Stocks, which were under water for most of Wednesday amid earnings disappointments and terrorism fears, rallied in the last moments of the session as bargain hunting took hold.
The Dow Jones industrial average ended higher by 52.17 points, or 0.52%, to 10,157.88. The tech-heavy Nasdaq composite added 8.48 points, or 0.51%, to 1,672.66. And the broader Standard & Poor's 500 index gained 6.01 points, or 0.56%, to 1,085.89.
Trading volume has been on the light side this week as concerns over the health of corporate profit reports -- along with worries about terrorist attacks and a possible war between nuclear-enabled neighbors Pakistan and India -- have kept Wall Street waiting by the sidelines.
After a dearth of economic data over the past three sessions, investors will have some numbers to chew on Thursday. Initial jobless claims are expected to slip 3,000 to 415,000 for the week ended May 18, resuming declines seen in three of the past four weeks. Standard & Poor's MMS said it suspects that with distortions related to extended benefits subsiding, initial claims will drift lower. But continuing claims may keep rising as the extended benefits may discourage a more active job search.
April durable goods orders are also out Thursday. MMS expects a flat reading on orders and sees shipments rising 0.5% for the month. Weakness in orders is expected to come from aircraft, though gains in vehicles and parts should offset that somewhat. Outside of transportation, MMS sees modest gains in both the tech and non-tech groups.
In the corporate sector, earnings updates from well-known tech names Ciena (CIEN) and Novell (NOVL), and doughnut chain Krispy Kreme (KKD), are also slated for Thursday.
On Wednesday, investors were weighed down by the latest uncertainties over terrorism and worry could hamper markets Thursday as well. New York's Brooklyn Bridge was reopened after closing for an hour early Wednesday morning as authorities investigated a suspicious package. Government officials have warned that another terrorist attack is imminent and landmarks like the Brooklyn Bridge and Statue of Liberty are possible targets.
The prospect of war between Pakistan and India also worried investors. The killing of a separatist leader in Kashmir and renewed fighting at the disputed region is fueling fears of war between the two countries.
Software stocks suffered after Goldman Sachs cut its forecast for 26 companies. A joint Gartner Group and Goldman Sachs information technology spending confidence survey showed that companies are still skittish about spending. The survey showed that technology budgets would be flat throughout the rest of 2002 while spending would drop by 0.4%. Massive discounting among tech vendors has slowed, but pricing pressures remain in the industry.
Retailers were in the spotlight Wednesday. Troubled apparel retailer Gap Inc. (GPS) Wednesday unexpectedly announced the retirement of its legendary chief executive Mickey Drexler. The stock tumbled after the announcement.
Polo Ralph Lauren (RL) posted earnings that were flat from a year ago, but shares fell when the designer and retailer kept its full-year outlook unchanged. Similar sell-offs happened in shares of Target (TGT) and Home Depot (HD) earlier in the week after they did not raise earnings guidance.
Home improvement retailer Home Depot, also a Dow stock, continued to decline a day after it announced results that met Wall Street expectations, but disappointed investors by not offering improved guidance.
Meantime, in a move to expand its consumer operation in California, Citigroup (C), the No. 1 U.S. financial services company said it plans to buy West Coast thrift Golden State Bancorp (GSB) for about $5.8 billion in cash and stock. Shares of the Dow component moved lower on the news.
Strength in shares of Johnson & Johnson (JNJ) offset weakness on the Dow after it announced that trial results of its drug-coated stent, a device used to keep the coronary artery open during angioplasty procedures, showed just a 2% rate of artery re-clogging.
Separately, a competitor to J&J, medical device maker Guidant (GDT) said it will restructure its endovascular division, layoff workers and take a one-time charge in order to stay profitable.
In telecom news, WorldCom (WCOM), the No. 2 U.S. long-distance phone and data services provider, said it will get rid of its tracking stocks and dividend payments, for a savings of $284 million a year. The company is trying to fend off a cash crunch.
U.S. Treasuries rose for a third straight session, benefiting from safe-haven buying on concerns over terrorist attacks. Shorter-dated notes have outperformed.
The Treasury hiked the 2-year note by $2 billion to $27 billion, which is a record amount. An increase was generally expected, says S&P's MMS, and the increased size isn't likely to weigh on the notes much considering the current safe-haven trading and speculation that this could be the last 2-year note auction for a while given debt limit issues. This auction will raise $4.92 billion in new cash.
European markets finished lower amid ongoing worry over terrorism. London's FTSE 100 finished off 45.30 points, or 0.87%, to 5,151.90, while investors fled to safe-haven bonds. The Bank of England voted 9-0 to hold rates unchanged in May. France's CAC 40 index closed lower by 72.91 points, or 1.66%, to 4,326.29. Germany's DAX index finished down 65.11 points, or 1.31%, to 4,919.50, despite news that March construction rose 5.8% and the country exited recession in the first quarter.
Asian stocks ended higher. Japan's benchmark Nikkei 225 index jumped 160.82 points, or 1.36%, to 11,961.98, led by cyclical stocks that rose on economic recovery hopes. Hong Kong's Hang Seng gained 41.91 points, or 0.36%, to 11,795.20.