Updated from 4:26 p.m. EST
A final-hour push left stocks higher Thursday, reversing weakness that lingered for much of day. Robust economic data, positive earnings from
and upbeat comments from
Chairman Alan Greenspan prevailed by day's end.
Dow Jones Industrial Average
closed up 36.14 points, or 0.4%, to 9856.97, while the
gained 6.24 points, or 0.6%, to 1058.05 and the
rose 17.00 points, or 0.9%, to 1976.37. The close is the Nasdaq's highest since January 2002, while the Dow and S&P ended a hair below multimonth highs established Monday.
The Nasdaq's relative strength was spurred largely by Cisco's stronger-than-expected earnings after the market close Wednesday. Cisco posted earnings that easily topped estimates, raised guidance, maintained impressive gross margins and extended its stock-buyback plans. CEO John Chambers said he sees "very cautious increases in business capital spending," which fanned enthusiasm for tech stocks. Cisco also got a lift from four analyst upgrades, including USB Piper Jaffray. Shares of Cisco rose $1.10, or 5.1%, to $22.90.
Even though stocks ended higher Thursday, the equity markets have gotten too complacent of late, some analysts worry. "Virtually no part of the risk curve discounts above-average levels of risk today," said Morgan Stanley's U.S. strategist Steve Galbraith in a research note. "Given how far we have come, the risk/reward is nowhere near as positively skewed as a year ago."
In economic news, initial jobless claims for the week ended Nov. 1 declined by 43,000 to 348,000, the lowest level since January 2001. Economists had expected a slightly smaller decline to 380,000. Claims have now been below 400,000 for the past five weeks and the four-week moving average is at its lowest level since March 2001. Thursday's report heightened expectations for Friday's October employment report.
Productivity in the third quarter improved by 8.1%, the fastest annualized pace since the first quarter of 2002, but slightly less than economists' expectations of 8.5%. Notably, workers' hours increased for the first time since April 2000, another hopeful sign on the employment front.
In a speech delivered to the Securities Industry Association Thursday morning, Greenspan said the odds "increasingly favor a revival in job creation." In a separate speech Thursday, Fed governor Ben Bernanke reached similar conclusions.
The 10-year Treasury bond was hit hard by the strong economic figures and warnings from Greenspan about the growing U.S. budget deficit. The benchmark bond was down 14/32, its yield rising to 4.41%. The dollar was stronger, particularly against the Japanese yen.
Among other stocks on the move,
shares rose 7 cents, or 0.2%, to $46.66 after the company issued postclose earnings and guidance Wednesday that beat expectations.
Among other big-cap techs,
gained $1.01, or 1.1%, to $89.34;
shares rose 36 cents, or 2.9%, to $12.70; and
gained 38 cents, or 1.1%, to $34.12.
Sales results from some of the nation's largest retailers were mixed in October, but the damage was limited due to seasonal factors. "Unusually warm weather and the California wildfires appeared to have served as a drag on retail activity during October," said Morgan Stanley U.S. economist David Greenlaw.
shares rose 69 cents, or 1.2%, to $58.61. The company said same-store sales improved by 4.5%, toward the high end of Wal-Mart's estimates.
reported a 1.6% rise in October sales, below the company's estimated range. The company said sales at its Target chain were in line with expectations, but overall numbers were brought down by disappointing results from both Mervyn's and Marshall Field's. Shares of Target added 31 cents, or 0.8%, to $39.15.
Among other retailers,
reported better-than-expected sales, but
sales plunged 11.6% last month. JP Morgan promptly downgraded the stock from overweight to neutral on the news. Kohl's shares dropped $1.90, or 3.5%, to $52.30.
Overseas, the Bank of England raised its key lending rate Thursday by 0.25% to 3.75%, while the European Central Bank left its main refinancing rate unchanged at 2.00%. It was the first hike from the BOE since February 2000.
International markets were mixed. The Nikkei 225 closed down 2.6% to 10,552, ahead of weekend elections, while Hong Kong's Hang Seng finished lower by 2.3% to 12,150. In Europe, the FTSE 100 closed higher by 0.5% to 4324 and Germany's DAX finished higher by 0.4% to 3734.
Looking ahead, Friday's October employment report is the most anxiously awaited event of the week, given that the labor market has proved to be the missing piece of the nascent recovery in the U.S. Economists expect payrolls to grow by 55,000, slightly lower than last month's dramatic upside surprise. The unemployment rate is expected to hold steady at 6.1%.
The payroll figure will be closely watched, but keep in mind that economists estimate that the U.S. economy needs to add approximately 125,000 jobs per month, to keep up with the growing U.S. labor force.
Despite rising expectations for the job's report, risks remain.
Chairman Alan Greenspan tempered expectations for a significant near-term drop in unemployment. Referring to productivity gains, he noted that, "one consequence of these improvements in efficiency has been a temporary ability of many businesses to meet increases in demand while paring existing workforces."