Major indexes pushed higher amid strength in European and Asian bourses, ahead of Friday's closely watched payrolls report
Stocks finished higher Thursday amid a global rally that began in Asia on upbeat economic sentiment. Major indexes pared gains in afternoon trading, however, amid concerns about subprime lender New Century Financial's (NEW). Analysts continued to debate whether the market has hit a short-term bottom, with some traders nervous ahead of Friday's employment report, says Standard & Poor's Equity Research.
On Thursday, the Dow Jones industrial average rose 68.57 points, or 0.56%, to 12,261.02, paced by AT&T (T) on an A.G. Edwards upgrade. The broader Standard & Poor's 500 index added 9.92 points, or 0.71%, to 1,401.89. The tech-heavy Nasdaq composite was up 13.09 points, or 0.55%, to 2,387.73.
NYSE breadth was decidedly positive, with 25 issues advancing for every 8 declining. Nasdaq breadth was 18-12 positive.
The market's latest rebound may not signal an end to its recent woes, some analysts say. "While most markets recently reversed their respective intermediate uptrends from last summer's lows, the larger bull market trends from the 2002-2003 low remains intact," says Walter Murphy, Jr., technical research analyst at Merrill Lynch, in a report. "Since medium term momentum is overbought and deteriorating, further weakness appears likely in the weeks ahead."
Others say worries about subprime loans shouldn't spread into a broader crisis. "Poor performance of recent subprime mortgages, ongoing distress among lenders, and the possibility of a broader credit crunch continue to worry market participants," says Goldman Sachs economist Andrew Tilton, in a note to clients. "But we emphasize we do not see this broad 'mortgage credit crunch' as the most likely outcome."
In economic news Thursday, weekly jobless claims fell 10,000 to 328,000 in the week ended Mar. 3, more than expected, following the previous week's 338,000 reading. Investors were awaiting Friday's report on February nonfarm payrolls, which Action Economic sees rising by 90,000.
Overseas, the European Central Bank raised its benchmark interest rate 25 basis points to 3.75%. ECB President Jean Trichet said rates were still on the "accommodative side," likely indicating more hikes to come.
Meanwhile, the Bank of England kept its key lending rate unchanged and signaled it will remain on the sidelines if inflation pressures ease.
The value of the Chinese yuan rose after U.S. Treasury Secretary Henry Paulson said Chinese officials should loosen controls on interest rates, accelerate sales of state-owned banks, and let the exchange rate move more freely.
Among Thursday's stocks in the news, retailers were posting lackluster February sales results. Wal-Mart (WMT), Costco (COST), Limited (LMT), and J.C. Penney (JCP) were among companies reporting lower monthly same-store sales than analysts expected.
On the upside, Target (TGT), Nordstrom (JWN) and Saks (SKS) beat Wall Street sales forecasts.
Chip equipment makers like Applied Materials (AMAT) helped lead the market higher after Morgan Stanley raised its recommendation on the sector from in-line to attractive.
However, New Century Financial was sharply lower amid speculation the subprime mortgage lender might file for bankruptcy, following the resignation of board member David Einhorn.
Elsewhere, Verizon (VZ) was higher after a federal judge ordered Internet phone carrier Vonage (VG) to the pay the company $58 million in a patent-infringement ruling.
Apple (AAPL) edged higher following an American Technology Research report the iPod maker might launch a new laptop this year that will save data on flash memory chips instead of a hard drive.
Shares of Ford (F) gained after Credit Suisse raised its recommendation on the automaker from underperform to neutral.
Monster Worldwide (MNST) was higher after Citigroup raised its recommendation on the staffing provider from hold to buy.
On the M&A front, Citigroup (C) was higher on a report the bank might buy Taiwan's Bank of Overseas Chinese for $425 million. Earlier this week, Citigroup bid $10.8 billion for control of Japan's Nikko Cordial.
CVS (CVS) raised its takeover bid for Caremark Rx (CMX), offering to pay $52.96 a share, plus a one-time dividend of $7.50 per share. The previous dividend offer was $6 per share. The bid follows a $26.84 billion, or $61.73 a share, offer from Express Scripts (ESRX).
In the energy markets, April West Texas Intermediate crude oil futures fell 18 cents to $61.64 a barrel, after running into technical resistance.
European markets finished higher. The FTSE-100 index in London rose 71.2 points, or 1.16%, to 6,227.7. Germany's DAX index added 95.48 points, or 1.44%, to 6,713.23. In Paris, the CAC 40 index was up 69.19 points, or 1.27%, to 5,524.26.
Asian markets ended solidly higher. In Japan, the Nikkei 225 index climbed 325.69 points, or 1.94%, to 17,090.31. In Hong Kong, the Hang Seng index gained 256.53 points, or 1.36%, to 19,175.17. Korea's Kospi index advanced 12.94 points, or 0.92%, to 1,423.89.
Treasury yields rebounded modestly amid the drop in weekly jobless claims and speculation Friday's labor report may beat expectations. The 10-year note fell in price 05/32 to 100-30/32 for a yield of 4.51%, while 30-year bonds dropped 11/32 to 101-19/32 for a yield of 4.65%.