Beige Book report from the Federal Reserve lifted the markets out of the doldrums. Wednesday also brought several strong earnings announcements from several heavyweights, unexpectedly higher durable goods orders, and record new home sales.
The Dow Jones industrial average finished up 57.32 points, or 0.54%, to 10,637.09. The broader Standard & Poor's 500 index was up 5.63 points, or 0.46%, to 1,236.79. The tech-heavy Nasdaq composite was up 10.23 points, or 0.47%, to 2,186.22.
In economic news Wednesday, durable goods orders rose 1.4% in June, following May's 6.4% surge. Excluding transportation, orders rose 2.6%. This beat the average forecast, which was looking for a small decline in orders.
The Fed's Beige Book report found the economy has continued to expand throughout the June-July period, as expected, with strong growth in most manufacturing sectors. Labor markets also continue to improve, according to the report. All signs from the Beige Book seem to be consistent with another rate hike from the Federal Reserve's Open Market Committee, according to Action Economics.
U.S. new home sales rose to a new record in June, to 1.37 million, surpassing median forecasts. The number still didn't really surprise the bond market, however, given the strong gain in existing home sales on Monday, says Action Economics.
The most closely-watched economic news of the week will be Friday's advance GDP figure. The GDP is expected to rise 3.2%, with a 2.5% in the chain price index, marking a slowdown from the past two quarters, which have seen 3.8% gains in each.
After the close Tuesday, Sun Microsystems (SUNW
) posted second-quarter results. The server maker reported earnings of $121 million, or 4 cents a share, vs. 23 cents a share last year. Excluding one-time charges, earnings were 6 cents a share. This topped analyst expectations.
) posted a 6.8% drop in profit, to 70 cents a share down from 75 cents a share, on a 15% rise in revenue. Profits during the same period a year ago included one-time gaines, including a tax refund and the sale of one of Boeing's units. The aerospace manufacturer also raised its outlook to earnings of $2.75-$2.85 a share in 2005.
) saw net income of 12 cents, vs. 18 cents during the same period a year ago, as higher taxes offset a 26% rise in revenue. The online retailer said it expects between $1.76 billion and $1.91 billion in third-quarter sales, for total earnings between $8.28 billion and $8.67 billion for 2005.
Linear Technology reported net earnings of 34 cents a share in the second quarter, vs. 31 cents for the quarter a year ago, slightly beating analyst estimates. The company said that it was difficult to give a third quarter forecast with confidence, but anticpated similar sales to this quarter.
Electronic Arts (ERTS
)also reported second-quarter results after the close. The video game company saw a first quarter net loss of $58 million, or 19 cents a share, vs. earnings of 8 cents a share during the same period last year. The company also lowered its earnings estimate for the 2006 fiscal year.
The weekly oil inventory data reported a 2.3 million barrel draw in crude supplies, in line with market expectations. Distillate supplies were considerably higher than expectations, up 3.1 million barrels, while gasoline supplies fell by 2.1 million barrels, a bigger drop than expected. Oil prices were down 11 cents to $59.10 in volatile trading.
Treasury yields closed higher after a strong report on durable goods orders, record new home sales, and a Beige Book from the Fed that pointed toward continued economic growth. The 10-year note yield traded higher at 4.26%.
European stock markets finished higher Wednesday. London's FTSE 100 index was up 7.40 points, or 0.14%, to 5,263.60.
Germany's DAX index rose 11.86 points, or 0.24%, to 4,855.35.
In Paris, the CAC 40 index gained 12.35 points, or 0.28%, moving to 4,433.13.
Asian markets finished higher Wednesday. In Japan, the Nikkei index closed up 91.12 points, or 0.83%, at 11,835.08.
In Hong Kong, the Hang Seng index gained 31.93 points, or 0.22%, moving to 14,801.86.