(Updated from 4:08 p.m.)
Stocks got a big green light today from trendsetters
Dow Jones Industrial Average closed higher by a 237.97 points, or 2.32%, to 10,478.99; while the
Nasdaq Composite Index gained 103.63 points, or 5.25%, to 2075.67; and the
S&P 500 index gained 27.96 points, or 2.37%, to 1208.14.
Last night, Yahoo! and Motorola each topped analysts' lowered bottom-line estimates by a penny. Yesterday afternoon, Microsoft raised its fourth-quarter revenue forecast, and this morning, GE edged past earnings estimates. All were stronger in midday trading, and their words helped invigorate investors in
blue-chips and technology issues. Motorola was the sturdiest of the group, climbing 15.8% to $18.15, despite posting sales that came in short of the consensus projection.
The swing from dreary preannouncements to optimistic forecasts came as a welcome relief on Wall Street. Over the past week, concerns about corporate profits have brought the major market indices to their lowest level in three months. "It's a step in the right direction," said Bob Basel, director of listed trading at
Salomon Smith Barney
. "There's more interest in stocks today than there has been lately."
But traders cautioned that today's rally doesn't give the all-clear signal. "People may be thinking that the bad news is already priced into the market, but it's still too early to tell," said Bob Harrington, co-head of block trading at
. "The earnings news is not good enough to sustain a rally, and the market will probably be stuck in a trading range."
Weekly data on
initial jobless claims continued to show deteriorating conditions in the labor market, a weak area of the economy. The results were distorted by a seasonal downturn in the auto sector and the Independence Day holiday. Still, the number of U.S. citizens filing for first-time unemployment benefits was the highest since 1992, sharply exceeding the drop economists had forecast.
But today, however, market-watchers had earnings on the brain. Internet portal Yahoo! posted sharply lower earnings of $8.7 million, or 1 cent a share, compared with $69.2 million, or 11 cents a share, in the year-ago period. But the company managed to
beat analysts' expectations, which called for the company to break even. Yahoo! jumped 7.2% to $18.26.
Handset maker and chip producer Motorola
rang in its second consecutive quarterly operating loss. The company lost $232 million, or 11 cents a share, excluding items, compared with earnings of $551 million, or 25 cents a share, in the same quarter a year ago.
Microsoft said yesterday that its
fourth-quarter sales would total $6.5 billion to $6.6 billion, up from the company's previous guidance of $6.3 billion to $6.5 billion. The company also said it planned to post a $2.6 billion investment loss to write down some of its investments. Additionally, the Redmond, Wash., software developer said it would allow computer makers to customize computer screens with direct links to Microsoft rivals, in a nod to a court's finding of antitrust violations. Microsoft closed up 7.7% to $71.60.
The good news spread beyond the tech sector. General Electric met analysts' second-quarter earnings estimates of 39 cents a share, up from 34 cents in the year-ago period. Since the
last week killed the company's proposed acquisition of
, GE's stock has dropped. But today that trend reversed, as GE rose 5.4% to $47.
With second-quarter earnings season in full swing, stocks have been searching for direction. The earnings outlook remains mixed, and investors are waiting for signs that the economy is turning around. After a spring rally, the major averages retreated from their May 21 levels. As of yesterday's close, the Nasdaq is now 14.5% below that day's close of 2305.6, while the Dow has fallen by 10.7% from 11,337.9. The S&P 500 has lost 11.2%. For the year to date, the Nasdaq is off 20.2%, the Dow is 5.1% lower and the S&P 500 is down 10.6%.
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