Stocks surged Thursday, as investors set aside their concerns about rising interest rates and focused instead on bullish earnings reports from blue-chip companies like Caterpillar and Boeing.
“The market’s been stuck in a rut and I think we’re seeing a strong bounce due to optimism surrounding earnings,” said Keith Keenan, vice president of institutional trading at brokerage Wall Street Access.
Thursday’s stock surge was accompanied by a spike in trading volume as investors returned to the stock market in large numbers following two days of congressional testimony from Federal Reserve Chairman Alan Greenspan.
After a shaky open, the Dow Jones industrial average rallied mid-morning. It held on to a triple-digit gain for the rest of the session, reaching an afternoon high of 179 points and eventually closing the day up 143.93 points, or 1.4 percent, and notching its biggest one-day point gain since March 25. The broader Standard & Poor’s 500-stock index closed the day up 15.84 points, or 1.4 percent.
The technology sector got a boost from online marketplace eBay’s strong earnings report, released after Wednesday's closing bell, and a quadrupling of profit at wireless technology company Qualcomm. The Nasdaq composite index, which tracks the broader technology sector, closed the day up 37.28 points, or 1.9 percent.
Wall Street is in the midst of its busiest week for first-quarter earnings reporting, but before today investors have had a muted reaction to mostly good corporate results, focusing instead on Fed chief Greenspan’s testimony to Congress earlier this week.
Greenspan’s message to Congress — that the economic recovery is stable and the expansion will likely continue — was a disappointment for the stock market, as it many investors interpreted it as confirmation that rates will likely rise before the year is out.
But analysts say investors’ concerns may be overblown. Most say the likelihood of a rise in interest rates has been on the cards for some time, while others doubt that a rise in rates from their current 45-year low would significantly dent future corporate profits.
“Anyone who didn’t think the Fed would raise interest rates soon doesn’t have a pulse,” Al Goldman, chief market strategist at A.G. Edwards, told CNBC, adding that he doesn’t think a modest rise in interest rates will restrain the economic recovery.
A drop in bond yields also lifted Wall Street’s mood Thursday, after tame inflation data and a report indicating the labor market’s recovery remains spotty eased fears the Federal Reserve may have to hike interest rates soon, analysts said.
Before the open, the Labor Department said U.S. wholesale prices rose sharply last month, thanks to a big jump in food prices.
The government said the Producer Price Index (PPI), which measures prices paid to farms, factories and refineries, climbed 0.5 percent in March. Excluding sometimes volatile food and energy costs, the “core” rate of PPI advanced 0.2 percent.
Separately, the Labor Department reported that fewer people signed up for jobless benefits last week Thursday — a sign that companies are less inclined to slash their payrolls. The decline, which follows a week when new applications rose sharply, still left the total higher than economists expected.
Signs of good corporate health abound, however. Analysts surveyed by Thomson First Call expect earnings growth of about 17 percent. With results flooding in from dozens of companies, including more than 70 in the S&P 500, Thursday was one of the busiest days of the earnings season.
Caterpillar said quarterly earnings more than tripled on increased demand, higher selling prices and improved profits on its diesel truck engines, leading to company to raise its outlook for the year. Its share price rose 4.2 percent to $84.10, making it one of the biggest percentage gainers on the Dow.
Boeing said its first-quarter earnings per share would significantly exceed analysts’ estimates based on broad strength in core businesses. Shares of Boeing, which reports its earnings on Wednesday, rose 3.5 percent to $42.27.
Late Wednesday, eBay posted a first-quarter profit that nearly doubled from a year earlier, boosted by strong transaction activity and growth in its PayPal unit. EBay's share price rose 10.4 percent to $82.59 and was one of the biggest percentage gainers on the Nasdaq 100.
Qualcomm Wednesday reported a fourfold increase in quarterly earnings on strong demand for phones and other devices, and raised forecasts. Its share price rose 3.1 percent to $67.88 on the Nasdaq market.
Overseas, Japan’s Nikkei average finished Thursday 0.3 percent higher. In Europe, France’s CAC-40 rose 1.1 percent, Britain’s FTSE 100 added 0.7 percent and Germany’s DAX index rose 0.8 percent.