U.S. Stocks Ride Higher Into the Afternoon
Updated from 11:53 a.m. EDT
Stocks in New York recovered from morning jitters to embark on a robust afternoon climb Thursday as traders took heart in plunging crude-oil prices amid mostly in-line economic data.
The blue-chip indices were both better by roughly 0.9% following an especially choppy morning, with the
Dow Jones Industrial Average
surging 114 points to 12,709 as the
S&P 500
added 13 points to 1398. The
Nasdaq Composite
jumped 30 points, or 1.2%, at 2517.
Neil Hennessy, president and portfolio manager with Hennessy Funds, blamed pure emotion for many of the erratic moves early on. "Everybody is trying to figure out where it's going just simply on their gut feelings on a daily basis," he said.
The session later saw crude deepening its early losses after the government said last week's crude stockpiles had dwindled by 8.8 million barrels. Futures were recently plunging $3.09 to $127.94 a barrel
"Oil is starting to crack," Hennessy said. "Somebody at some point is going to say, 'Enough is enough.' "
Hennessy compared oil to housing and technology, two recent examples of boom-and-bust markets. "History is interesting, because it tends to repeat itself," he said.
Gold futures shed $24.50 to $876 an ounce. The U.S. dollar jumped by 0.9% against both the euro and the yen as the dollar index, which measures the greenback against a basket of other major currencies, spiked 0.7%.
One of the early points of focus was the Commerce Department's second report on U.S. gross domestic product for the first quarter. The initial reading indicated that GDP grew 0.6% from January through March, but the revision showed a 0.9% increase, matching analysts' forecast.
The report will undergo another possible revision before it's finalized, but so far it seems to indicate that the economy managed to avoid contraction in the beginning of the year -- which, if accurate, would run contrary to what many economists have predicted.
"It's pretty hard to have a recession when the economy is expanding by almost a percent," said Richard Yamarone, chief economist with Argus Research. "I don't think we'll knock the cover off the ball in the second quarter, but there are a lot of signs that the economy is actually gathering some footing."
"It defies what everybody's saying out there," said Hennessy. "The economy grew." He also believes that even if the U.S. is still headed for two quarters' worth of contraction -- the generally accepted definition of a recession -- such a recession would be a mild one.
Separately, the Labor Department said initial jobless claims rose to 372,000, slightly ahead of the 370,000 estimate.
Investors were also dealing with news that Dallas
Federal Reserve
president Richard Fisher, a member of the central bank's Federal Open Market Committee, said interest rates could be hiked "sooner rather than later" if inflationary expectations continue to worsen, "even in the face of an anemic economic scenario."
The Fed has eased its overnight lending rate by 325 basis points since September. For his part, Fisher has a reputation as an inflation hawk who hasn't always been convinced about the necessity to lower rates.
On the corporate side,
Sears Holdings
(SHLD)
swung to a surprise loss in the fiscal first quarter. Excluding items, the retailer lost 53 cents a share on dwindling revenue of $11.07 billion. Sears, which operates its namesake chain as well as Kmart, also added $500 million to its stock-buyback authorization. Shares were down 2.5%.
Big-box discount retailer
Costco
(COST) - Get Report
, meanwhile, said its earnings soared by nearly one-third to $295.1 million compared with a year earlier, when the company's bottom line was weighed down by a hefty charge. Costco topped analyst estimates for earnings and revenue. The stock reversed early gains and recently gave up 0.8%.
Shares of Dow component
General Motors
(GM) - Get Report
were little changed following reports that the automaker is considering further restructuring moves, possibly lowering production or cutting unpopular vehicle lines. That follows another report this week that
Ford
(F) - Get Report
is looking to cut around 2,000 jobs.
Elsewhere, media reports said that the chief executives of United Airlines operator
UAL
(UAUA)
and
US Airways
(LCC)
are scheduled to meet today in order to discuss their potential merger. On Wednesday, news had surfaced that the proposed combination was falling apart. UAL shares rose 4.4% as U.S. Airways climbed 6.5%.
Also,
Bear Stearns
(BSC)
shares rose 1.7% to $9.54 after shareholders approved the
all-stock takeout proposal
by
JPMorgan Chase
(JPM) - Get Report
that, based on JPMorgan's most recent closing price, values the investment bank at $9.32 a share. In March, the figure came to $10 a share. JPMorgan was adding 2.2%.
Elsewhere,
Men's Wearhouse
(MW)
slid 8.6% after the suits purveyor pulled its full-year outlook under the bottom end of its last projected range. The retailer posted a shrinking profit for the most recent quarter and missed analyst targets.
But fellow retailer
Coldwater Creek
(CWTR)
, which sells women's apparel, boosted its 2008 guidance to make room for a profit after posting a far narrower quarterly loss than what the Street had anticipated. Previously, breaking even for the year was the best that Coldwater had hoped for. The stock tacked on 7.1%.
Treasury prices were falling. The 10-year note sank 27/32 in price to yield 4.11%, and the 30-year bond tumbled 1-13/32 in price, yielding 4.78%.
The major overseas markets were mainly on the rise. In Asia, Tokyo's Nikkei 225 surged 3% overnight, and the Hang Seng Index in Hong Kong climbed 0.6%. As for European exchanges, London's FTSE 100 ticked down fractionally to 6068, but Germany's Xetra Dax was up 0.3%. The Paris Cac rose 0.1%.