Stocks Still Climbing on Tech Rally, Fed News
Updated from 1:13 p.m. EDT
Stocks in New York continued their climb Thursday as traders registered a delayed reaction to the
Federal Reserve's
rate-cut decision, while working past mixed economic data and disappointing corporate earnings.
The
Dow Jones Industrial Average
was soaring 165 points, or 1.3%, at 12,985, and the
S&P 500
climbed 19 points, or 1.4%, to 1405. The best performer was the tech-heavy
Nasdaq Composite
, which was up 56 points, or 2.3%, at 2468.5 as big-caps
Intel
(INTC) - Get Report
,
Apple
(AAPL) - Get Report
and
(GOOG) - Get Report
advanced.
The market's upturn represents a marked recuperation from Wednesday, when the major indices erased their gains after the
Federal Reserve
eased its benchmark lending rate by another quarter-point and, for many, seemed to leave the door at least slightly open to further cuts in the future.
"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 surge, 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 yesterday, 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, said King, "Long term, we think it's definitely a positive. 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 1.2% against the euro to $1.5447, 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 plunged $2.17 to $111.29 a barrel, and gold shed $14.20 to $850.90 an ounce.
Among companies, Dow component
Exxon Mobil
(XOM) - Get Report
was an early drag on the market 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 was falling 3.7%.
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 falling 2.6%.
Las Vegas Sands
(LVS) - Get Report
, a casino-resort operator, dropped 8.2% 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 were recently tiptoeing up 0.7%.
Elsewhere,
Starbucks
(SBUX) - Get Report
climbed 3.4% 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 7.9% 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 3.77%, and the 30-year bond sank 21/32 in price, yielding 4.51%.
As for overseas bourses, most major 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.