Markets & Finance

Falling Oil Fuels Stock Gains


Stocks finished higher Thursday, helped by lower oil prices, firm retail sales and the latest round of earnings reports. Friday's nonfarm payroll report could determine how much further stock averages rise, says Standard & Poor's Equity Research.

The Dow Jones industrial average rose 38.58 points, or 0.34%, to 11,438.86. The broader Standard & Poor's 500 index added 4.4 points, or 0.34%, to 1,312.25. The tech-heavy Nasdaq composite climbed 19.93 points, or 0.87%, to 2,323.9, helped by solid earnings from Expeditors International (EXPD) and Whole Foods Market (WFMI).

Technical indicators are fairly upbeat, some analysts say. "We believe the NASDAQ 100 lagged as it is still working off a short-term overbought reading, but the intermediate trend remains positive," says Merrill Lynch chief market analyst Mary Ann Bartels. "The market is considered to be in an uptrend as long the S&P 500 stays above 1260."

April nonfarm payrolls are expected to rise 205,000, which could raise the likelihood of further tightening by the Federal Reserve, says Action Economics. Also Friday, March consumer credit is seen rising $4.5 billion.

Market players were digesting strong April retail sales figures Thursday. Wal-Mart (WMT), Costco Wholesale (COST), Pacific Sunwear (PSUN) and Limited Brands (LTD) were among retailers beating Wall Street projections.

Abercrombie & Fitch (ANF), Nordstrom (JWN) and even recently disappointing Gap (GPS) also reported higher-than-expected sales.

The technology sector got a boost from Microsoft (MSFT), which was higher following a decline Wednesday. The software giant announced a new targeted advertising push against rival Google (GOOG).

In earnings news, manufacturing conglomerate Tyco International (TYC) was higher after posting a fivefold increase in profit for its fiscal second quarter.

Paper maker International Paper (IP

slipped despite posting a first-quarter loss of $1.2 billion.

On the downside, Eastman Kodak (EK

was lower after posting a sixth consecutive quarterly loss. The film and imaging company also said it is considering selling its health unit, which includes medical printers and x-ray film.

Financial services company Prudential (PRU) was lower after issuing lower guidance following an 11% drop in first-quarter profit.

Meanwhile, coffee chain Starbucks (SBUX) was up after late Wednesday posting a 27% rise in second-quarter earnings.

In broker calls, Franklin Resources (BEN) was higher after Bear Stearns upgraded the asset manager from peer perform to outperform (see BW Online, 05/02/06, "Franklin: Healthy, Wealthy, and Wise").

Friday's earnings calendar is relatively light. Companies set to report include Warren Buffett's Berkshire Hathaway (BRKA), Sanofi-Aventis (SNY) and Warner Music Group (WMG).

On the economic front, the Labor Department said U.S. first-quarter nonfarm productivity rebounded to 3.2%, from a downward-revised 0.3% fourth-quarter decline. That's a little stronger than expected, but may not have much impact on the markets, says Action Economics. Initial jobless claims rose 5,000 to 322,000 in the week ended Apr. 29, also a little above forecasts.

Separately, U.S. personal income for March was revised lower to an increase of $49.9 billion, or 0.5%, over the same period a year earlier. That's a change from the originally reported gain of $88.8 billion, or 0.8%, due to improperly included Medicare payments.

In the energy markets Thursday, June West Texas Intermediate crude oil futures closed down $2.34 at $69.94 a barrel. A weekly inventory report Wednesday showed supplies unexpectedly rose 1.7 million barrels.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 26.9 points, or 0.45%, to 6,036.9. Germany's DAX index climbed 70.36 points, or 1.18%, to 6,039.32. In Paris, the CAC 40 index gained 39.76 points, or 0.77%, to 5,233.7.

Asian markets finished mixed. In Hong Kong, the Hang Seng index fell 13.05 points, or 0.08%, to 17,013.93. Korea's Kospi index rose 5.85 points, or 0.41%, to 1,441.02. Japan's Nikkei 225 index was closed for a holiday after on Tuesday rising 228.06 points, or 1.35%, to 17,153.77.

Treasury Market

Prices for 10-year Treasury notes edged lower to 95-01/32 with a yield of 5.15%, while 30-year bonds inched higher to 89-00/32 for a yield of 5.23%.


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