Stocks Greenbacked

A recovering dollar, improved jobs data and positive news from the financial sector lead the major indices higher. Frank Curzio weighs in with The Real Story (above).
Author:
Publish date:

Stocks in New York finished higher Thursday as investors took heart in a recovering U.S. dollar, improving jobless numbers and relatively positive news out of the financial sector.

The

Dow Jones Industrial Average

took a brief morning dip, then shot higher by some 180 points before losing about half those gains. In the end, the index closed up 85.73 points, or 0.67%, at 12,848.95. The

S&P 500

rose 8.89 points, or 0.64%, to 1388.82, and the

Nasdaq Composite

climbed 23.71 points, or 0.99%, to 2428.92.

The market started off on an upbeat note after the Labor Department reported that the number of people filing for unemployment benefits dropped by 33,000 people last week to a better-than-expected 342,000. The consensus called for an unchanged figure.

Peter Cardillo, chief market economist with Avalon Partners, believes the data had a part in boosting the U.S. dollar, which eventually translated into an equities rally as it helped cool down the recent surge in oil prices.

An analyst note from Brown Brothers Harriman said the dollar's main propellants today included a hint that the European Central Bank won't raise interest rates, which would have diminished the dollar's value. Marc Chandler, who also writes for

RealMoney.com

, sister site to

TheStreet.com

, noted the ECB has been warning of possible rate hikes for about a month.

Also helping the greenback, Chandler said, was the prospect that the Fed is about done with cutting U.S. rates. In an effort to stimulate the economy, the central bank has slashed the benchmark lending rate by 3 percentage points since September, and that has tended to weaken the dollar.

The greenback was rising 1.5% against the euro at $1.5682, and it firmed by 0.9% against the yen. The dollar index, which measures the currency against a basket of its major counterparts, climbed 1%. Simultaneously, crude oil was down $2.24 to $116.06 a barrel. Gold futures were sliding, as well, losing $19.60 to $889.40 an ounce.

"The weak dollar seemed to be hanging over the market along with oil prices, and with good reason," said Bill Stone, chief investment strategist with PNC Wealth Management. "Oil remains stubbornly high, but at least we got a break from it."

He pointed out that the market's surge comes even as futures are pricing in a 20% chance that next week's Fed meeting will yield no interest-rate easing at all. Just last week, he noted, futures were indicating a 100% chance of at least some change.

"I almost think the market would seem to be okay with no cut, that we'll be all right," he said. "We were in such a crisis mode, and a good number of people were looking for financial Armageddon. I don't think anyone's looking for that now."

Stocks' breadth was mixed Thursday despite the market's strong finish. Around 2.2 billion shares changed hands on the

New York Stock Exchange

, with advancers beating decliners by a 3-to-1 margin. But on the Nasdaq, which saw volume reach 2.32 billion shares, decliners edged out advancers.

On the corporate front, helping intensify buying pressure was

Merrill Lynch's

(MER)

announcement that the investment bank is keeping its dividend steady at 35 cents a share, bolstering the hope that financials have endured the worst of the credit crisis and are now primed for recovery. Merrill shares ended up 7.1%.

Also, insurers were rallying after

Aflac

(AFL) - Get Report

and

Travelers

(TRV) - Get Report

each beat Wall Street projections and lifted the bottom end of their respective full-year forecasts. Shares finished up 4% and 5%, respectively.

But

Aetna

(AET)

was shut out of the rally after reporting a sinking -- though in-line -- first-quarter profit. The insurer also reaffirmed its full-year guidance, which comes in a penny below consensus. Shares began higher but were recently off 1.9%.

Joining the strong insurance names, however, was Dow component

American International Group

(AIG) - Get Report

, which climbed 7.1% to become one of the index's best-performing components.

The Dow also got support from

General Motors

(GM) - Get Report

, which was lately up 5.6% after rival

Ford

(F) - Get Report

posted a surprise first-quarter profit of $100 million. The carmaker said a robust showing in Europe and South America offset a loss in its North American segment, which itself was narrowed sharply from last year. Ford shares bounded up 11.7%.

