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Stocks finished with strong gains on Wednesday after a report showed solid growth for the U.S. economy in the fourth quarter and oil prices fell. The strength in stocks partly reflected short covering and bargain hunting after recent weakness, according to Standard & Poor's MarketScope.
The Dow Jones industrial average jumped 135.23 points, or 1.3%, to 10,540.93. The broader Standard & Poor's 500 index gained 16.05 points, or 1.38%, to 1,181.41. The Nasdaq composite index climbed 31.79 points, or 1.61%, to 2,005.67.
In the energy markets Wednesday, May West Texas Intermediate crude oil settled down 24 cents at $53.99 per barrel, after ranging between $52.50 and $54.40, following a higher than expected build in crude inventories. Stocks rose by 5.4 million barrels, according to EIA data, where the Street had been expecting a 2.2 million barrel rise.
A few economic reports are coming out on Thursday. Economists expect February factory orders to rise 0.5%, while shipments decline 0.5%. The strong ISM reading and industrial production gain in February suggest it was a solid month for factory activity, although the disappointing set of durable goods data have dampened the forecast, says Action Economics.
The March Chicago purchasing managers index is seen falling to 60.5 from February's better-than-expected 62.7. This survey continues to run much higher than all the other factory surveys, notes Action Economics.
February personal income is expected to rise 0.4%, while consumption increases 0.5%. The price indexes, including the new market-based measures, will get increased scrutiny given heightened concerns with brewing inflation pressure, notes Action Economics.
And Thursday's release of initial jobless claims is forecast to be 319,000 for the week ended Mar. 26. For most of 2005, initial claims have hovered in a lower 300,000 to 325,000 range, compared to a 325,000 to 350,000 range for most of 2004, says Action Economics. Historically, a claims range of 300,000-325,000 has translated to monthly payroll gains in the 200,000-250,000 range, says Action Economics. This report sets up the market for the March employment data that will be released on Friday.
On Wednesday, investors got an update on
gross domestic product. The final reading for fourth-quarter GDP growth was left at 3.8%, unrevised from the preliminary 3.8% rise and 3.1% advanced readings. The chain price index was boosted to up 2.3% from 2.1%. The growth rate was a little softer than the 4.0% expected and may help support modest gains in Treasuries, though the bump up in the deflator may offset, says Action Economics.
Gains in some large-cap stocks helped fuel the rally Wednesday. Procter & Gamble (PG
) rose in the wake of positive analyst comments regarding the stock's valuation.
Confirmation that Mark Hurd will be Hewlett-Packard's (HPQ
) new CEO prompted a few analyst upgrades on the stock.
Semiconductor stocks rallied Wednesday, sparked by a strong earnings report from Micron Technology (MU
). Late Tuesday, the memory-chip maker said net income for the quarter ended Mar. 3 rose to 17 cents a share from a year-earlier loss of 4 cents a share, above the consensus forecast of 15 cents a share.
Amid other stocks in the news, American International Group (AIG
) said it discovered improper documentation for a controversial transaction with a Berkshire Hathaway (BRK.A
) unit at the center of the probes and that it will delay filing its 2004 annual report until Apr. 30, according to news reports. On Tuesday, Hank Greenberg said he will retire as AIG's nonexecutive chairman, amid an investigation into the insurance company. AIG shares fell on Wednesday.
Electronics retailers Best Buy (BBY
) and Circuit City Stores (CC
) were expected to report quarterly earnings today, but said they will delay these reports. Best Buy says it will release results Friday, and Circuit City says it will report within the next two weeks.
Treasury yields fell in the wake of the steady final GDP print, which was trumped by the uptick on the PCE deflator, says Action Economics. The 10-year note closed with a yield of 4.56%.
European stock markets ended lower on Wednesday. London's Financial Times-Stock Exchange 100 index was down 18.3 points, or 0.37%, to 4,900.7.
Germany's DAX index fell 4.37 points, or 0.1%, to 4,347.52. In Paris, the CAC 40 index lost 17.04 points, or 0.42%, to 4,064.61.
Asian markets finished mixed on Wednesday. In Japan, the Nikkei 225 index fell 33.94 points, or 0.29%, to 11,565.88 after a report showed industrial production fell more than expected in February, signaling slowing economic growth.
In Hong Kong, the Hang Seng index rose 13.87 points, or 0.10%, to 13,425.75.