updated 1/26/2005 9:28:26 AM ET 2005-01-26T14:28:26

A raft of strong earnings reports from corporate America boosted investors’ lagging confidence Tuesday and pushed Wall Street’s main stock indices sharply higher, helping the Dow Jones industrial average to turn in its best one-day performance so far this year.

Major Market Indices

Wall Street bellwether Merrill Lynch posted a record year, while U.S. Steel swung to a profit. And despite slumping profits at drug makers Johnson & Johnson and Merck, both said their earnings met or surpassed analysts’ forecasts, showing resiliency in the embattled pharmaceutical sector.

In another boost for stocks, the Conference Board said its consumer confidence index for January came in at 103.4, up from December’s reading of 102.7 and better than the 101.3 analysts expected.

Still, analysts said the market’s gains were rather deceptive. Declining issues outnumbered advancers by a slim margin on the New York Stock Exchange, and advancers outpaced decliners by only 8 to 7 on the Nasdaq stock market — a sign that investors are picking their stocks very carefully and are quick to sell under-performing issues.

“I’m not sure if this is the beginning of a reversal in market sentiment, but the good earnings news and the confidence data are causing a lot of bargain hunting and we’re getting a strong day as a result,” said Peter Cardillo, chief strategist at New York retail brokerage S.W. Bach.

The Dow Jones industrial average rallied some 100 points in the first 30 minutes of trading, hitting a high of 141 points mid-session. But the index gave up some of its gains in afternoon trading, eventually closing up 92.95 points, or 0.9 percent. Broader indices also retreated. The Standard & Poor’s 500-stock index gained 4.66 points, or 0.4 percent, and the tech-loaded Nasdaq composite index added 11.25 points, or 0.6 percent.

The string of upbeat earnings news helped investors overcome recent fears about the upcoming Iraqi elections and higher crude oil prices, which pushed above the $49 per barrel level Tuesday. After a volatile session, the price of a barrel of light, sweet crude settled at $49.64, up 83 cents on the New York Mercantile Exchange.

Tuesday’s stock market gains helped to reverse some of the slide in stocks seen so far this year. After a strong post-election run-up in the market, stock prices declined in the first three weeks of 2005, the first time that has happened since 1982. And on Monday, the Dow, the Nasdaq composite and the S&P 500 all ended lower for the fourth consecutive session, each at its lowest close since November.

In Tuesday’s other economic news, the National Association of Realtors said pre-existing home sales fell in December to a seasonally adjusted annual rate of 6.69 million units, slightly less than the 6.8 million economists had forecast. For all of 2004, sales rose 9.4 percent to an all-time high of 6.68 million units, with historically low interest rates credited for the jump in sales.

Despite one-time charges that sent profits falling 34 percent, Johnson & Johnson’s revenues rose 13 percent for the quarter, and the healthcare products giant surpassed Wall Street estimates by 3 cents per share without the charges. Johnson & Johnson’s stock price rose $2.23 to close at $63.72.

Shares of Merck rose $1.10 to $30.95 after the company posted earnings that matched analysts’ forecasts of 50 cents per share. Profits fell 21 percent due to lost sales and a legal reserve connected to Vioxx, the arthritis drug pulled from the market Sept. 30 due to increased risks of heart attack and stroke. The company nonetheless managed a 2 percent increase in revenue for the quarter, which was better than Wall Street expected.

Merrill Lynch saw its quarterly profit slip 2 percent for the quarter, but said the results helped the brokerage to a record profit for the year. Merrill Lynch, which surpassed Wall Street profit forecasts by 9 cents per share, saw its shares rise $1.19 to $57.99.

Chemical maker DuPont’s shares rose 57 cents to $46.58. The company reported declining sales and profits, but after one-time charges the Dow component beat estimates by 4 cents per share.

Ford Motor warned that income from its financial services division would slip in 2005, and said its first-quarter earnings would fall well below current Wall Street forecasts. Ford’s shares nonetheless added 16 cents to close at $13.23

Shares of pharmaceutical services provider AmerisourceBergen fell $1.05 to $56.52 after the company said its profits fall 41 percent for the fourth quarter, missing analysts’ estimates by 3 cents per share.

And U.S. Steel said it swung to a profit for the fourth quarter, compared to a year ago, as the global steel market improved and the company implemented cost-cutting measures. The company beat Wall Street’s earnings forecasts by 84 cents per share. U.S. Steel’s stock price climbed 79 cents to $51.16.

Overseas, Japan’s Nikkei average fell 0.1 percent. In Europe, Britain’s FTSE 100 closed up 0.6 percent, France’s CAC-40 gained 0.9 percent and Germany’s DAX rose 0.8 percent.

The Associated Press contributed to this report.


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