Stocks rally on earnings optimism
Better-than-expected results from Travelers, AT&T, McDonald's and 3M push the Dow past 10,000 again, sparking a bigger rally.
NEW YORK†(CNNMoney.com) -- Blue chips led a bigger stock market rally Thursday, as better-than-expected results from four components pushed the Dow industrials above 10,000 again and reassured investors about the ongoing corporate reporting period.
Investors took in stride announcements from the Federal Reserve and the Obama administration's pay czar regarding curbing executive pay.
Stocks dipped in the early going, before managing a blue-chip led charge starting in late morning. Gains were broad based, with 26 of 30 Dow stocks rising, including 3M, McDonald's, AT&T and Travelers, all of which reported better-than-expected results.
Travelers jumped almost 8% and was one of many financial stocks that gained on the day. The KBW Bank (BKX) index rose 3.4%.
Stocks have been seesawing over the last week, with the Dow topping and giving up the 10,000 level and the S&P struggling around 1,100. Both major indexes, as well as the Nasdaq, are at nearly one-year highs.
Stocks tumbled Wednesday after influential analyst Richard Bove of Rochdale Securities cut his rating on Wells Fargo, sparking a steep selloff in the banking sector.
But the selloff proved to be short term, with investors again using any selling as an opportunity to buy on the dips, as has been the trend for months.
Stocks have been on a tear since bottoming in March at the low point of the financial market crisis. Since hitting a more than 12-year low on March 9, the S&P 500 has risen just short of 60% as of Wednesday's close.
Despite persistent calls for a selloff of anywhere from 10% to 15%, any declines in the period have been moderate, in the 3% to 5% range.
Additionally, the declines have been met with a rash of buyers eager to return. For now, those trends are still in place, said Kenny Landgraf, principal and founder at Kenjol Capital Management.
"There are still a lot of people who missed the move who are now looking to increase their risk exposure," he said. "That impact, combined with improving fundamentals, is going to keep the positive trends intact."
Pay crackdown: Obama administration "pay czar" Kenneth Feinberg called for the seven biggest federal bailout recipients to cut in half total compensation for their top executives.
Additionally, the Federal Reserve proposed a broad overhaul of pay policies at 28 of the largest U.S. banks. The review is part of its effort to temper some of the triggers to the risk taking that exacerbated the credit crisis.
The two announcements had almost no impact on the market, perhaps because an overhaul had been in discussion for months.
Corporate results: Dow component Travelers (TRV, Fortune 500) said its quarterly profit more than tripled, easily topping analysts' estimates. The insurer also lifted its full-year forecast to a profit of between $5.30 and $5.50 per share. Shares jumped 7.7%.
Fellow Dow component AT&T (T, Fortune 500) reported a better-than-expected third quarter profit thanks to the impact of Apple's iPhone, for which it has been the exclusive carrier. Wireless revenue jumped 10% in the quarter. Shares gained 0.6%.
So far, 167 companies, or 33% of the S&P 500, have reported results. Profits are currently on track to have fallen 19.2% versus a year earlier, according to the latest from Thomson Reuters. Revenue is expected to have dropped over 10% from a year ago.
Other company news: Microsoft (MSFT, Fortune 500) launched the newest version of its operating system, Windows 7. The tech behemoth, a Dow component, is hoping that users who have been running XP for years will switch to the new system -- and forgive it for the disappointing performance of Windows Vista in 2007.
Microsoft reports quarterly results Friday.
Economy: Around 531,000 Americans filed new claims for unemployment last week, down from 520,000 the previous week. Economists surveyed by Briefing.com were expecting a bigger drop, to 515,000.
Continuing claims, a measure of those who have been receiving benefits for a week or more, fell to 5.92 million from 6.02 million in the previous week. Economists were expecting claims to fall to 5.97 million.
The index of leading economic indicators (LEI) rose 1% in September after rising a revised 0.4% in the previous month. Economists thought it would rise 0.8%.
The U.S. Federal Housing Finance Agency's housing price index fell 0.3% in September after rising 0.3% in August. Economists thought it would rise 0.3%.
World markets: Global markets were mixed. In Europe, London's FTSE 100 fell 1%, France's CAC 40 lost 1.4% and Germany's DAX gave up 1.2%. Asian markets ended lower with the Japanese Nikkei down 0.6%.
Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.42% from 3.38% late Wednesday. Treasury prices and yields move in opposite directions.
Currency and commodities: The dollar fell against the euro, weakening again after it fell to a 14-month low Wednesday. The dollar gained versus the yen.
The dollar had risen in the morning, pressuring dollar-traded commodity prices. Prices remained lower in the afternoon, even as the dollar turned mixed.
U.S. light crude oil for December delivery fell 18 cents to settle at $81.19 a barrel on the New York Mercantile Exchange, edging off a one-year high.
COMEX gold for December delivery fell $5.90 to settle at $1,058.60 an ounce. Gold has surpassed records repeatedly this month due to the weak dollar and longer-term worries about inflation.