Wall Street moved soundly higher Thursday, sending the Dow Jones industrials to their first close above 14,000 as investors kept jitters about the economy at bay and focused on a string of upbeat earnings reports.
The Standard & Poor’s 500 index also had a record close.
Profit news from companies like International Business Machines Corp., network equipment maker Juniper Networks Inc., and business software company SAP AG help lift stocks and boosted investors’ appetite for technology issues. However, the momentum could be short-lived as Google Inc. after the closing bell Thursday turned in a second-quarter profit that fell short of Wall Street’s high expectations.
Resurgent concerns about the health of subprime loans, which are made to borrowers with poor credit history, generally hurt financial stocks, while a report that a would-be suitor for Alcoa Inc. had lost interest kept the Dow Jones industrial average from extending its gains.
The flurry of corporate news Thursday coincided with Fed Chairman Ben Bernanke’s return to Capitol Hill for the second day of his midyear report to Congress in which he said problems such as foreclosures among holders of subprime mortgages are “likely to get worse before they get better.” Also, a research group predicted Thursday that the housing slump will cause the economy to contract slightly in coming months.
“I think we are seeing people trying to decide whether earnings are sustainable,” said Jeffrey Dunham, principal at Dunham & Associates in San Diego. He said the stock market’s recent run-up in part reflects investors’ desire not to miss out on gains.
“I don’t see any big conviction by anybody to leap into the market but we’re all terrified to not be players. It’s gone awfully far in an awfully short time and the market is trying to figure out ’Is this a head-fake or is this the real deal?”’
The Dow rose 82.19, or 0.59 percent, to 14,000.41. The blue chip index danced around the 14,000 mark during the session, having first reached it on Tuesday but not closing above that level until Thursday. The Dow’s close topped the previous record of 13,971.55 set Tuesday and marked the index’s 32nd record close of the year.
Broader stock indicators also gained Thursday. The S&P 500 rose 6.91, or 0.45 percent, to 1,553.08; its previous record of 1,552.50 occurred Friday. The technology-focused Nasdaq composite index rose 20.55, or 0.76 percent, to 2,720.04, following the upbeat tech earnings.
Though stocks briefly shed some gains after newly released minutes from the Federal Reserve’s last meeting appeared to confirm that the central bank has no plans to cut rates anytime soon, investors resumed buying in short order.
Bonds showed little overall movement. The yield on the benchmark 10-year Treasury note was flat at 5.03 percent from late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
The stock market’s rise came even as oil moved higher. Light, sweet crude settled up 87 cents at $75.92 per barrel on the New York Mercantile Exchange after briefly touching $76 for the first time in 11 months.
Thursday’s gains extended a partial recovery that started late in Wednesday’s session, when the Dow pulled itself up from a loss of 134 points to end with only a 53-point deficit. Stocks had ceded ground Wednesday amid uneasiness about Bernanke’s assessment of the economy, though analysts subsequently noted there was little new in his comments.
In economic news Thursday, the Conference Board said its Index of Leading Economic Indicators fell 0.3 percent, showing a steeper decline than the 0.1 percent decrease Wall Street had expected. The group predicts housing will cause the economy to slow.
The Fed’s minutes came as no surprise to investors who largely had given up hopes for lower rates this year. But reminders of the Fed’s stance can set off selling.
Concerns about the effects of the housing slowdown, which have damped investor sentiment to varying degrees in recent months, seemed to re-emerge Thursday as Bernanke responded to Congressional questioning on the matter.
Nervousness had returned Wednesday following word that two Bear Stearns Cos. hedge funds were rendered essentially worthless by bad bets on the subprime lending market, which targets borrowers with poor credit. As home values in some parts of the country have drifted lower, those behind on payments have found it harder to tap into their home equity to square away their debts.
“There is a lot of bad news in the marketplace,” Dunham said, citing oil prices, concerns about an unraveling of subprime loans and uncertainty about interest rates. He said, however, that if earnings remain robust and if interest rates eventually come down investors could look past some of their concerns and send the Dow and the rest of the stock market higher.
“We don’t have another ’99 occurring here,” he said, referring to the stock market run-up in 1999 that preceded the dot-com collapse. “Things haven’t reached stupid levels.”
On Thursday, earnings held Wall Street’s interest. IBM, one of the 30 stocks that make up the Dow industrials, jumped $4.78, or 4.3 percent, to $115.86 after the technology company said strength in its software division and an improvement in its services business helped second-quarter profits. The company raised its profit forecast for the year. Its stock surged past an earlier 52-week high of $111.88, rising as high as $116.48.
Google’s second-quarter earnings rose 28 percent but the Internet search company’s per-share profit totaled $3.56 per share excluding items. Analysts, on average, had expected $3.59 per share, according to Thomson Financial. Google fell to $504.11 in after-hours electronic trading, down 8.1 percent from its regular-session close of $548.59.
Also in tech news, Microsoft Corp. fell 51 cents to $31 in after-hours trading, after disappointing investors following several robust quarters that beat analyst estimates. Thursday’s results were in line with estimates.
Juniper Networks Inc. reported it swung to a profit in the second quarter from a loss a year earlier. The stock rose $3.33, or 12.5 percent, to $30.06; the stock topped a previous 52-week high of $27.99 and traded as high as $30.97.
Germany’s SAP rose $3.59, or 6.9 percent, to $55.54 after reporting market-share gains boosted profits. The stock also hit a 52-week high, trading up to $56.20. The previous high was $55.96.
Alcoa, also a Dow stock, fell $1.83, or 3.9 percent, to $44.62 after The Australian newspaper reported that BHP Billiton dropped plans to make a bid for the aluminum producer.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.19 billion shares, compared with 3.55 billion Wednesday.
The Russell 2000 index of smaller companies rose 5.94, or 0.70 percent, to 851.85.
In market action abroad, Japan’s Nikkei stock average rose 0.56 percent. Britain’s FTSE 100 rose 1.11 percent, Germany’s DAX index rose 1.24 percent, and France’s CAC-40 rose 1.16 percent.