Dow Rises by 104 Points; S&P Closes Above 1200

Stocks rally after the Fed says economic activity picked up in many parts of the country. Retail and earnings show strength. Gregg Greenberg has The Real Story.
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NEW YORK (

TheStreet

) -- Stocks finished near their highs of the session Wednesday, lifted by surging retail sales figures and blockbuster earnings on the same day the

Federal Reserve

said

economic activity picked up in most parts of the country.

The

S&P 500

crossed the 1200 level for the first time since September 2008 on Wednesday, two days after the

Dow Jones Industrial Average

closed above the 11,000 mark since that same month. The Dow staged a triple-digit rally on the day, up 104 points, or 0.9%, to close at 11,123. The S&P 500 gained 13 points, or 1.1%, to 1211, and the

Nasdaq

went ahead by 39 points, or 1.6%, at 2505.

"The biggest positive factor is probably the retail sales report," said Commonfund chief economist and market strategist Michael Strauss, deeming March's 1.6% surge in retail sales "confirmation of the sustainability of this recovery."

"The economy looks to be growing at a solid clip and with no inflation pressures," he said. Earlier, the Labor Department said core consumer prices remained flat in March.

As far as interest rates are concerned, Strauss believes that low inflation buys the

Federal Reserve

some time to start looking at ways to reduce its balance sheet before adjusting the federal funds rate. He expects the central bank to start normalizing the discount rate as soon as the end of the month or early May and then focus on lowering its balance sheet. Higher interest rates, he says, aren't likely before the second half of the year.

"Right now the economy doesn't need an emergency fed funds rate; it could probably do fine with a more normalized rate, but low inflation rates do give them a little bit of time. Just because you're getting growth, doesn't mean you have to start panicking, and the Fed isn't panicking here," he said.

Strong earnings reports from

Intel

(INTC) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

were also supporting gains across the equity market.

In an earnings preview released after the bell,

UPS

(UPS) - Get Report

said earnings jumped 33% in the first quarter helped by increasing international volumes, while revenues improved by 7%. The performance helped push the delivery firm's full-year guidance higher, which was also lifting shares higher in extended-hours trading.

Overseas, Hong Kong's Hang Seng gained 0.08%, and Japan's Nikkei advanced 0.4%. The FTSE in London added 0.7%, and the DAX in Frankfurt rose 0.8%.

>>The Economy

>>Company News

>>Commodities and the Dollar

>>Treasuries

The Economy

Consumer prices rose 0.1% in March, according to the Labor Department's

consumer price index. Core CPI, which excludes food and energy prices, remained unchanged, supporting the belief that inflation pressure will remain subdued for a while.

The Census Bureau reported a 1.6% jump in

March retail sales, surpassing Wall Street's projection for 1.1% growth. Excluding autos, sales rose by 0.6%.

The Mortgage Bankers Association reported a seasonally adjusted drop of 9.6% in mortgage application volume last week. Purchase applications fell 10.5%, while refinancing requests slipped 9% week over week.

Business inventories rose 0.5% in February, which was higher than the 0.3% increase that analysts had been expecting. That compares to growth of 0.2% in January.

Federal Reserve Chairman Ben Bernanke said economic recovery likely started in the latter half of last year in his testimony on the economic outlook before the Joint Economic Committee in Washington. He also reiterated the central bank's intention to keep interest rates low for an extended period.

Stocks picked up further after the Fed released its so-called beige book in the afternoon. The report, which gauges economic conditions ahead of the Federal Open Market Committee meeting April 27-28, said economic activity had increased in nearly all of the Fed's districts, save for St. Louis.

Retail sales and manufacturing activity were up, though commercial real estate activity remained weak in most of the areas. The labor market also remained sluggish, though the report noted some a pickup in temporary hiring, while loans and credit quality fell.

>>Overview

>>Company News

>>Commodities and the Dollar

>>Treasuries

Company News

Intel shares gained 3.3% after the technology bellwether blew past analysts' estimates with first-quarter earnings of 43 cents a share late Tuesday. Wall Street had been expecting a profit of 38 cents a share.

