Stocks Catch an Updraft

Updated from 4:12 p.m. EST

Stocks closed broadly higher Tuesday as a rally in the bond market pushed down interest rates, and strong profits from Goldman Sachs ( GS) outweighed surging oil.

The Dow Jones Industrial Average rose 75.32 points, or 0.68%, to 11,151.34. The S&P 500 added 13.35 points, or 1.04%, to 1297.48, putting both near almost five-year highs. The Nasdaq Composite gained 28.87 points, or 1.27%, to 2295.90.

The Dow lagged behind the other indices due to a 3.2% decline in Procter & Gamble ( PG) and a 1.1% pullback in General Motors ( GM).

The 10-year Treasury was up 18/32 in price to yield 4.69%. The dollar was lower against the yen and euro.

"The tame retail sales outlook helped the bond market," said Barry Hyman, equity market strategist with Ehrenkrantz King Nussbaum. "The market rewarded that with a very strong day. Financials and technology stocks righted themselves. We're on the cusp of taking out some important resistance levels."

About 1.56 billion shares traded on the New York Stock Exchange, with advancers beating decliners by a 3-to-1 margin. Trading volume on the Nasdaq was 1.94 billion shares, with advancers outpacing decliners 2 to 1.

A string of brokerage earnings kicked off with Goldman Sachs, which posted first-quarter earnings of $2.48 billion, or $5.08 a share a share, up from $1.51 billion, or $2.94 a share, a year ago. Results handily beat the Thomson First Call consensus of $3.29 a share. Net revenue jumped 61% from last year to $10.34 billion.

Goldman also raised its quarterly dividend by 10 cents to 35 cents a share. Shares rose $8.70, or 6.2%, to close at $149.42.

Reports from Bear Stearns ( BSC), Lehman Brothers ( LEH) and Morgan Stanley ( MS) are due later in the week.

On the economic front, the Labor Department said retail sales fell 1.3% in February, a greater decline than expected, as bad weather in the northern U.S. kept shoppers at home. Excluding autos, retail sales fell 0.4%, matching economists' expectations.

To view Gregg Greenberg's video take on today's market, click here .

"We're still waiting on inflation data later this week, including the consumer price index and import and export prices," said Peter Cardillo, chief market analyst with SW Bach & Co. "These reports will give us a better idea of what the Federal Reserve is thinking regarding further rate hikes."

The current-account deficit ended last year at $804.9 billion, a 20.5% increase over 2004, according to the Commerce Department. During the last three months of the year, the deficit totaled $224.9 billion.

"A big increase in the deficit was clearly signaled by the monthly trade numbers," said Ian Shepherdson, chief economist with High Frequency Economics. "Numbers deteriorated substantially as a result of both higher oil prices and a return to import-sensitive inventory building."

Also, the Commerce Department said business inventories rose 0.5% in January, greater than expectations for a 0.3% gain.

Oil spiked again after a 3% run-up Monday, as the International Energy Agency reduced its estimate for worldwide petroleum demand in the current year. The European group now sees daily demand rising by 1.49 million barrels a day, down from 1.78 million in its previous forecast. April crude finished up $1.33 to close at $63.10 a barrel.

By sector, the Philadelphia Oil Service Sector index added 2.6%, and the Amex Oil index rose 1.5%. The Amex Airline index rebounded from Monday's loss and closed higher by 2.9%. The Philadelphia Semiconductor Sector index finished up 2.2%.

Among stocks, Pepsi Bottling Group ( PBG) reiterated its 2006 earnings forecast of $1.76 to $1.84 a share, including a charge of 18 cents related to stock options expense. Excluding the expense, Pepsi Bottling expects to earn $1.94 to $2.02 a share. Analysts expect earnings of $1.82 a share. The stock tacked on 12 cents, or 0.4%, to $29.90.

AstraZeneca ( AZN) said it will likely make a first option payment to Merck ( MRK) in 2008 as part of a marketing partnership between the two. The payment isn't expected to exceed $3.3 billion. The payout signals the end of an arrangement giving Merck a royalty on U.S. sales of some of AstraZeneca's products.

AstraZeneca dipped 2 cents, or 0.1%, at $50.92. Merck lost 10 cents, or 0.3%, to $35.10.

In early ratings news, Deutsche Bank upgraded Anheuser-Busch ( BUD) to buy from hold, citing improving fundamentals. Shares of Budweiser's parent are flat since the start of the year. The same stock was also upgraded at Bear Stearns. The stock improved by 71 cents, or 1.7%, to finish at $43.33.

Shares of Chipotle Mexican Grill ( CMG) surged 12.2% a day after the company reported fourth-quarter earnings that beat estimates. RBC Capital Markets initiated coverage of the McDonald's ( MCD) spinoff at sector perform. The firm also set a stock price target for the restaurant chain at $50. The stock added $5.29 to $48.70.

Monday night, Procter & Gamble raised the low end of its third-quarter earnings guidance, but also said organic sales growth during the period could be a percentage point below forecasts. P&G cited "recent customer inventory reductions and tempered outlooks for Asia and Eastern Europe." P&G dropped $1.97, or 3.2%, to $60.01.

Sonus Networks ( SONS), which makes equipment for voice-over-Internet-protocol calling, said fourth-quarter earnings slipped slightly to $5 million, or 2 cents a share, on a 27% rise in sales to $57.2 million. Analysts were expecting earnings of 1 cent a share on sales of $50 million. Sonus slid 34 cents, or 6.3%, to $5.08.

Also after the bell Monday, retailer Kohl's ( KSS) said Chief Operating Officer Arlene Meier will retire at the end of 2006. Shares were up 77 cents, or 1.5%, to close at $51.94.

Overseas markets were mixed, with London's FTSE 100 little changed at 5950 and Germany's Xetra DAX adding 0.3% to 5871. In Asia, Japan's Nikkei fell 0.8% overnight to 16,238, while Hong Kong's Hang Seng edged down 0.1% to 15,520.

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