Commodities names were losing ground in the wake of falling oil and gold futures.

ConocoPhillips

(COP) - Get Report

reported crushing Wall Street targets with earnings of $4.1 billion, or $2.62 a share, thanks to advancing oil futures. But the stock was still losing 1.9%.

Rivals

Exxon Mobil

(XOM) - Get Report

and

Chevron

(CVX) - Get Report

gave up 1.7% and 2.2%, respectively.

Meanwhile, gold miners

Goldcorp

(GG)

,

Barrick Gold

(ABX)

and

Kinross Gold

(KGC) - Get Report

sank between 3.9% and 7.5%.

Back among financial winners,

Credit Suisse

(CS) - Get Report

gained ground, as well, despite posting its first shortfall in more than five years as it wrote off $5.14 billion in bad assets in the first quarter. That pales in comparison to writedowns at Swiss rival

UBS

(UBS) - Get Report

, and Credit Suisse called its capital position "strong," suggesting it won't need to raise any cash, as UBS was forced to do this month. Credit Suisse shares rose 4.8%.

T. Rowe Price

(TROW) - Get Report

was also among the big financial winners, adding 11.8%, after the asset manager said first-quarter earnings grew by 6% to $151.5 million despite broader economic troubles. Per-share income missed expectations by a penny.

The

NYSE

Financial Sector Index surged 2.2%, and the KBW Bank Index rocketed 4.4%.

Further, tech titan

Apple

(AAPL) - Get Report

recovered from early losses, gaining 3.7%, after the company saw its profit jump 36% to comfortably beat analyst estimates. Shares were down earlier as investors reacted to weak guidance for the current quarter.

Away from earnings, Arby's franchiser

Triarc Cos.

(TRY)

finally agreed to buy

Wendy's

(WEN) - Get Report

for about $2.34 billion in stock, following months of discussion on that possibility. Wendy's stock was recently up 4.2%, and Triarc tacked on 2.7%.

On the losing side,

Amazon.com

(AMZN) - Get Report

fell 4.1% after the online retailer eased its 2008 operating-earnings forecast and reporting an essentially flat operating margin in the first quarter. Analysts were hoping for some improvement. The Internet retailer also reported better-than-expected earnings of $143 million on soaring sales of $4.13 billion.

Cell phone maker

Motorola

(MOT)

surrendered 3.1% after its quarterly loss and weak second-quarter projection.

Outside of tech,

Starbucks

(SBUX) - Get Report

was also losing ground on its soft guidance. The coffee seller said tough economic conditions should keep its customer-traffic numbers down and force a first-quarter profit drop to 15 cents a share from 19 cents last year. That's well under the consensus estimate. Shares plunged 10.4%.

Back on the economic docket, the Census Bureau said new-home sales in March sank 8.5% from the prior month to a 526,000 annual pace. A number more on the order of 580,000 had been anticipated.

Paul Mendelsohn, chief investment strategist with Windham Financial, believes that those dismal numbers may have had a part in temporarily taking down the indices this morning.

Durable-goods orders -- an important indicator of factory activity -- stepped back 0.3% last month, according to the Commerce Department. That's worse than the flat number economists were expecting, but still an improvement on February's figure, which itself was revised to a 0.9% drop from the prior figure of minus 1.7%.

Treasury prices took a slide as investors moved their funds into equities. The 10-year note was down 22/32 in price to yield 3.82%, and the 30-year bond gave up 25/32 in price, yielding 4.54%.

Markets overseas were mixed. The Hang Seng Index in Hong Kong jumped 1.6% overnight at 25.681, but Tokyo's Nikkei 225 lost 0.3%. In Europe, London's FTSE 100 dropped 0.5% and the Paris Cac shed 0.3%. Germany's Xetra Dax added 0.4%.