Stocks Battle to Solid Close

The Nasdaq adds another 0.7% despite surging oil prices.
Author:
Publish date:

Updated from 4:05 p.m. EST

Stocks rode a bumpy road to another solid session Thursday as optimism bred by strong retail sales and

Merck's

(MRK) - Get Report

courtroom victory overwhelmed surging oil prices.

The

Nasdaq Composite

, which rose 25 points by midday but lost most of the gain later, battled back to close up 15.91 points, or 0.74%, to 2160.22. The performance brought its five-day gain to 4.67%. The

Dow Jones Industrial Average

, which was up almost 90 points at midday, added 49.86 points, or 0.48%, to 10,522.59. The

S&P 500

ended 5.18 points higher, or 0.43%, to 1219.94.

"Decent gains faded as the day went along," said Michael Sheldon, chief market strategist with Spencer Clarke. "The likely culprit was the further rise in bond yields along with the short-term technical breakout of oil to the upside. We also may have some people taking profits ahead of tomorrow's job reports data. It hasn't been a total washout."

The 10-year Treasury note was down 9/32 in price to yield 4.64%, while the dollar was higher against the yen and flat against the euro.

About 1.99 billion shares traded on the

New York Stock Exchange

, with advancers beating decliners by a 17-to-15 margin. Trading volume on the Nasdaq was 2.33 billion shares, with advancers outpacing decliners 17 to 14.

Oil prices, which spent most of the week below $60 a barrel, spiked in the final minutes of Nymex floor trading. December crude finished up $2.03 to $61.78 a barrel, while natural gas added 8 cents at $11.69 per million British thermal units.

"We've had a load of good news," said Paul Mendelsohn, chief investment strategist with Windham Financial. "We'd probably have a stronger gain on the indices if Treasury yields and crude prices weren't rising."

Chip stocks also pared their gains after leading early. The Philadelphia Semiconductor Sector Index finished up 1.9%. Component

Micron

(MU) - Get Report

gained 4.5%.

Merck was the strongest gainer on the Dow, closing up 3.8%, after a jury found that Merck wasn't liable for a plaintiff's heart attack and that it adequately warned of risks associated with the drug.

Traders were emboldened after a flurry of specialty and teen retailers reported blowout October results. Among them were

Abercrombie & Fitch

(ANF) - Get Report

, which said same-store sales rose 31% year over year, and

Pacific Sunwear

(PSUN)

, which also raised earnings guidance.

Investors also took a positive view of a Labor Department report showing that third-quarter productivity rose 4.1%, while unit labor costs fell by 0.5%. Both numbers were stronger than expected.

"These numbers look great, but year-over-year unit labor costs are still up 2.7%," said Ian Shepherdson, chief economist with High Frequency Economics. "More to the point, the falling unemployment rate signals bigger increases ahead." The government's October employment report is due out tomorrow.

"We're likely to get some distortion in the jobs data because of the hurricanes," Sheldon said. "What will be more important to the markets will be the underlying tone of the labor markets, especially heading into the end of the year."

Meanwhile, factory orders for the month of September fell unexpectedly by 1.7%. The Institute of Supply Management's services index rose to 60.0, ahead of expectations.

In what is likely his last congressional testimony,

Federal Reserve

Chairman Alan Greenspan addressed the economy, inflation and energy prices in a speech Thursday before the Joint Economic Committee. The speech comes two days after Fed policymakers carried out their 12th straight quarter-point rate hike, bumping up fed funds to 4%.

"The longer-term prospects for the U.S. economy remain favorable. Structural productivity continues to grow at a firm pace, and rebuilding activity following the hurricanes should boost real GDP growth for a while," he said. "More uncertainty, however, surrounds the outlook for inflation."

"Greenspan's testimony suggests that the fed chairman remains firmly committed to further rate hikes," said Shepherdson. "Strong growth coupled with uncertainty in the inflation outlook sounds like a recipe for higher rates to us."

Tuesday's Fed rate hike led to the market's only hiccup in an otherwise stellar week for the bulls. Entering Thursday, the Dow Jones Industrial Average is up 243 points, or 2.4%, over the past four sessions, while the S&P 500 has gained 36 points, or 3.1%, and the Nasdaq has surged 80 points, or 3.9%.

