Markets & Finance

Stocks Post Strong Finish, Led by Blue Chips


Stocks finished Monday's session with robust gains as earnings reports from Procter & Gamble (PG) and McDonald's (MCD) encouraged buying.

Other news helped buoy investors. Developments in talks with North Korea suggested that the country may curb its nuclear program. And a large legal settlement with Wall Street firms also appeared to benefit markets.

The Dow Jones industrial average index finished up 165.26 points, or 1.99%, to 8,471.61. McDonald's, SBC Communications (SBC), AT&T (T) and Intel (INTC) headed the positive column.

The broader Standard & Poor's 500-stock index added 16.03 points, or 1.78%, to 914.84. Meanwhile, the tech-laden Nasdaq composite index gained 27.70 points, or 1.93%, to 1,462.24.

So far, the earnings season has given Wall Street reasons to cheer, as cost-cutting has resulted in few disastrous reports. Even McDonald's, which has been trying to turn its business around, said first-quarter net income rose to $327.4 million, or 26 cents per share, up from $253.1 million, or 20 cents, in same year-ago period. The company also outlined plans to reduce 2003 capital spending to $1.2 billion, down 40%, in an attempt to increase sales at already existing operations.

Consumer products giant Procter & Gamble said its quarterly profit rose to $1.27 billion, or 91 cents a share, in the fiscal third quarter, up from $1.04 billion, or 74 cents a share, a year ago. Results at both McDonald's and P&G were boosted by sales of tooth whitening products and favorable foreign exchange rates.

More earnings are on tap Tuesday: Concord EFS (CE), JDS Uniphase (JDSU), Halliburton (HAL) and Northrop Grumman (NOC) are set to announce their latest quarterly reports.

Terms of a final settlement to resolve allegations that major brokerage firms issued biased ratings on stocks to lure investment-banking business may also be lifting market sentiment. Individual analysts Henry Blodget of Merrill Lynch (MER) and Jack Grubman of Citigroup's (C) Solomon Smith Barney will reportedly pay $20 million as part of the $1.4 billion settlement involving 10 Wall Street banks.

On the geopolitical front, North Korea reportedly offered to suspend its nuclear program in exchange for security assurances and resumption of diplomatic standing with the U.S.

The latest World Health Organization update on SARS suggests that many Asian countries have contained the health crisis. Investors will have more to mull amid a meeting Tuesday in Bangkok to address the spread of SARS.

In economic news, an update on personal income came in as expected, up 0.4% in March. February figures were revised to up 0.2% on income and up 0.1% on spending. Disposable income rose 0.3% and is up 4.4% year over year. These data are close to expectations and won't have much impact on trading.

Traders will get more economic data later this week. "Overall, we expect the data to be encouraging, although we would be surprised if the numbers were conclusive," says economic research firm MMS International. Tuesday, investors get an early read on consumer confidence for April. MMS expects the figure to rise to 75.0 from 62.5.

Treasury Market

Prices of U.S. Treasuries finished lower as stocks rallied. Expectations of sluggish manufacturing and employment data later in the week and lower oil prices are supportive of Treasuries, says MMS.

Updates on manufacturing gauges Chicago-PMI and ISM are due later in the week as are auto sales, which will be a key indicator on consumption expecations for April. The employment report, however, may command less interest than usual as the normal lag of hiring relative to activity could have traders focusing more on the leading indicators of economic activity, says MMS.

MMS notes that traders will also look to the Treasury Dept.'s scheduled Apr. 28 announcement of second and third quarter borrowing requirements, and the Treasury's scheduled Apr. 30 announcement of its May refunding package.

World Markets

European stock markets finished higher, buoyed by gains in U.S. markets. London's FTSE index finished up 70.10 points, or 1.81%, to 3,940.30. The biggest contributors to the advance in the FTSE included HSBC Holdings, BP-Amoco, Barclays, Lloyds, Royal Bank of Scotland, and Vodafone. In Frankfurt, the DAX index added 115.69 points, or 4.08%, to 2,953.92. Siemens, E.ON, Allianz, Deutsche Bank and DaimlerChrysler were among the issues leading the way higher. In Paris, the CAC 40 index finished higher by 82.83 points, or 2.89%, to 2,949.57.

In Asia, stocks finished mixed. Worries about SARS and its effect on business, continued to weigh. Japan's Nikkei 225 index finished Monday's session down 91.62 points, or 1.19%, at 7,607.88. Losses in bellwether issue Sony paced declines. Meanwhile, Hong Kong's benchmark Hang Seng index added 26.03 points, or 0.31%, to 8,435.04.


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