- The Washington Times - Friday, April 20, 2007

Strong global growth and better-than-expected earnings at blue-chip U.S. companies sent stocks soaring yesterday, with the Dow Jones Industrial Average vaulting more than 150 points to a record high within reach of 13,000.

Global titans Honeywell, Caterpillar, Google and American Express led the rally with reports of expanding sales and earnings from abroad, where robust growth is helping to pull along the U.S. economy. The Dow closed up 153 points to 12,962, resuming a string of 34 record closes that was interrupted briefly by a slump last month.

The best April rally in four years also pushed the Nasdaq Composite Index and the Standard & Poor’s 500 Index to six-year highs. Investors had tempered their expectations for first-quarter earnings in light of slower U.S. growth, but were pleasantly surprised by an initial wave of upbeat results.

“Everybody expected earnings to be weak and they look very good,” said Greg Church, chief investment officer of Church Capital Management. “Growth worldwide is expanding, and these companies that are reporting are benefiting from that.”

Stocks also have been buoyed by cash surging into the market as investors turn away from other assets favored in previous years — such as housing and bonds — to take advantage of the winning streak in stocks.

“It’s not a matter of 13,000 for the Dow, we could be looking at 14,000 by the end of the year,” said Robert Froehlich, chief investment strategist for investment firm DWS Scudder. “There’s too much money out there chasing too few companies. This story isn’t ending anytime soon.”

Benign economic news this week contributed to investors’ buying mood. New data indicated that home builders modestly picked up the pace of construction last month, while the core rate of inflation remained tame.

With little evidence of change in the economy, investors focused on earnings and found they had been too bearish. A spate of better-than-expected results prompted analysts to boost their estimates for first-quarter earnings growth at S&P; 500 companies to 6.2 percent from 3.1 percent last week, according to Bloomberg News.

Google lifted technology stocks after reporting a 69 percent increase in first-quarter profit — exceeding expectations and reassuring investors who had grown cautious about tech growth. Google rose $10.83 to $482.48.

Reaping benefits from a worldwide building boom, Caterpillar became the Dow’s biggest mover after reporting strong growth in profits and sales, and offering robust profit guidance for its heavy, earthmoving equipment. Caterpillar shares rose $3.20 to $71.82.

David Burritt, Caterpillar’s chief financial officer, credited a “global footprint” for enabling the company to shrug off the collapse in U.S. home building by boosting construction, mining and other equipment sales worldwide, including a 44 percent increase in Europe, Africa and the Middle East for the quarter that ended March 31.

“We’re clearly a less cyclical company than we used to be,” he said. “Frankly, it’s hard to remember a time when we’ve had a situation when we’ve shown such strength outside of North America when North America has been down.”

Booming global demand for civilian aircraft parts, military vehicles and energy-saving equipment sent Honeywell International shares up $2.34 to $51.40, toppling Wall Street projections.

“Most of the bears and the gloom-and-doomers thought that first-quarter earnings would stink. Once again, the gloomy Guses have been proven wrong,” said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc.

Analysts say the weakening dollar, which is approaching a record low against the euro and hit a 25-year low this week against the British pound, helps U.S. companies operating overseas, as their profits in strong currencies are translated back into dollars when reported on Wall Street.

Limiting the Dow’s rise, McDonald’s reported quarterly profit rose 22 percent, but its shares dipped 42 cents to $48.36 as it said it would sell off Latin American units. Pfizer reported one-time charges that pushed profit lower by 18 percent, but the results still beat expectations. Its stock declined 10 cents to $26.97.

American Express Co. rose $2.05 to $61 after first-quarter profit topped Wall Street expectations. The nation’s third-largest credit-card brand said the period was driven by higher spending and more cards issued.

H&R; Block Inc. jumped 73 cents to $22.56 after the tax preparer agreed to sell its money-losing subprime home-loan unit to Cerberus Capital Management LP.

Shares of Capital One Financial Corp. fell $4.54 to $72.80 after the largest independent U.S. credit-card issuer said first-quarter profit missed analysts’ estimates because of mortgage-loan losses.

With crude oil and gasoline prices on the rise, energy shares in the S&P; 500 climbed 2.1 percent, posting the best gain among 10 industry groups.

Exxon Mobil Corp., the world’s biggest oil producer, added $2.30 to a record $79.76. ConocoPhillips, the third-largest U.S. oil company, increased $1.97 to $71.25.

Schlumberger Ltd. said its first-quarter profit spiked 63 percent, as the world’s largest oil field services provider continued to benefit from heightened oil drilling worldwide. Its shares rose 91 cents to $75.23.

Schlumberger Chief Executive Officer Andrew Gould said that accelerated oil field activity in Europe, Africa, the Middle East and Asia and heavy demand for technical services such as well testing and seismic surveys “contributed to this highly satisfactory overall financial performance.” Schlumberger remains “exceptionally well placed” to benefit from the current global exploration and production environment, he said.

This article is based in part on wire service reports.

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