Dow jumps 108 on solid earnings
NEW YORK » A drop in oil prices and strong earnings at PepsiCo Inc. and Cisco Systems Inc. propelled stocks higher yesterday, with the Dow Jones industrial average surging more than 100 points. Reports that Pfizer Inc. might sell its consumer products business contributed to the advance.
Wall Street's major indexes built momentum throughout the afternoon, climbing higher as the close neared. But with investors still concerned about interest rates, analysts viewed the market's jump with caution.
"The market was a little oversold," said Russ Koesterich, senior portfolio manager at Barclays Global Investments in San Francisco. "I think this (the run-up) is mostly technical. I don't think you can read too much into it, since there weren't a lot of drivers."
Cisco, which closed up 7.2 percent, led tech and telecom stocks higher after its earnings exceeded analysts' expectations. An upgrade of Dell Inc. also helped the tech sector.
Investors who had lost patience with drug maker Pfizer applauded news it was mulling a sale or spin off of the consumer business, which includes Listerine mouthwash, Visine eye drops and Lubriderm skin lotion. Its stock rose 5.7 percent.
The Dow rose 108.86, or 1.01 percent, to 10,858.62.
Broader stock indicators were higher. The Standard & Poor's 500 index rose 10.87, or 0.87 percent, to 1,265.65, and the Nasdaq composite index rose 22.02, or 0.98 percent, to 2,266.98.
The indexes moved sharply higher after the S&P 500 pierced 1,260, said Ryan Larson, equity trader at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher. Traders had been seeing 1,260 as a "resistance level" for the index -- a price ceiling that has, in past sessions, triggered a sell-off.
"Once the S&P broke through that, it was kind of a herd mentality: One goes, they all go," Larson said.
Sentiment also improved as crude oil prices declined for the second day. Crude oil settled at $62.55 a barrel, down 54 cents, on the New York Mercantile Exchange. Crude oil fell $2.02 a barrel Tuesday.
In company news, networking gear provider Cisco Systems rose $1.31 to $19.40 after its fiscal second-quarter earnings, excluding one-time items, beat analysts' expectations. In its earnings report, which followed the close of trading Tuesday, the company said its profits dropped, hampered by stock-option expenses, but sales rose on strong business orders.
Technology stocks were also helped by Sanford Bernstein's upgrade of Dell Inc. to "outperform" from "market perform."