NEW YORK (
) -- The
finished near the highs of Thursday's session, after data showing strong regional business activity but a still-weak labor market failed to clarify the hazy economic recovery outlook.
The Dow Jones Industrial Average went higher by 84 points, or 0.8%, at 10,393. The
added 7 points, or 0.7%, at 1,107, and the
went ahead by 15 points, or 0.7%, to 2,242.
But in a surprise move after the closing bell, the
announced it will hike its discount rate to 0.75% from 0.5% effective Friday. The move, which the Fed characterized as a "normalization," will narrow the spread between the fed funds rate and the discount rate to 0.5%. Futures sold off after the news was released.
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"The only thing that was peculiar about it was the timing," said Art Hogan, chief market strategist at Jefferies, who noted the Fed recently signaled the move was coming at some point.
Though Hogan believes the market should receive the news as a positive, Doug Roberts, chief investment strategist at ChannelCapitalResearch, said the hike may be coming ahead of an unexpectedly hotter consumer price index figure on Friday morning.
"They're not taking it well," said Roberts, in reference to stock futures. "It's a weird time to do this with options expirations tomorrow. I'm kind of a little shocked on a day like this with already a lot of cross currents. I hope they don't make a mistake with this."
After tech shares finished broadly higher,
said improving notebook PC shipments helped lift fourth-quarter revenue well beyond forecasts to $14.9 billion. Adjusted earnings came to 28 cents a share, beating the consensus by a penny, according to estimates provided by Briefing.com. Shares were selling off soon after the report's release in extended-hours trading.
Ahead of Thursday's opening bell, the Labor Department reported initial jobless claims rose by 31,000, to 473,000 in the week ended Feb. 13, from an upwardly revised 442,000, in the prior week. Economists had expected claims to dip to 430,000.
Separately, the department also said January's
producer price index rose 1.4%, far outpacing the 0.8% uptick that economists had been anticipating. Core PPI, which excludes food and energy prices, increased 0.3% after remaining flat in December.
Philadelphia Federal Reserve Bank's February index, a measure of business conditions for manufacturers in the region, came in at 17.6. The level exceeded the reading of 17 that economists had been expecting and was well ahead of last month's level of 15.2.
Also, the Conference Board reported a 0.3% increase in leading economic indicators for January, which slightly missed the 0.5% rise that the market had anticipated and was well below December's 1.2% increase. Last month's number was upwardly revised from 1.1%.
Josh Feinman, chief economist at Deutsche Bank Group's DB Advisors, said that while the recovery is gaining strength, it has been driven by the inventory cycle and stimulus policies. The real test, therefore, lies ahead.
"For the recovery to become self-sustaining and shift persistently into higher gear, a positive feedback loop needs to develop between strengthening private demand, improving labor markets and firming incomes," Feinman said, adding that several factors pose threats to the strength of the recovery, such as a sluggish labor market and possible risk-aversion among companies and consumers.
"Unlike severe recessions in the past, this one was not caused by Fed tightening that can quickly be reversed, but by the bursting of a housing/credit bubble whose effects may linger, restraining the recovery for a while and delaying the full venting of pent-up demand."
was the Dow's best-performing stock, followed by
Bank of America
Meanwhile, shares of
, Bank of America,
were the most heavily traded on the
, which had a listed volume of 3.9 billion. The Dow saw light volume of over 185 million compared with an average volume of 200 million.
Disappointing earnings from
Las Vegas Sands
dragged shares down by 8.9% and 7.1%, respectively, and pressured the gaming sector. The
Market Vectors Gaming
ETF fell 1.9%.
was the Dow's biggest laggard despite topping analysts' estimates for the fourth quarter. The Bentonville, Ark., retailing giant disappointed investors with same-store sales that missed its own expectations with a 1.6% decline and a weak forecast for the first quarter. Its shares shed 1.1%.
Wal-Mart's news counterbalanced that of fellow blue chip
, which reported its results after Wednesday's closing bell, exceeding estimates and hiking its full-year guidance on strong PC and server sales. H-P shares traded 1.4% higher.
reported robust first-quarter earnings and raised its year-end guidance to between $2.68 and $2.78 a share, exceeding analysts' forecasts for a 2010 profit of $2.66 a share. The stock traded ahead by 4.1%.
had a wider-than-expected loss in the fourth quarter but said it expects higher unit sales in 2010. Shares lost 4.8%.
In other earnings news, telecommunications services company
reported a 7% dip in fourth-quarter earnings and warned that 2010 sales could be lower than previously forecast. The company's range of $3.5 billion to $3.7 billion, however, still exceeded analysts' forecasts for year-end sales of $3.1 billion. The stock ticked up by 1.6%.
In other news,
has opted not to sell its derivatives portfolio, according to a
The White House signaled its intention to tackle rising federal budget concerns in the morning. President Obama signed an executive order creating a bipartisan fiscal responsibility commission, co-chaired by Erskine Bowles, former White House Chief of Staff under President Clinton, and Alan Simpson, former Republican Senator from Wyoming.
Bank of Japan members voted unanimously to hold the overnight call rate target at 0.1%, which it has kept since December 2008.
Overseas, Japan's Nikkei gained 3%. The FTSE in London was up 0.9%, and the DAX in Frankfurt was ahead by 0.6%.
The Energy Information Administration reported an increase of 3.1 million barrels in crude oil inventories and a 1.7 million barrel rise in gasoline stocks in the week ended Feb. 12. Distillates supplies, meanwhile, fell by 2.9 million barrels. Analysts polled by Platts had been looking for a 1.65 million barrel build in crude stockpiles, an increase of 1.5 million barrels in gasoline supplies and a decline of 1.6 million barrels in distillates stocks.
Crude oil for March delivery traded $1.73 higher to settle at $79.06 a barrel.
dollar was trading marginally higher against a basket of currencies, while the most actively traded April
gold contract shed $1.40 to settle at $1,118.70 an ounce.
The benchmark 10-year Treasury weakened 15/32, lifting the yield to 3.795%.
--Written by Melinda Peer and Sung Moss in New York