Buoyed by a surprisingly strong GDP report and a sharp decline in oil prices, the blue chips stayed hot on Thursday with a 200-point jump on scant volume.
Today's Market
The Dow Jones Industrial Average rose 212.67 points, or 1.85% to 11715.18, the Standard & Poor’s 500 gained 19.02 points, or 1.48%, to 1300.68 and the Nasdaq Composite picked up 29.18 points, or 1.22%, to 2411.64. The FOX 50 added 14.48 points, or 1.58%, to 930.60.
The day's rally carried the Dow to its sixth positive closing bell out of the past seven trading sessions. The benchmark index has now risen more than 340 points since last Tuesday.
In addition to the relatively strong GDP report and a $2 slide in crude, give credit for the rally to several better-than-expected earnings reports from names like Tiffany (TIF) and Zale (ZLC), as well as a big day for the financial sector. Mortgage giants Fannie Mae (FNM) and Freddie Mac(FRE) extended their win streaks with big gains.
The Dow was led on Thursday by the index's financial components, namely insurer AIG (AIG) and Bank of America (BAC). Financial giants Citigroup (C) and JPMorgan Chase (JPM) weren't far behind. Coca-Cola (KO) was the only blue-chip stock failing to join in the rally.
The Nasdaq Composite didn't enjoy as much strength as the broader indexes but still closed more than 1% higher ahead of PCmaker Dell's (DELL) quarterly results after the closing bell. Level 3 Communications (LVLT) and Amylin Pharmaceuticals (AMLN) led the way up on the Nasdaq 100, jumping 7% a piece. Tech giants eBay(EBAY) and Cisco (CSCO) also closed with solid gains.
It's worth noting that volume on the New York Stock Exchange remains very low. Just 950 million shares exchanged hands on the NYSE on Thursday, compared to a typical day's volume of 1.3 billion.
The positive mood on Wall Street was set by the Commerce Department's gross domestic product report, which measures the growth of the nation's goods and services. GDP was upwardly revised to show the economy grew at a rate of 3.3% last quarter thanks to the economic stimulus package and strong exports. Originally, the government said the economy grew at a more modest pace of 1.9%.Economists had been expecting a smaller bump up to a pace of 2.7%.
In any case, it's a much better reading than the first-quarter's GDP growth of 0.9%. Without the benefit of the stimulus package and as slowing global economies weigh on exports, WallStreet is worried growth could slow considerably or even turn negative over the next two quarters.
Also, the Labor Department said jobless claims fell by 10,000 last week to 425,000 -- the sixth straight week of claims exceeding 400,000, the longest such streak since the summer of 2003. Economists surveyed by Dow Jones Newswires had been expecting claims would have fallen by 12,000. Continuing claims for unemployment jumped by 64,000 to 3.42 million -- the highest level sinceNovember 2003.
Despite a series of scary headlines on Tropical Storm Gustav, crude oil prices took a nose dive on Thursday, ending a three-day win streak. Crude closed down $2.56 to $115.59 a barrel. Earlier in the day oil prices had nearly eclipsed $120 a barrel.
The energy market didn't appear to be overly concerned about Gustav, which weather forecasting firm Planalytics said is "likely to explode into a major hurricane" and threaten U.S. Gulf oil and gas production early next week.
Traders began to bet the government would tap the Strategic Petroleum Reverse after the International Energy Association pledged to release emergency oil supplies if needed. The last time the Energy Department took such a move was three years ago this week when Hurricane Katrina slammed into the Gulf coast.
Corporate Movers
Lehman Brothers(LEH) is facing a “real likelihood” of a hostile takeover by a bank or private equity firm, Ladenburg Thalmann analyst Richard Bove said, according to Reuters. The influential analyst predicted the saga won’t continue much longer, the news agency reported. Separately, Lehman plans to lay off as many as 1,500 employees ahead of its quarterly results on September 15, The New York Times reported. The job cuts would amount to 6% of the struggling investment bank's headcount and add to the 6,000 employees already laid off since June 2007, the newspaper reported.
Toyota (TM) downgraded its global sales forecast by 700,000 vehicles as the auto maker reacts to rising gasoline prices and weaker economic forecasts around the world. The auto maker now sees 2009 sales of 9.7 million vehicles, which would represent a 2% rise in sales from the targets for this year. The 2008 goal of 9.5 million was downgraded just a month ago. Even as sales growth has slowed, Toyota has narrowed the gap between it and the world's No. 1 auto maker, General Motors (GM).
Fannie Mae(FNM) unveiled a management shakeup late Wednesday, including a new chief financial officer, chief risk officer and chief business officer. The mortgage giant's board also gave its chief executive officer a vote of confidence, saying it is "firmly committed" to DanielMudd. Fannie and sister company Freddie Mac(FRE), which back or own more than $5 trillion of U.S. mortgages, have been under pressure to raise capital and avoid a government bailout that could wipe out shareholders.
Tiffany (TIF) beat the Street with second-quarter earnings of 63 cents per share and boosted its full-year earnings outlook, sending its shares soaring. The high-end jeweler said sales rose to $732.4 million. Analysts had been expecting earnings of 55 cents on $728.72 million in sales. Looking ahead, Tiffany boosted its 2008 earnings view by two cents, to a range of $2.82 to $2.92 per share.
Sears (SHLD) posted a 62% drop-off in second-quarter profit, missing analyst estimates. The retailer posted an adjusted-profit of 21 cents per share on sales of $11.76 billion. Analysts had been looking for stronger results of 33 cents per share on revenue of $11.7 billion. Sears sees little help from the economy in the near future, likely resulting in more pressure on sales and profit margins.
Zale (ZLC) lost 15 cents per share in its fiscal fourth quarter but managed to exceed Wall Street’s expectations, boosting its stock to 52-week highs. The jeweler’s revenue rose 6.1% to $456 million. Analysts had been expecting a wider loss of 57 cents per share on $449.13 million in sales. Zale said it sees adjusted-earnings for fiscal 2009 in the range of $1.10 to $1.25 per share, compared to analyst estimates from Thomson Reuters for 90 cents.
William-Sonoma (WSM) posted second-quarter earnings excluding one-time items of 8 cents per share, topping forecasts of 7 cents. The retailer’s revenue slumped 4.6% to $819.6 million, missing calls for $832.40 million in revenue. Shares dove to 52-week lows as the home furnishings company cut its outlook for the third quarter and the full year, hurt by the weak housing market.
Microsoft (MSFT) unveiled Internet Explorer 8 a day ago, a new browser aimed at staving off increasing competition from Mozilla’s Firefox browser. The latest Explorer version includes new security and privacy features and a “smart” address bar. Internet Explorer is the world’s most widely-used browser, comprising 75% of the market share.
World Markets
The Dow Jones Euro Stoxx 50 Index, an index that tracks the 50 largest companies in Europe, rose 60.27 points, or 1.83%, to a reading of 3359.42. London's FTSE 100 Index, added 73.10 points, or 1.32%, to 5601.20.
On the European continent, the CAC 40 Index in Paris picked up 88.41 points, or 2.02%, to 4461.49 while Germany's DAX jumped 99.51, or 1.57%, to 6420.54.
In Asia, Tokyo's Nikkei 225 benchmark index rose 15.29 points, or 0.12% to 12768.25. The Hong Kong's Hang Seng Index dropped 492.43 points, or 2.29%, to 20972.29.
