Economic report cheers investors
NEW YORK » Stocks soared yesterday, with the Dow Jones industrials gaining 128 points as a sharp drop in oil prices and a reassuring assessment of the economy helped investors overcome their disappointment over Intel Corp.'s earnings and troubling sales forecasts.
Intel's profits and a warning of slow fourth-quarter sales rattled investors who had hoped for more bullish forecasts from corporate America. But the market drew solace late in the day from the Federal Reserve, which in its regular "Beige Book" breakdown of the economy said many parts of the country are still seeing decent growth despite high energy prices.
Stocks also got a boost from falling crude oil futures after the Energy Department reported larger-than-expected inventories of oil, gasoline and heating oil. A barrel of light crude was quoted at $62.41, down $1.10, on the New York Mercantile Exchange.
Yet earnings, and the Fed report were measures of the economy's status weeks and months ago. While investors were eager to buy after October's poor performance, they remain nervous about rising inflation and consumer spending for the fourth quarter and beyond -- leading analysts to wonder whether yesterday's rally can be sustained.
"There are some signs on the wall here that we may have hit the bottom of this market, and we could be ready to move up," said Chris Johnson, manager of quantitative analysis at Schaeffer's Investment Research in Cincinnati.
The Dow rose 128.87, or 1.25 percent, to 10,414.13.
Broader stock indicators also moved higher. The Standard & Poor's 500 index climbed 17.62, or 1.5 percent, to 1,195.76, while the tech-focused Nasdaq composite index added 35.24, or 1.71 percent, to 2,091.24.
Bonds built on the previous session's gains, with the yield on the 10-year Treasury note falling to 4.46 percent from 4.47 percent late Tuesday. The dollar was lower against most major currencies, while gold prices also fell.
The Commerce Department said new housing construction rose to an annualized rate of 2.108 million units, far greater than the 1.975 million economists expected -- a possible sign of a pickup in the cooling housing market.
In earnings news, Intel's revenues were below Wall Street's forecasts despite strong laptop computer sales. But it was the fourth-quarter outlook, which included warnings of slower sales, that caused nervous investors to sell off the stock, which was down sharply in early trading but finished the session down just 3 cents at $23.69.