Updated with closing stock prices.The major indices surged more than 3% Wednesday as the market welcomed an Intel ( INTC) earnings surprise, a fresh round of economic data and minutes from the latest Federal Open Market Committee meeting. The Dow Jones Industrial Average gained 256.72, or 3.1%, to 8616.21, while the S&P 500 climbed 26.84 points, or 3%, to 932.68. The Nasdaq Composite advanced 63.17 points, or 3.5%, to 1862.90. Industrials, energy, financial and tech stocks were all swept up in a cross-sector rally after earnings and economic data offered a promising glimpse of the state of the economic recovery. Intel, which surpassed earnings expectations and raised guidance late Tuesday, was one of the greatest gainers on the Dow, rising 7.3%. American Express ( AXP) also rose 12.2% as traders snapped up credit card stocks after Capital One Financial ( COF) and Discover Financial Services ( DFX) reported fewer-than-expected defaults and delinquencies in June. (Click below to hear Bill Stone, chief investment strategist at PNC Wealth Management talk about this week's earnings and economic data, and why he thinks investor sentiment may be changing.)
Board members and FOMC participants expect that the Fed won't have to extend a number of emergency facilities beyond Feb. 1, 2010, if recent improvements in the market continue. However, they're prepared to extend the terms of some or all programs as needed if financial stresses don't moderate. The Fed minutes came amid a slew of earnings aside from Intel. Gannett ( GCI) shares surged 29.5% after the company, which reported an 18% drop in revenue, managed to beat profit estimates by 9 cents a share. Abbott Labs ( ABT) reported profit roughly in line with expectations, and fast-food restaurateur Yum! Brands ( YUM) exceeded targets, but pulled down guidance for same-store sales growth for the rest of the year. Abbott and Yum! Brands fell 2.7% and 5.5%, respectively. Bank reports will continue to roll in later this week with JPMorgan Chase ( JPM) releasing its results on Thursday and Citigroup ( C) and Bank of America ( BAC) slated for Friday.
Outside of earnings, traders had an array of economic data to consider. The Department of Labor said that the consumer price index, the most widely cited gauge of inflation, increased by 0.7% in June after an 0.1% increase the month prior. The acceleration was largely due to a 17.3% increase in the gasoline index, according to the report. The core index, which excludes energy, increased 0.2%. In another release, the Empire Manufacturing Survey's business conditions index increased 9 points to -0.6, and the new orders index and prices paid index rose above zero for the first time in several months. At the same time, the inventories index slipped to a record low, according to the report.
Other data showed capacity utilization was little changed at 68% in June, in line with expectations, and industrial production fell by a smaller than expected 0.4% after a 1.2% drop the month prior. "I can't say they're outright good numbers, but we got back to this 'less bad' kind of thing, and maybe after the last four weeks of declines we've readjusted to the idea that less bad is enough now," says Bill Stone, chief investment strategist at PNC Wealth Management. "For a while the markets had come to a point where you had to get outright good data or better data in order to get a move forward." In other news, struggling small business lender CIT Group ( CIT) could receive a temporary government loan from the Treasury Department and Federal Reserve to allow it more time to strengthen its balance sheet, Reuters reports. Shares rose 1.9% to $1.64. Meanwhile, Boeing's ( BA) Integrated Defense Systems division told employees it will have to eliminate about 1,000 jobs due to Pentagon budget reductions. Boeing shares were up 2.3% at $41.23. Elsewhere, crude oil futures rose $2.02 to $61.54 a barrel, and gold rose $16.60 to $939.40 an ounce, while the dollar fell against the pound and euro. Longer-dated Treasuries were falling in price, rising in yield. The 10-year was lower by 1-8/32 to yield 3.62%, while the 30-year lost 2-6/32, yielding 4.51%. Stocks overseas were mostly higher. In Europe, London's FTSE 100 and the DAX in Frankfurt advanced 2.6% and 3.1%, respectively. In Asia, the Nikkei in Japan and Hang Seng in Hong Kong rose 0.1% and 2.1%, respectively.