- The Washington Times - Thursday, July 16, 2009

NEW YORK

Stocks surged Wednesday for the second time in three days as investors pounced on more evidence that the economy might not be as sickly as some had feared.

Major stock indicators jumped about 3 percent, including the Dow Jones Industrial Average, which rose 257 points, its biggest one-day gain since March 23.

Strong earnings and an upbeat forecast from Intel Corp. and a more favorable take on the economy from the Federal Reserve pulled investors into the stock market. Stocks also rallied Monday after an influential banking analyst raised her target on Goldman Sachs Group Inc.

The stock market had drifted lower over the past month as hopes faded that the economy would stage a quick recovery. Stocks soared in March and April as glimmers of hope from banks and economic indicators stoked belief in a turnaround this year. But with little new evidence of improvement since then, investors began to worry last month that they had been too hasty in concluding that the economy was bottoming out.

The handful of reports this week from big companies are injecting the stalled rally with new energy because corporate profits are the ultimate driver of stock prices. The latest encouragement came from Intel, the giant computer chip maker whose much-better results suggested that computer sales — and perhaps capital investment in general — is picking up faster than had been expected.

Investors also latched onto a report showing industrial companies cut production far less in June than they had in previous months. The Federal Reserve said output at the nation’s factories, mines and utilities slipped 0.4 percent last month after sliding 1.2 percent in May.

Traders found more good news when the Fed released minutes from its June meeting later Wednesday saying it now expects the economy to contract at a slower pace than previously thought.

“What we’re seeing is some confirmation that stabilization is in fact upon us,” said Matthew Kaufler, portfolio manager at Federated Clover Investment Advisors in Rochester, N.Y. “At least right now investors are willing to say it’s not going to be as bad as feared.”

The Dow jumped 256.72, or 3.1 percent, to 8,616.21, its third straight gain.

The Standard & Poor’s 500 Index rose 26.84, or 3 percent, to 932.68, while the technology-heavy Nasdaq Composite Index gained 63.17, or 3.5 percent, to 1,862.90.

Investors are showing again this week that economic data are important but corporate earnings and forecasts are even more important in galvanizing buyers.

Wednesday’s gain in the Dow was the best percentage climb since April 9, when the blue chips jumped 3.1 percent as Wells Fargo & Co.’s early profit report topped expectations. For the S&P 500 index, the day’s jump was the biggest since a 3 percent rally on May 18 when a better-than-expected profit report from Lowe’s Cos., the home-improvement chain, helped boost sentiment.

The 10-year Treasury note, a widely used benchmark for mortgages and other loans, tumbled more than a point, pushing its yield up to 3.61 percent from 3.47 percent late Tuesday.

Intel’s upbeat report followed strong earnings Tuesday from Goldman Sachs Group Inc. Goldman kicked off earnings in the banking industry by easily topping analysts’ earnings predictions. The Wall Street banking giant said it earned $2.72 billion, after paying preferred dividends, only two quarters after posting a steep loss during the peak of the credit crisis. The stock rose $1.22, or 7.3 percent, to $18.05.

Investors will be watching three other big banks - JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. - reporting second-quarter results this week to see whether the industry is recovering.

The Russell 2000 Index of smaller companies rose 18.22, or 3.7 percent, to 514.74.

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