U.S. stocks jumped Wednesday, erasing most of the previous day’s bruising losses as a positive outlook from the financial sector and a spate of strong earnings from airlines and other bellwethers gave investors reasons for optimism. The Dow Jones Industrial Average added 129.35 points, or 1.18%, to finish at 11107.97, while the Standard & Poor’s 500-stock index was higher by 12.27 points at 1178.17 and the Nasdaq Composite gained 20.44 points to 2457.39.
Materials and energy stocks were two of the best performing sectors, a day after both were clobbered by fears over Beijing’s attempts to slow the world’s second-largest economy. Cliffs Natural Resources added 3.6%, Freeport McMoRan Copper & Gold gained 2.8%, and Massey Energy jumped 5.1% amid reports the Richmond, Va., miner is exploring a potential sale of the company.
Transport stocks also soared, with the Dow Jones Transportation Average gaining 2.2% after a trio of airlines reported strong earnings. Delta Air Lines jumped 11% after swinging to a third-quarter profit and reporting strong forward bookings through the holiday season.
American Airlines parent AMR Corp. surged 13% after its first profit in two years, while US Airways Group gained 7.4% on strong earnings. JetBlue Airways and United Continental rode the wave of optimism, picking up 6.8% and 7.6% respectively. “People are getting confident that earnings are going to be good this year,” said Maris Ogg, president of Tower Bridge Advisors. “Maybe not to the level where we have 75% or 80% of companies beating expectations, but people are more confident the economy is on a more even keel.” Intel and Boeing helped advance the broad-based rally, which included all but three of the Dow’s 30 components and all 10 sectors of the S&P 500.
Boeing added 3.4% to lead the Dow components after the aerospace company said it swung to a quarterly profit from a year-ago loss and lifted its outlook. Intel gained 2.2% after it said it would invest up to $8 billion over several years to upgrade its manufacturing plants in the U.S. and build a new research facility in Oregon.
Also contributing were pharmaceutical companies, as Merck gained 1.3% and Pfizer added 1.6%. Even financial stocks joined in the rally, despite continuing worries over mortgage foreclosures.
Morgan Stanley pared deep morning losses to finish down by one penny after the investment bank’s net profit fell in the third quarter, and Wells Fargo gained 4.3% after the San Francisco bank posted its best-ever quarterly earnings and made encouraging remarks on the foreclosure issue. Goldman Sachs Group rose 1.8% after its second consecutive quarterly profit decline, of 40% from a year earlier, surpassed most analyst estimates.
BlackRock, however, fell 2.9% even after beating analysts’ forecasts with third-quarter earnings rising 74%. Bank of America, at the center of the foreclosure debacle, erased a steep morning decline to finish down 0.4%. Oppenheimer and Stifel both downgraded the stock, and the Charlotte, N.C., lender vowed to fight government-backed demands that it repurchase loans that allegedly didn’t meet underwriting guidelines and other promises. “There’s still a lot of headline risk around the financials, and that’s going to persist for some time,” said Jim Dunigan, managing executive of investments at PNC Wealth Management. “Most of the banks seem to have their arms around the challenges and they’re working through them, adjusting to the new financial regulations and business models. So if you can stomach the headline risk, you’re building value over time, but there’s still going to be some volatility.”
United Technologies reversed its morning decline to creep up 0.4% after third-quarter earnings for the maker of Otis elevators and Pratt & Whitney plane engines posted slower-than-expected revenue growth.
Abbott Laboratories dropped 0.9% after third-quarter net income fell 40%, while Yahoo added 2% to reverse most of Tuesday’s loss after the company reported a surge in profits. Online auctioneer eBay, which finished with a 0.5% gain, added another 7% in after-hours trading after beating earnings expectations.
Sanofi-Aventis added 2.1% on news that U.S. antitrust regulators have given the green light for its proposed acquisition of Genzyme. Genzyme, which also announced third-quarter net income that more than quadrupled on strong product sales, advanced 0.3%.
Genzyme is meeting Friday with investors and analysts to provide 2011 financial guidance and make its case that the offer doesn’t adequately value its existing business, its recovery plans or its pipeline products. Danish drug maker Novo Nordisk jumped 11% after the Food and Drug Administration sent a rival diabetes drug back for more testing. The makers of that drug fell, with Amylin Pharmaceutical down 46%, Alkermes down 28%, and Eli Lilly down 3.9%.
BHP Billiton rose 3.3% despite a growing likelihood Saskatchewan’s government would vote down its proposed $38.6 billion takeover of Potash Corp. of Saskatchewan, The Wall Street Journal reported. Potash fell 0.7%.
The broad gains came amid continued weakness in the dollar. The U.S. Dollar Index, which measures the greenback against a basket of six others, fell 1.3% as the euro jumped to almost $1.40. The yen strengthened to trade at 81.16 yen to the dollar–its strongest finish in 15 years. The benchmark 10-year Treasury note gained, pushing the yield down to 2.47%. Gold gained, while oil rose to $81.77 a barrel.
Source: Dow Jones Newswires