Major indexes charged ahead in Thursday's final hour after a brief bout of weakness. Investors were looking ahead to Friday's jobs report
Volatility continues to rule the day on Wall Street. U.S. stock indexes ended higher Thursday in another choppy session that saw the S&P 500 index, up for most of the day, briefly dip into negative territory before returning solidly into the green in the last hour of trading. Equities were helped by some solid profit reports and news of a smaller-than-expected initial jobless claims figure for the last week in July.
But investors remain tentative in view of wild swings between rallies and sell-offs this week, showing a lack of conviction in a sustained market uptrend amid growing credit-crunch concerns. Some observers are uncertain whether the housing slump and worsening conditions in credit markets will drive the economy into recession.
On Thursday, the Dow Jones industrial average was up 100.96 points, or 0.76%, at 13,463.33, boosted by strength in Honeywell (HON). The broader S&P 500 index rose 6.39 points, or 0.44%, to 1,472.20. The tech-heavy Nasdaq composite index climbed 22.11 points, or 0.87%, to 2,575.98.
Optimism over solid earnings reports from Nokia (NOK), Lear (LEA), Eastman Kodak (EK), and CVS Caremark (CVS) -- and takeover deal for CheckFree (CKFR) -- was tempered by ongoing worries about deteriorating credit markets, as subprime lender Accredited Home Lenders (LEND) warned of possible bankruptcy, according to Standard & Poor's MarketScope.
The tone for the broader market was positive, with 22 shares gaining in price for each 11 shares declining on the NYSE, while Nasdaq breadth was 17-13 positive in heavy volume. The CBOE volatility index, or VIX, widely regarded as the market's "fear gauge", which surged to five-year highs on Wednesday, ended lower Thursday.
Looking ahead to Friday, the big event for Wall Street will occur ahead of the start of trading: the Labor Dept.'s employment report for July. Economic research outfit Action Economics expects nonfarm payrolls to be up 125,000 on the month, which is below the 145,000 average monthly gain in 2007, but in line with June's 133,000 gain.
Another labor-market indicator provided a hopeful sign on Thursday. Initial jobless claims rose by only 4,000 to 307,000 for the week ended July 28, bringing the July average to 305,000, versus averages of 318,000 in June. This week's figure is consistent with a tight labor market, according to Action Economics.
In other economic news Thursday, U.S. factory orders rose 0.6% in June, offsetting the 0.5% drop in May, but under the 1.0% increase markets had expected. Excluding transportation, orders fell 0.5%.
Another subprime lender was in the spotlight Thursday. Accredited Home Lenders shares plunged amid a dire warning from the company. Accredited said that based on unprecedented market events, the likelihood of it achieving profitable operations in the near term, possibly for an extended period of time, is no longer likely. The company cannot assure it will continue to operate as going concern. This comes on the heels of homebuilder Beazer Homes' (BZH) 40% plunge on Wednesday after it denied a report about bankruptcy and liquidity problems.
In spite of some rebounds in stocks hurt recently by contagion fears, the market is nervous about more financial problems related to subprime lending to surface in the weeks ahead. Mortgage banker sources cited by Action Economics say rates on 30-year fixed mortgages are going up even for prime borrowers even when Treasury yields decline as credit spreads widen and liquidity for trading of mortgages on the secondary market dries up.
In the energy markets Thursday, September West Texas Intermediate crude oil futures rose 33 cents to $76.86 per barrel on some late buying amid uncertainties about supply and demand. Despite a 6.5 million barrel decline in inventories last week, WTI stocks are still 12% above the five-year average, notes S&P MarketScope. Some dealers cited by S&P note that OPEC is not producing enough oil to meet potentially high global demand this fall and winter, but U.S. refineries have increased production, which has eased product supply concerns.
Among stocks in the news Thursday, Walt Disney Co. (DIS) reported a third-quarter profit of 58 cents a share from continuing operations, up from 51 cents a share a year ago, on a 6.7% rise in revenue. The entertainment company said it has acquired Club Penguin, an online virtual world for kids.
Viacom Inc. (VIA.B) posted better-than-expected earnings of 54 cents a share, excluding 9 cents in one-time gains, for the second quarter, unchanged from a year ago. Despite film marketing costs weighing on the latest results, recent releases of Transformers and Shrek 3 should contribute to profits in the second half of 2007, with MTV restructuring gains starting in 2008, Standard & Poor's said.
Walgreen Co. (WAG) reported a 7.2% increase in same-store sales for July and an 11% rise in total sales.
Eastman Kodak (EK) narrowed its second-quarter loss to 47 cents a share from $1.24 a year ago, aided by lower sales, general and administrative costs, as well as lower research and development costs, which offset a 7% drop in worldwide sales. The company still expects digital revenue to grow by 3% to 5% in 20p07, while total revenue is expected to fall 4% to 7%.
Mattel Inc.'s (MAT) Fisher-Price unit voluntarily recalled some nearly one million toys made by a contract manufacturer in China that were produced using non-approved paint pigment containing lead, which violates industry standards. The toys being recalled include popular pre-school characters such as Elmo and Big Bird.
In merger news Thursday, Checkfree shares surged after the electronic commerce processor agreed to be acquired by Fiserv Inc. (FISV) in all-cash deal valued at about $4.4 billion.
Two companies braved the volatile environment on Wall Street to stage initial public offerings. Shares of business info provider Dolan Media (DM) and Genpact Ltd. (G), a provider of business process outsourcing services, were higher in their fist day of public trading Thursday.
European stock markets ended higher Thursday, though indexes gave back some of the session's gains in late trading. In London, the FTSE 100 index rose 0.8% to 6,300.30. Germany's DAX index was 0.81% higher at 7,534.13. In Paris, the CAC 40 index was up 0.49% to 5,682.07.
Asian markets traded mostly higher on Thursday. In Japan, the Nikkei index climbed 0.67% to 167984.11. In Hong Kong, the Hang Seng index slipped 0.05% to 22,443.25. In China, the Shanghai Composite index rose 2.49% to 4,407.73.
Treasuries rose modestly Thursday, as the bond market extended a period of consolidation to five consecutive sessions ahead of the July labor report Friday. The 10-year Treasury note rose 07/32 in price to 97-00/32 for a yield of 4.76%. The 30-year bond climbed 13/32 to 97-22/32 for a yield of 4.89%.