Stocks moved higher in choppy trading Wednesday, as investors focused on strong earnings news from Intel Corp. instead of a government report that high oil prices and lower exports had pushed the U.S. trade deficit to a record level.
Anxiety about Wall Street’s slow start to the year has made some investors wary of making big bets as a number of companies prepare to release quarterly earnings, and a mixed bag of reports and outlooks did little to build confidence. It made for a confusing market on Wednesday, as stocks meandered in and out of positive territory, but most analysts remained upbeat about the prospects for 2005.
“The start of the year has been difficult, but at the end of the day I think the fundamentals of the economy are intact,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “The earnings season will probably shape up pretty well, so it seems the selling is based more on what happened in November and December than on the future. So for that reason I’m pretty bullish.”
The Dow Jones industrial average was up 61.56 points, or 0.6 percent, at Wednesday’s close, having made most of its gains in the final hour of trading, while the broader Standard & Poor’s 500-stock index was up 4.71 points, or 0.4 percent. The Nasdaq Composite index rose 12.91 points, or 0.6 percent.
In Washington, the Commerce Department said America’s trade deficit soared to an all-time high of $60.3 billion in November, reflecting record levels for imports of everything from oil and consumer goods to farm products. The 7.7 percent rise from an imbalance of $56 billion in October beat the previous monthly record, and caught economists by surprise; they’d forecast a slight narrowing of the trade gap.
The news weakened the U.S. dollar, which fell sharply against the euro and other world currencies after the deficit data was released. Treasury Secretary John Snow has said repeatedly that the Bush administration supports a “strong dollar” policy, but some analysts believe the U.S. government is content to see the dollar fall because it makes U.S. exports cheaper.
The unexpected widening in the trade gap also led to a bounce in gold and, initially, oil prices, which were also moving on the government’s weekly report on fuel inventories. The Department of Energy found a 3 million barrel drop in crude supplies, a deeper decline than analysts had expected, but a 1.9 million barrel build in distillate fuels, which include heating oil. Light, sweet crude for February delivery added 69 cents to settle at $46.37 per barrel.
But analysts say what might matter more for investors is the next batch of earnings reports, which could set the tone for the rest of 2005.
“I think if we can get some solid earnings numbers coming up, we can see which way the market wants to go,” said Stephen Carl, head of equity trading at The Williams Capital Group. “Conversely, if there’s a lot of disappointment in the reports, we’ll see where we don’t want it to go. We just have to play wait and see for a while.”
Chip maker Intel rose 62 cents to $23.16 after beating Wall Street earnings estimates by 2 cents a share and reporting stronger than expected revenues on strong holiday sales of computer and cell phone chips. It also issued an optimistic outlook for the first quarter.
Hospital operator HCA Inc. surged 10 percent, or $4.02, to $43.70, after the company raised its profit forecast for the fourth quarter, thanks to lower than expected debt expenses and a reduction in its tax rate. HCA also reiterated its projected earnings for the 2005 year.
OfficeMax Inc. tumbled 4.7 percent, or $1.42, to $28.88, after saying its earnings report would be postponed pending an internal accounting probe. The office supplies retailer also announced the resignation of its chief financial officer, who was stepping down after only two months on the job; the former CFO will return on an interim basis while OfficeMax seeks a permanent replacement.
United Parcel Service Inc. slid 7.4 percent, or $6.12, to $77.18, after the company lowered its fourth-quarter earnings forecast, citing higher costs and an unexpected slowdown in post-Christmas package volume. Rival FedEx Corp. was down 94 cents at $94.47 after reiterating its outlook for the quarter, saying it had experienced a strong holiday season and continued to see favorable conditions and demand for its services.
Pharmaceuticals maker Mylan Laboratories Inc. was up 40 cents at $17.57 after appearing to back away from a contentious bid to take over King Pharmaceuticals Inc. Citing King’s plans to restate more than two years of earnings, Mylan said it is unlikely the company will be able to complete the $4 billion stock deal. King lost 82 cents to $11.17.
Overseas, Japan’s Nikkei average shed 0.75 percent. In Europe, France’s CAC-40 lost 0.85 percent, Britain’s FTSE 100 fell 0.73 percent and Germany’s DAX index closed down 1.16 percent.