Where Conspiracy and Reality Collide

Associated Press 

By MADLEN READ and TIM PARADIS , 02.05.09, 03:05 PM EST

 Investors shook off weak economic readings and placed bets on retail and technology stocks Thursday after a range of companies posted better-than-expected sales and profit reports. All the major indexes gained more than 1 percent, including the Dow Jones industrial average, which rose more than 100 points.

Retailers including Wal-Mart Stores Inc. and Macy’s Inc. turned in better-than-expected reports. Wal-Mart’s January sales beat Wall Street’s forecasts after the chain drew shoppers focused on necessities like groceries. Macy’s, which this week said it would slash 7,000 jobs, on Thursday raised its fourth-quarter and full-year forecasts after reporting its sales.

Overall sales numbers were still dismal, but investors had grown so fearful about falling sales that retail chain’s stocks had been badly beaten for months.

“We’re being overly pessimistic on things like retailers,” said Chris Cordaro, chief investment officer at RegentAtlantic Capital LLC in Morristown, N.J. “People realize you’re going to have shop somewhere.”

The technology-heavy Nasdaq composite index led the major market indicators after Akamai Technologies Inc. said its fourth-quarter earnings rose a better-than-expected 13 percent as more customers signed up for its Internet traffic-management services.

“The economy at some point will recover and when it does, tech is a pretty interesting play,” said Subodh Kumar, global investment strategist at Subodh Kumar & Associates in Toronto. “It will likely be one of the first movers.”

The reports helped the market overcome a flurry of bad news on the economics front. Unemployment benefits claims rose last week to a 26-year high, and factory orders fell for the fifth straight month in December. However productivity rose by 3.2 percent in the fourth quarter, more than twice what analysts expected.

Bank stocks pared early losses following speculation the government could funnel aid to regional banks. And investors examined reports that Senate Banking Committee Chairman Christopher Dodd, D-Conn., said the government could consider suspending accounting rules governing how companies value assets. This could make it easier for banks to avoid having to book huge losses each quarter on investments that have fallen in their worth but are hard to value.

Investors are also still waiting for a stimulus plan to pass the Senate, and the bill keeps swelling. Most recently, a new tax break for homebuyers pushed the cost well above $900 billion.

In midafternoon trading, the Dow industrials rose 106.49, or 1.34 percent, to 8,063.15. The Dow had been down 111 points early in the session.

Broader stock indicators also rose. The Standard & Poor’s 500 index rose 14.27, or 1.71 percent, to 846.50, and the Nasdaq composite index rose 31.90, or 2.11 percent, to 1,546.95.

The Russell 2000 index of smaller companies rose 8.44, or 1.88 percent, to 456.92.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.05 billion shares.

Stocks had tumbled on Wednesday after earnings from companies including two Dow components – Kraft Foods Inc. and Walt Disney Co. – disappointed investors.

Bond prices were mixed Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, fell to 2.90 percent from 2.94 percent late Wednesday. The yield on the three-month T-bill rose to 0.29 percent from 0.28 percent.

The dollar was mostly higher against other major currencies. Gold prices also climbed.

Light, sweet crude rose 67 cents to $40.99 a barrel on the New York Mercantile Exchange.

Investors are also focused on the week’s most highly anticipated economic gauge, the January payrolls report.

“There are some indications tomorrow’s unemployment report might not be as bad as expected,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, N.Y. “A lot of investors believe the market is undervalued at this level.”

Retailers climbed after their reports. Wal-Mart rose $1.68, or 3.6 percent, to $48.10, while Macy’s rose 53 cents, or 6.4 percent, to $8.85.

Among tech stocks, Akamai rose $2.58, or 18 percent, to $16.75.

Bank stocks moved higher. JPMorgan Chase & Co. rose $1.04, or 4.3 percent, to $25.08, and PNC Financial Services Group Inc. rose $1.59, or 5.5 percent, to $30.42.

Regional banks also rose. Huntington Bancshares Inc. rose 51 cents, or 35 percent, to $1.95. Regions Financial Corp. rose 49 cents, or 20 percent, to $2.99.

Overseas, Britain’s FTSE 100 rose 0.01 percent, Germany’s DAX index rose 0.39 percent, and France’s CAC-40 slipped 0.09 percent. Japan’s Nikkei stock average fell 1.11 percent.

 Original Forbes.com Article 

~ by Eric Harrington on February 5, 2009.

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