) sparked hope that earnings will continue to improve. At the same time, the latest batch of economic data bolstered belief in the economic recovery.
The Dow Jones industrial average shot up 207.60 points, or 2.06%, to 10,301.32. The Nasdaq Composite index surged 63.01 points, or 3.59%, to 1,816.79. And the broader Standard & Poor's 500 index, meanwhile, gained 25.56 points, or 2.32%, to 1,128.11.
Texas Instruments (TXN
) helped spark the rally in semiconductor stocks. Late Monday, the chipmaker reported first quarter EPS (pro forma) of $0.01, vs. $0.18, on 28% lower revenue, and says it expects total revenue to grow about 10% in the second quarter from the first quarter. And chip equipment maker Novellus Systems (NVLS
) was notably higher after it reported a narrower than expected quarterly loss, and analysts raised earnings estimates.
After the closing bell, Intel (INTC
), reported earnings of $0.15 a share, meeting analysts' estimate. Revenue rose 3% to $6.78 billion. The stock was rising in after-hours trading.
Telecommunications and wireless stocks also rose after Sprint PCS Group (PCS
) reported a narrower than expected first quarter loss. AT&T (T
), a member of the Dow, jumped nearly 10% on the news.
General Motors was one of the biggest gainers in the Dow after the automaker reported first quarter results and raised its earnings forecasts.
Among other Dow stocks, Coca-Cola (KO
) reported first quarter EPS of $0.40, vs. $0.36 a year ago, on 5% higher worldwide volume. The beverage maker's EPS excludes charges and accounting changes and was in line with analysts' forecasts. However, Caterpillar (CAT
) reported a disappointing quarter.
Bank company FleetBoston Financial (FBF
) says it plans to reduce exposure to targeted areas of corporate lending and sell its Robertson Stephens securities unit after reporting first quarter EPS of $0.70, despite a 3.6% revenue drop.
On the economic data front, industrial production rose 0.7% in March after a revised 0.3% gain in February (+0.4% previously). Capacity utilization rose to 75.4% from a revised 74.9% (74.8% previously). The headline data were stronger than expected, and reflect the improvement in the economy this year, says S&P MMS.
In addition, the consumer price index, a measure of inflation at the consumer level, rose 0.3% in March. This was less than analysts had expected. The core rate, which excludes food and energy, rose a tame 0.1%. As expected, energy led the gains, up 3.8% as gas prices rose 8%. Apparel costs rose 1.2%, as did transportation. Overall, the CPI report supports a very benign inflation trend, which should keep the Federal Reserve sidelined on interest rates into the summer, says S&P MMS.
Lastly, U.S. housing starts fell 7.8%, a bigger drop than expected, to a 1.646 million unit pace in March. Building permits fell 9.9% to a 1.599 million annual rate. Even though relatively low mortgage rates are supporting the housing market, a return to a more seasonal weather pattern and more aggressive seasonal factors were expected to knock these numbers lower, says S&P MMS.
The only economic report on deck Wednesday is the trade report, which is due out before the opening bell.
The spotlight will be on Federal Reserve Chairman Alan Greenspan's testimony before the Joint Economic Committee of Congress about monetary policy and the economic outlook. Greenspan may not stake out a clear policy path, says S&P MMS says, and is expected to stick with the script of his semiannual testimony that "expansion is well underway," but "the dimensions of future growth remain uncertain." S&P MMS believes the tame inflation environment will delay the tightening cycle until August, though a shift in the bias could be seen as soon as next month if the FOMC wanted to acknowledge the apparent strength expected in first quarter GDP.
On Wednesday, numerous earnings reports are scheduled, including Boeing, Ford (F
), Pfizer (PFE
), and Philip Morris (MO
). In the tech area, the highlights will be IBM (IBM
) and Apple Computer (AAPL
U.S. Treasuries fell amid the strong industrial production data and a surging stock market. But short-covering ahead of Greenspan's address Wednesday, along with friendly comments from the Fed President Stern, helped pare the losses by the close, says S&P MMS.
European stock markets were higher, led by a surge in technology and telecommunication services shares and aided by a strong opening on Wall Street. In London, the Financial Times-Stock Exchange 100 index closed up 52.10 points, or 1%, to 5,253.50.
In France, the CAC 40 added 96.25 points, or 2.14%, to 4,598.74. And in Germany, the DAX Index gained 87 points, or 1.66%, to 5,331.17, following a report German industrial production rose more than expected 0.9% in February.
In Asia, the markets ended higher. Japan's Nikkei gained 209.36 points, or 1.88%, to close at 11,346.66, as technology shares surged on earnings optimism after Novellus Systems said its second quarter sales will exceed analysts' forecasts. The market was also reportedly supported by hopes that the government is trying to goad the stock market higher ahead of the G7 meeting over the weekend.
In Hong Kong, the Hang Seng added 60.55 points, or 0.56%, to close at 10,788.53.