 lost 0.6% overnight, and the FTSE 100 in London closed flat at 6087.

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