In economic data, a better-than-expected home sales report and strong durable goods orders for the month of March, provided some signs of an improved economic climate. However, investors remain skeptical that the economic slowdown is at a bottom and most analysts expect the Federal Reserve to continue with its easing stance.
"Certainly the economic numbers that came out today add a bit of optimism perhaps that the Fed is going to cut by 50 basis points at the next Fed meeting," says Peter Cardillo, chief strategist at Westfalia Investments. "I'm leaning toward a 25 basis point cut, but if employment figures are weak and GDP is on the negative side we could see 50." Both reports are slated for release this Friday.
The Dow Jones Industrial Average finished Wednesday up 170.67 points, or 1.63%, to 10,625.01. The Nasdaq Composite index added 43.02 points, or 2.12%, to 2,059.63. Meanwhile, the broader S&P 500 gained 19.23 points, or 1.59%, to 1,228.70.
Technically, the Nasdaq's ability to remain above 2,000 has been encouraging. "The market is showing a little more backbone than the past two days," says Greg Nie, senior vice president of technical research at First Union Securities in Chicago. "We're still in the camp that the market is in the early stages of a spring rally." Nie says a positive close today will provide a sign that the market is on track for a rally.
Earnings were a mixed bag. Communications chip maker Applied Micro Circuits Corp. (AMCC
) after Tuesday's close reported fourth-quarter earnings that missed analysts' and its own revenue forecasts. Online retailer Amazon.com Inc. (AMZN
) said it was on track to have its first profitable quarter before year's end and media giant Walt Disney Co. (DIS
) said strong second quarter results were driven by its movie business.
While on the whole stocks held their ground, a laundry list of downgraded stocks from UBS Warburg created some weakness in technology. The bank lowered investment ratings to 'hold' on top networking company Cisco (CSCO
) and Internet infrastructure concern Juniper (JNPR
in the news today included several drug companies that issued first-quarter results Wednesday morning. Pharmacia Corp. (PHA
) profits said profits rose 19% while American Home Products Corp. (AHP
) said sales rose 16%, in line with analysts' expecations. Bristol-Myers Squibb Co. (BMY
) saw first-quarter sales rise 10% on strength in its anti-cholesterol drug Pravachol. Healthcare, biotech and pharmaceutical stocks were trading higher.
Treasuries finished lower as equities rallied late in the day. The latest economic data showed a stronger than expected rise of 3% for durable goods orders in March. But strength was concentrated in transportation, where orders were up 21.4%. Excluding transportation, orders fell 1.8%.
In other economic news, a report said new home sales in March rose 4.2%, much higher than the slight decrease that was forecasted. Existing home sales for March rose 4.8% though analysts had expected a decrease to 5.13 million, down from 5.18 million sales a month earlier.
Investors will look to the employment cost index on Thursday and preliminary first-quarter Gross Domestic Product data on Friday.
Stock markets in Europe ended lower. London's Financial Times-Stock Exchange 100 index ended down 12.80 points, or 0.22%, to 5,827.50. In Germany, the DAX Index ended down 9.38 points, or 0.15%, at 6,115.19. In France, the CAC 40 finished down 16.59 points, or 0.31%, to 5,407.84.
Asian markets finished mixed. Japan's Nikkei 225 index finished up 84.32 points, or 0.61%, to 13,827.50. Hong Kong's Hang Seng Index fell 25.06 points, or 0.19%, to 13,249.55. By Amy Tsao in New York