Markets & Finance

Stocks Finish Higher


Investors bet that Google's earnings would be better than expected. Earlier, housing starts for March plunged, while the Philly Fed index improved

After wavering earlier on some gloomy economic news about labor and housing, stocks pushed higher as investors placed bets that Google's (GOOG) first quarter earnings report would top analysts' expectations. After the market close, Google delivered EPS (non-GAAP) of $5.16, above the $4.93 forecast.

Tech stocks led the way higher Thursday, with the tech-heavy Nasdaq composite index climbing 43.64 points, or 2.68%, to 1,670.44.

The 30-stock Dow Jones industrial average gained 95.81 points, or 1.19%, to 8,125.43. The broad S&P 500 index rose 13.24 points, or 1.55%, to 865.30.

Treasuries were lower, sending the yield on 10-year notes up to 2.83%. The dollar index was higher at 85.12. Gold futures were down to $879.70. Oil futures moved up to $49.95.

In economic news Thursday, weekly jobless claims fell 53,000 to 610,000, but continuing claims rose 172,000 to a record 6,022,000. Also, March housing starts plunged 10.8% after surging in February. But building permits climbed 17.2%. And the Philadelphia Fed index rose to -24.4 from -35.0.

Some investors are questioning when the economy will recover. "In the past few weeks, economic data had been supporting the bulls' justification of a 20%+ advance for the major equity indices since the March 9 low," wrote Sam Stovall, chief investment strategist for Standard & Poor's, in a note Apr. 16. "Now, economic reports are testing this belief and are fueling near-term concern that an economic recovery may be more than six months off."

Stovall says S&P still thinks an end to the current recession will occur by the middle of the second half of 2009. But he says "the continued displacement in credit markets represents a potential impediment to long-term market and economic recoveries."

JPMorgan Chase & Co. (JPM) posted $0.40, vs. $0.67, first quarter EPS on 50% higher revenue. The Street was looking for $0.32 EPS. JPM notes extremely high credit costs of $10 billion (including $4 billion added to reserves), largely in Card Services and Retail Financial Services. It says it's reasonable to expect additional increases to credit reserves if the economic environment worsens.

General Growth Properties (GGP) announced it is seeking relief to reduce and restructure its debts under Chapter 11 bankruptcy. In addition, it says about 158 regional shopping centers owned by GGP, certain other GGP subsidiaries have also filed for protection.

Nokia (NOK) posted EUR 0.10, vs. EUR 0.39, first quarter non-IFRS EPS on 27% revenue decline. It expects second quarter mobile device market share to increase quarter-to-quarter and for 2009.

On the positive side, Rosetta Stone (RST) had a successful debut for its IPO today, shooting up 38% to 25 from its 18 offering price.

EBay (EBAY) reached a tentative agreement to buy a controlling stake in GMarket (GMKT), South Korea's largest online auction Web site. Under the agreement, eBay will make a cash tender offer of $24 for each GMKT common and American depositary share outstanding, for a total purchase price of up to about $1.2 billion, assuming all outstanding shares are tendered. The deal is expected to close in the current quarter.

Harley-Davison (HOG) shares rallied after the company posted a lower first quarter profit, but reaffirmed its plans to ship between 264,000 and 273,000 Harley-Davidson motorcycles to dealers worldwide in 2009.

Activision Blizzard (ATVI) says due to the better-than-expected performance of its titles, its first quarter net revenues and EPS are tracking ahead of its prior outlook. Notes, on Feb. 11, it provided an outlook of first quarter GAAP EPS of $0.08 on $860 million revenues, $0.03 non-GAAP EPS on $550 million revenue.

Southwest Airlines (LUV) posted $0.03 first quarter loss, vs. $0.06 EPS (excluding special items), on 6.8% revenue drop. It says first quarter results were disappointing, but not surprising given the current economic environment. It currently expects another year-over-year decline in second quarter operating unit revenues, based on revenue and booking trends thus far.

Sun Microsystems (JAVA) would be willing to resume acquisition talks if IBM makes a stronger commitment to complete the purchase, according to Bloomberg News.

McCormack is senior producer for BusinessWeek.com's Investing channel.

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