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Markets spark to life
in stronger trading
NEW YORK >> Wall Street barreled out of its slump yesterday, soaring in response to a solid consumer confidence reading and a strong earnings outlook from Verizon Communications. The Dow Jones industrials gained more than 120 points, springing back above 10,000.
Verizon's bullish second-quarter earnings and positive outlook were a much needed boost to a market that has sagged for four weeks on concerns over stalled economic growth and a series of second-half profit warnings.
Analysts believed the market was oversold and due for a strong rally. Volume on the New York Stock Exchange was moderate, but strong given the light trading that has marked recent weeks.
Investors were also cheered by a surge in consumer confidence. The Conference Board's consumer confidence index rose to 106.1 in July, the highest level since June 2002 and up from last month's revised reading of 102.8.
"It looks to me like the stock market is trying to reverse this downward trend we've been in," said Brian Bush, director of equity research at Stephens Inc. "It would appear that the economy is reaccelerating again in July, and that could lead to better performance on the market."
The Dow Jones industrial average was up 123.22, or 1.2 percent, at 10,085.14, closing above the 10,000 mark for the first time since Thursday. It was the Dow's best one-day gain since June 7.
Broader stock indicators also closed sharply higher. The Standard & Poor's 500 index climbed 10.76, or 1 percent, to 1,094.83, and the Nasdaq composite index was up 30.08, or 1.6 percent, at 1,869.10. The S&P 500 and Nasdaq were coming of year-to-date lows on Monday.
In other economic news, new home sales fell by a less-than-expected 0.8 percent to 1.326 million homes in June. Wall Street had estimated 1.275 million new homes sales for the month.
This kind of economic data, analysts said, shows that despite the concern over second-half earnings growth, the economic and corporate profits remain on track.
"This kind of volatility that we've seen this month is part of the normal workings of the market," said Rafi Zaman, managing director for U.S. equities at Dupont Capital Management. "The underpinnings of the market are still positive. Earnings growth as we've had, around 15 percent this year, is unsustainable. Between 7 and 8 percent is sustainable, and we're getting there."
Still, despite analysts' upbeat assessment, the market remained tentative, and yesterday's advance could evaporate in profit-taking if the next big batch of earnings reports today and tomorrow disappoint the market. Among the companies reporting today are Boeing Co., Sony Corp. and Time Warner Inc.; tomorrow, Exxon Mobil Corp., Bristol-Myers Squibb and Gillette Co. are scheduled to release their results.
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