Wal-Mart

(WMT) - Get Report

said that same-store sales rose 4.3% in October, matching expectations. The world's largest retailer expects November sales growth in a range of 3% to 5%. The stock lost 11 cents, or 0.2%, to close at $47.45.

Other positive retail same-store sales reports came from

Urban Outfitters

(URBN) - Get Report

, up 13%,

Wet Seal

(WTSLA)

, increasing 46.6%, and

Chico's FAS

(CHS) - Get Report

, rising 17.9%.

Weaker reports were posted by

Limited Brands

(LTD)

, falling 4%,

Pier 1 Imports

(PIR) - Get Report

, down 10.4%, and

Sharper Image

(SHRP)

, off 18%.

Wednesday night,

American Eagle Outfitters

(AEOS)

said same-store sales rose 17.3% year over year, beating Wall Street forecasts. But

Hot Topic

(HOTT)

reported a worse-than-expected 5.7% decline.

In earnings news,

MCI

(MCIP)

posted a third-quarter profit of $271 million, or 82 cents a share, including a tax-related gain of $164 million. The results reversed a year-ago loss of $3.4 billion that reflected $3.5 billion in charges.

MCI's revenue fell 12% from a year ago to $4.47 billion, missing analysts' estimates for $4.54 billion. MCI also said its acquisition by

Verizon

(VZ) - Get Report

should be completed this year or early next year. MCI shares were down a penny to finish at $19.82.

Comcast

(CMCSA) - Get Report

posted third-quarter earnings of $222 million, or 10 cents a share, unchanged from a year ago. Revenue jumped 9.4% to $5.6 billion. The Thomson First Call consensus was for EPS of 14 cents on revenue of $5.58 billion. Comcast lost $1.44, or 5%, to $27.36.

Video-game maker

Activision

(ATVI) - Get Report

swung to a $13.2 million loss in its second quarter on a 28% year-over-year sales decline. Still, the results weren't as bad as feared, and the company maintained its fiscal-year guidance. Activision climbed 57 cents, or 3.4%, to $17.38.

Casino operator

Harrah's Entertainment

(HET)

posted third-quarter operating earnings of $1.01 a share, beating the Thomson First Call consensus of 99 cents a share despite the impact of Hurricane Katrina. Revenue rose to $2.33 billion, ahead of last year but short of analysts' expectations. Harrah's added $1.15, or 1.9%, to $62.25.

CVS

(CVS) - Get Report

posted third-quarter earnings that rose 37% from a year ago to $252.7 million, or 30 cents a share. Sales increased 7.8% to $2.8 billion from a year earlier. The company also said it would not lower its fourth-quarter outlook after the effects of Hurricane Katrina, which as of Oct. 1 has kept 16 of its stores closed. CVS rose $1.95, or 8%, to $26.44.

Sara Lee

(SLE)

posted fiscal first-quarter earnings, excluding items, of 34 cents a share on revenue of $4.31 billion. The Thomson First Call consensus was for EPS of 27 cents on revenue of $4.64 billion. Sara Lee also offered second-quarter guidance that falls below analysts' forecasts. Shares were up 39 cents, or 2.2%, to close at $17.87.

DirecTV

(DTV)

swung to a third-quarter profit of $95 million, or 7 cents a share, after a loss of $1 billion, or 73 cents a share, last year. Revenue increased to $3.23 billion from $2.9 billion a year ago. The Thomson First Call consensus was for EPS of 5 cents on revenue of $3.27 billion. DirecTV lost 29 cents, or 2%, to $14.27.

In Wall Street ratings news, First Albany raised its target price on shares of

Apple

(AAPL) - Get Report

to $66 from $60, reflecting an upward revision of its 2006 earnings estimate. The brokerage expects Apple to sell 9 million iPods next quarter. Apple shares gained $1.90, or 3.2%, to $61.85.

Overseas markets were higher, with London's FTSE 100 adding 1.4% to 5431 and Germany's Xetra DAX up 1.1% to 5011. In Asia, Hong Kong's Hang Seng was little changed at 14,602, while Japanese markets were closed for a holiday.