Wall Street mounted a strong triple-digit rally Thursday, rebounding from the prior day’s slump as investors welcomed a slew of strong corporate earnings results and news that the New York Stock Exchange plans to merge with electronic trader Archipelago.
The Dow Jones industrial average was up 206.24 points, or 2.1 percent, at the close of trading, rebounding from the prior day’s 115-point slide and a 374-point decline last week. Thursday’s rally was the Dow’s best one-day point gain since April 2, 2003 and in percentage terms its best day since June 16, 2003.
The broader Standard & Poor’s 500-stock index was up 22.45 points, or 2 percent, at Thursday’s close, seeing its best daily gain since October 2003. The technology-rich Nasdaq composite index jumped 48.65 points, or 2.5 percent — its best one-day point gain since December.
Helping the market to rally mid-session was the Philadelphia Federal Reserve’s Manufacturing Index, which showed manufacturing in the Mid-Atlantic region expanded unexpectedly in April and at a faster pace than expected, as orders and shipments accelerated.
“The market is moving on the stronger-than-expected Philly Fed,” said Todd Clark, head of listed trading at Wells Fargo Securities. “Keep in mind, the market has been battered by fears of a slowing economy. But this is evidence to the contrary. Add to that, Greenspan saying that stagflation doesn’t appear to be a risk, and the market is reacting.”
Speaking before a Senate committee Thursday morning, Fed Chairman Alan Greenspan said that the U.S. does not seem to be heading towards stagflation — the 1970s-style combination of high inflation and lackluster economic growth.
Bargain-minded buyers jumped back into the market a day after concerns about rising inflation eclipsed strong earnings, sending stocks sharply lower. With stocks hardly faltering and money flowing out of bonds, analysts grew more confident about the equity market’s prospects following last week’s steep slide.
“Obviously, the market is oversold when you get multiple days of 100-point sell-offs. I think we’re going to have a nice rally here,” said Matt Kelmon, portfolio manager of the Kelmoore Strategy Funds.
“I think the market got flushed out; Everybody was frightened. When everyone starts seeing the glass as half-empty, it’s just panic in the streets. But once we get through earnings, I just see nothing but gradual upside for the rest of ’05,” he said.
Despite the day’s robust trading, however, some analysts were reluctant to declare an end to the slide that started last week, noting that the market has had a hard time lately sustaining its rallies.
“The market is still jittery,” said Jay Suskind, head trader at Ryan Beck & Co. “You’re seeing strong earnings numbers, there’s good visibility on the corporate side, but lousy macro-economic numbers for March, and that’s the big quandary. I think we need really another month or so of macro numbers to know whether March was just an economic soft patch, or not.”
In Thursday’s other economic news, the number of Americans filing new claims for unemployment benefits plunged by 36,000 last week, the biggest drop in more than three years. Labor Department analysts cautioned that the drop was overstated, however, because the normal seasonal adjustment process used to calculate claims was skewed by the early Easter holiday.
Separately, a closely watched index forecasting future business activity fell in March, a sign that the nation’s economic growth may be slowing. The Composite Index of Leading Economic Indicators fell 0.4 percent last month to 115.1, according to the Conference Board. Economists had expected a 0.3 percent decline.
Earnings from firms like Nokia and Motorola buoyed investors.
Nokia’s share price jumped 6.6 percent, or $1.01, to $16.35, after the company reported double-digit growth in the first quarter and raised its earlier estimate of the global mobile handset market in 2005, surprising analysts. Its rival, Motorola, also had better-than-expected earnings on a solid rise in sales; Motorola’s shares jumped 6.7 percent, or $1, at $15.93.
Dow component Merck’s shares rose 21 cents to $34.28 after the drugmaker issued results that matched its own recently raised forecast. Looking ahead, Merck raised the low end of its yearly forecast.
Shares of Archipelago soared 59.7 percent, or $11.20, to $29.96 on the Pacific Stock Exchange one day after the New York Stock Exchange announced plans to merge with its all-electronic rival exchange. The move, which took Wall Street by surprise, will transform the NYSE into a for-profit, publicly traded enterprise.
EBay’s share price slid 9 cents to $33.08 even though the firm announced better-than-expected results after the bell Wednesday, thanks to a surge in new customers and strong growth overseas. Optimistic executives also brightened their outlook for the rest of year, but worries about increased competition dogged the stock.
Overseas, Japan’s Nikkei stock average slid 0.9 percent. In Europe, France’s CAC-40 rose 0.03 percent, Britain’s FTSE 100 fell 0.1 percent and Germany’s DAX rose 0.4 percent.