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Earnings fueling
market optimism
U.S. stocks gained as higher-than-expected earnings forecasts from FedEx Corp. and Stanley Works bolstered optimism that profit growth will help extend a yearlong rally.
Stocks rebounded yesterday from their 2004 lows after the Federal Reserve said it will be "patient" about raising its benchmark overnight lending rate of 1 percent. That may help boost earnings by keeping corporate borrowing costs low.
"We have a pretty good backdrop for economic growth," said Scott Pape, who helps manage $1.3 billion at CastleArk Management LLC in Chicago. "The top line is going to see better growth than what the majority of people are looking for and profits will surprise on the upside in 2004 and 2005."
The Standard & Poor's 500 Index advanced 13.05, or 1.2 percent, to 1123.75 in New York. The Dow Jones Industrial Average increased 115.63, or 1.1 percent, to 10,300.30. The Nasdaq Composite Index climbed 33.67, or 1.7 percent, to 1976.76. Benchmark indexes rose for the third day in four.
Since Monday, the Dow average has gained almost 2 percent, the largest two-day advance in more than five months. The S&P 500 has increased 1.7 percent since Monday, the biggest increase since November.
More than three stocks rose for every one that fell on the New York Stock Exchange in the broadest rally since Feb. 6. Almost 1.5 billion shares changed hands on the Big Board, 3 percent more than the three-month daily average.
The S&P 500 has climbed 40 percent since March 11, 2003, when the benchmark reached its low for last year, amid optimism economic growth will accelerate and lift corporate profits.
The price of the Treasury's 10-year note closed down316 point, while its yield rose to 3.70 percent from 3.69 percent Tuesday. Two-year Treasury notes fell 1/32 point and yielded 1.49 percent, unchanged from Tuesday.
Analysts have raised their 2004 earnings growth forecasts for S&P 500 companies. Earnings will increase an average of 13.2 percent, up from a forecast of 12.9 percent at the beginning of the year, according to Thomson Financial.
FedEx, the overnight package-delivery company, added $3.16 to $71.59 after it said it expects fiscal fourth- quarter profit, excluding certain costs, of $1.15 to $1.25 a share. On average, analysts expected $1.16, according a Thomson survey. Third-quarter profit, excluding costs for employee severance and early retirements, was 71 cents a share, topping an analyst forecast of 67 cents.
Stanley Works jumped $2.14, or 5.8 percent, to $38.94. The largest U.S. maker of hand tools expects to earn between 63 cents and 67 cents a share in the first quarter, higher than the company's previous estimate of 49 cents to 51 cents from continuing operations.
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