Stocks rally on banks and techs
Wall Street moves higher as investors welcome JPMorgan Chase's strong results. Dow surges 94 points.
Why Louisville, CO is No. 1NEW YORK (CNNMoney.com) -- Stocks rallied Thursday, finding momentum in a choppy session, as investors welcomed JPMorgan Chase's better-than-expected profit report and geared up reports from tech leaders after the close.
The Dow Jones industrial average (INDU) gained 94 points, or 1.1%. The S&P 500 (SPX) index gained 8 points, or 0.9%. The Nasdaq composite (COMP) added 24 points, or 1.3%.
A choppy market found momentum at the end of the session, as investors resumed the recent rally.
"The earnings have been better than expected so far and it's a more positive scenario for investors," said Bernard McGinn, CEO of McGinn Investment Management. "The financial industry continues to recover and that's the key."
Better-than-expected results from Intel (INTC, Fortune 500) and Goldman Sachs (GS, Fortune 500) have helped support stock gains this week, enabling Wall Street to push toward the first up week in five. As of Thursday's close, the S&P 500 was up 7% for the week, recovering in just four trading sessions what it lost in the last four weeks.
After the close, Google (GOOG, Fortune 500) reported higher quarterly earnings that topped estimates. But the Internet search leader's revenue growth was meager due to slowing ad sales and profit growth was largely a result of cost cutting. Shares fell 3% in extended-hours trading.
IBM (IBM, Fortune 500) reported higher quarterly earnings that topped estimates on lower revenue that missed analysts forecasts. The company also forecast full-year earnings of $9.70 per share up from an early forecast of $9.20 per share. Shares gained 3% in after-hours trading.
Financial firms Bank of America (BAC, Fortune 500) and Citigroup (C, Fortune 500) both report results before the bell Friday. BofA is a Dow component. Fellow Dow component General Electric (GE, Fortune 500) also releases results in the morning.
"People have been pleasantly surprised by the earnings so far, but we still have a tremendous number of reports ahead," said Larry Glazer, managing director at Mayflower Advisors. "Investors will become increasingly skeptical and the level of expectations will rise."
Currently, S&P 500 profits are expected to have dropped around 35% versus a year ago, according to the latest Thomson Reuters forecast.
On the economic front, June housing starts and building permits are due Friday morning.
Financials: Dow component JPMorgan Chase (JPM, Fortune 500) reported a profit of $2.7 billion, or 27 cents per share, easily surpassing forecasts. The profit occurred despite a one-time reduction to earnings related to paying back the government's TARP money.
JPMorgan said strong investment banking results overshadowed losses in its consumer lending and credit card businesses. Shares inched lower.
At the other end of the spectrum, small business lender CIT Group (CIT, Fortune 500) plunged 71% amid bankruptcy fears after the company said late Wednesday that it will not receive a government bailout.
The collapse of Lehman Brothers last September was seen as exacerbating the financial crisis. However, unlike AIG and other firms that received government help, a CIT bankruptcy filing is not seen as a risk to crippling the broad financial system.
The full impact of such a filing isn't clear, with CIT helping to fund as many as 1 million small businesses.
"A number of big financial companies came out and said they don't have much exposure to CIT, so there's some relief that it's not a systemic risk," Glazer said.
Economy: The number of Americans filing new claims for unemployment fell more than expected last week, the Labor Department reported Thursday. Jobless claims fell to 522,000 last week, a six-month low.
However, results were influenced by shutdowns in auto industry production, rather than an improvement in the economy.
The Philadelphia Fed index, a regional reading on manufacturing, dipped to negative 7.5 in July from negative 2.2 in June. Economists expected the Philly Fed to have weakened to negative 5.
A record 1.53 million homes are in foreclosure in 2009, according to a report from online foreclosure marketplace RealtyTrac released Thursday.
Bonds: Treasury prices rose, lowering the yield on the benchmark 10-year note to 3.57% from 3.6% Wednesday. Treasury prices and yields move in opposite directions.
Other markets: In global trade, Asian and European markets ended higher.
In currency trading, the dollar gained against the euro and fell against the Japanese yen.
U.S. light crude oil for August delivery rose 48 cents to settle at $62.02 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $3.70 to settle at $935.40 an ounce.
Market breadth was positive. On the New York Stock Exchange, winners beat losers seven to three on volume of 1.18 billion shares. On the Nasdaq, advancers narrowly edged decliners eight to five on volume of 2.11 billion shares.
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