The strong showing also spread throughout the chip sector, as the Philadelphia Semiconductor index added 4.3%. Shares of

Advanced Micro Devices

(AMD) - Get Report

rose 3.5% ahead of its own earnings announcement expected Thursday.

Google

(GOOG) - Get Report

, which will also announce its first quarter figures on Thursday, added another 0.3% at $588.71.

JPMorgan Chase

(JPM) - Get Report

topped analysts' estimates by a dime with a first-quarter profit of 74 cents a share. Sales rose on strong performance in its investment bank unit. The stock added $1.86, or 4.1%, to $47.73.

The rest of the financial realm got a lift from the news, with the KBW Bank index climbing 3.4% today. JPMorgan,

Bank of America

(BAC) - Get Report

and

American Express

(AXP) - Get Report

helped lead the Dow higher, with each adding more than 3%, along with Intel.

Citigroup

(C) - Get Report

, Bank of America and

Ambac Financial

(ABK)

were the most actively traded on the

New York Stock Exchange,

which had a listed volume of 5.8 billion.

In other earnings news, rail transportation company

CSX

(CSX) - Get Report

easily outpaced estimates for 69 cents a share with first-quarter earnings of 78 cents a share. Sales also exceeded market expectations, rising 11%, to $2.5 billion. CSX shares added $2.18, or 4.1%, to $55.46.

Shares of insurance holding company

Progressive

(PGR) - Get Report

gained nearly 6% after beating first-quarter profit expectations by a nickel. Sales of $3.8 billion were also higher than projected.

Sirius XM Radio

(SIRI) - Get Report

shares surged 11.4%, to $1.07 after the satellite radio broadcaster announced an additional 171,441 net subscribers in the first quarter.

Bank of America named former

Northrop Grumman

(NOC) - Get Report

financial chief Charles Noski as chief financial officer effective May 11. The stock advanced 3.9%, to $19.40.

Shares of

General Mills

(GIS) - Get Report

added 0.3% even after the branded food manufacturer said it expects to take a non-cash charge of roughly $34 million, or 10 cents a share in the fourth quarter of fiscal 2010 on account of the new health care reform bill.

After the close of trading,

Yum! Brands

(YUM) - Get Report

, operator of such ubiquitous outlets as Pizza Hut and KFC, said it earned an adjusted 59 cents a share during the first quarter, beating consensus forecasts calling for 52 cents a share. The stock added 73 cents, or 1.8%, to $41.68 during the regular session, and was extending gains in the after-hours session.

>>Overview

>>The Economy

>>Commodities and the Dollar

>>Treasuries

Commodities and the Dollar

The Energy Information Administration said crude oil inventories shed 2.2 million barrels in the week ended April 9. Gasoline supplies also fell, by 1.1 million barrels while distillates rose by 1.1 million barrels.

The report comes on the heels of the American Petroleum Institute's late Tuesday read on inventories, which show

a 1.41 million-barrel gain in crude supplies

. Analysts polled by Platts are projecting gains of 1.6 million barrels. Gasoline supplies are expected to have lost 1 million barrels in the week ended April 9, while distillates are slated to increase by 1 million barrels.

The May crude oil contract traded $1.79 higher to finish at $85.84 a barrel. The June gold contract, meanwhile, gained $6.20 to settle at $1,159.60 an ounce.

The dollar was trading lower against a basket of currencies, with the dollar index down by 0.3%.

>>Overview

>>The Economy

>>Company News

>>Treasuries

Treasuries

The benchmark 10-year Treasury weakened 11/32, lifting the yield to 3.863%.

The two-year note slipped a fraction, boosting the yield to 1.057%. The 30-year bond fell 27/32, strengthening the yield to 4.734%.

--Written by Melinda Peer and Sung Moss in New York

.

>>Overview

>>The Economy

>>Company News

>>Commodities and the Dollar