Posted on 07/14/2005 1:49:20 PM PDT by Tumbleweed_Connection
A trifecta of good news - positive economic data, strong earnings and a sharp drop in oil prices - sent stocks sharply higher Thursday and lifted the Standard & Poor's 500 index to a four-year high. The Nasdaq composite index also moved into positive territory for 2005.
Wall Street was encouraged by the latest reading of the Labor Department's Consumer Price Index, which measures how much consumers pay at the retail level. The CPI was unexpectedly flat for June, while "core" CPI - with food and fuel costs removed - edged just 0.1 percent higher.
Record earnings from Apple Computer Inc. (AAPL) also cheered investors, while a sharp 1.7 percent jump in retail sales for June assuaged fears that high oil prices would crimp consumer spending.
"I was very pleasantly surprised by the releases today, with low inflation and very strong retail sales growth. And in general, second-quarter earnings are off to a very strong start," said Lincoln Anderson, chief investment officer at LPL Financial Services. "This is just unalloyed good news, and no dark spots in there that I can see."
According to preliminary calculations, the S&P rose 3.21, or 0.26 percent, to 1,226.50, its best showing since closing at 1,234.45 on July 3, 2001.
Other stock indicators also advanced. The Nasdaq composite index climbed up 8.71, or 0.41 percent, at 2,152.82 - its best close since Dec. 31 - while the Dow Jones industrial average was up 71.50, or 0.68 percent, at 10,628.89, its highest level since March 16.
Bonds moved lower as stocks rose, with the yield on the 10-year Treasury note rising to 4.18 percent from 4.16 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
Crude oil futures dropped sharply after the International Energy Agency predicted global demand would ease. A barrel of light crude settled at $57.80, down $2.21, on the New York Mercantile Exchange.
Despite the advance, the major indexes pulled back from their session highs as investors collected profits from the past week's runup in stock prices. The indexes have risen between 3 percent and 4 percent over the last six trading days.
"We're holding on, for the most part, but I think there's been some profit-taking that's kept us from going much higher," said Brian Williamson, an equity trader at The Boston Company Asset Management. "There's a lot of excitement about what's been happening with earnings and the economic data and oil, but we're still hitting a little resistance."
Nonetheless, investors received good news on nearly every point of concern. Yet the question now becomes whether the market will continue to make gains as earning season continues, or whether this is the best short-term result the market can achieve before autumn and the traditional year-end rally.
Retail stocks pushed higher on the positive Commerce Department sales report. Lowe's Companies Inc. hit an all-time high earlier in the session and was up 70 cents at $62.90. Target Corp. (TGT), which also reached a historic high, gained 52 cents to $58.39, and Best Buy Inc. added 60 cents to $75 after surpassing its all-time high in morning trading.
Apple's earnings boosted the overall tech sector as the computer and electronics maker credited ongoing demand for the iPod music player for its record profits. While Apple took the unusual step of warning that its third-quarter profits would fall below expectations, investors weren't dissuaded. Apple stock surged $2.40, to $40.75.
Advanced Micro Devices Inc. (AMD) rose 63 cents to $19.88 after the chip maker reported a 65 percent drop in profits, yet still beat Wall Street profit forecasts by 8 cents per share. While analysts expected the company to post a loss for the quarter, record microprocessor sales helped the company overcome a sharp drop in demand for flash memory chips.
In a rare bit of good news for the airline sector, Southwest Airlines Inc. had a 41 percent surge in profits for the second quarter. The company credited fare increases and rising passenger traffic for helping overcome rising fuel prices. Southwest climbed 44 cents to $14.42 and lifted other airline stocks as well. AMR Corp. (AMR), parent of American Airlines, gained $1.08 to $13.87, while Delta Air Lines Inc. (DAL) rose 61 cents to $4.05
The struggling automotive sector also got a boost, with General Motors Corp. (GM) jumping $1.13 to $37 after analysts at Lehman Brothers upped the stock to "equal weight" from "underweight." Ford Motor Co. (F) added 20 cents to $10.89 as well. Both stocks also benefitted from strong auto sales reported in June.
Yum Brands Inc. (YUM), parent company of the Taco Bell and KFC fast food chains, dropped $1.86 to $49.85 despite reporting a rise in second-quarter profits that beat Wall Street expectations by 5 cents per share.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where volume came to 1.57 billion shares, compared to 1.36 billion on Wednesday.
The Russell 2000 index of smaller companies was down 4.63, or 0.69 percent, at 663.02.
Overseas, Japan's Nikkei stock average rose 0.9 percent. In Europe, Britain's FTSE 100 was up 0.26 percent, France's CAC-40 gained 0.63 percent for the session, and Germany's DAX index climbed 0.41 percent.
I question the timing.
Here's the link.
Oil drives our economy. This is cold blooded evidence of such.
Anybody ping Willie Green yet?
...so where's the "ANWAR" part of the story? BTW--I believe the oil field is "ANWR". The late Mr. Sadat is "Anwar".
For you... who are aghast over the fact that the word is not located in the story, it is not. ANWAR was headlined in satire.
My apologies...I'm usually better at this game!
Sweet! I still don't see $30 oil, and I'm an economic optimist.
I really don't expect to see it either. Sigh.
Someone posted an article within the last day or two about how high oil prices were really clobbering China, to the point where they were having to idle factories for a couple of days a week because of the energy costs to run them. Maybe the Chinese economy has hit the wall in terms of its growth rate - it couldn't sustain the pace it was on forever.
I had posed that question a couple of months ago. I knew that the high oil prices were going to hurt us, but I wondered what would happen in China. It is difficult for any country to absorb the impact high oil prices is having.
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