Earnings gains drive stocks higher on Wall Street
By STEVE ROTHWELL
AP Markets Writer
NEW YORK (AP) -- Earnings gains at major U.S. companies and encouraging economic news pushed U.S. stocks to record levels Thursday.
A drop in claims for unemployment benefits signaled a healthier economy and encouraged investors to buy stocks. Separately, the Federal Reserve Bank of Philadelphia said manufacturing activity in the mid-Atlantic region grew in July at the fastest pace in more than two years.
Among companies reporting second-quarter earnings, Morgan Stanley was one of the standouts, rising $1.19, or 4.5 percent, to $27.72. The New York bank reported sharply higher earnings driven by investment banking gains. IBM rose $5, or 2.6 percent, to $199.50 after its profit beat analysts' forecasts as software sales grew.
Energy companies also gained after the price of oil shot to a 16-month on the signs that the economy is improving.
The stock market is back at record levels after pulling back in June amid concerns that the Fed was poised to reduce its stimulus program. The S&P 500 has gained 4.5 percent this month and is up 18.7 percent for the year, putting it on track to log its best annual performance since 2009, when it rose 23.5 percent.
The Federal Reserve's $85 billion of monthly bond purchases, intended to hold down long-term interest rates, has been a major factor supporting the rally in stocks. Fed chairman Ben Bernanke told the House Financial Services Committee Wednesday that there was no "preset course" for ending the stimulus and that any change would depend on how well the economy is doing. Investors have worried that the central bank might reduce its stimulus before the economy was strong enough. He repeated the comments to the Senate Banking Committee Thursday.
"The economic data continues to be solid and there's less concern that the Fed is going to take away the punch bowl before the economy is healthy enough to handle it," said Alec Young, a global equity strategist at S&P Capital IQ. "On balance, earnings aren't great but they're coming in ahead of expectations."
The Standard & Poor's 500 index climbed eight points, or 0.5 percent, to 1,689. The index has gained for 10 of the last 11 days.
The Dow Jones industrial average rose 80 points, or 0.5 percent, to 15,551 as of 2:10 p.m. Eastern Daylight Time. The Dow's gains were led by IBM and UnitedHealth Group, which reported higher earnings.
The Nasdaq composite rose was up three points at 3,613. The Nasdaq was held back by weak earnings reports from several major technology companies.
eBay Inc. fell $3.90, or 6.8 percent, to $53.47 after its CEO John Donahoe said late Wednesday that economic weakness in Europe and Korea will "continue to be a challenge" in the second half of the year.
Intel fell 88 cents, or 3.6 percent, to $23.27 after the world's largest maker of computer chips predicted flat sales amid a decline in PC sales. The company's earnings and revenue fell in the second quarter.
The weak results are in line with what's expected to be a weak second-quarter earnings season for the U.S. technology industry. Profit growth is expected to contract from a year ago.
Companies in the S&P 500 are expected to report profit growth of 3.7 percent for the quarter.
In government bond trading, the yield on the 10-year note edged up to 2.54 percent from 2.49 percent late Wednesday.
In commodities trading, the price of oil rose $1.68 cents, or 1.6 percent, to $108.15 a barrel. The price of gold gained $7, or 0.6 percent, to $1,284.50 an ounce.
The dollar rose against the euro and the Japanese yen.
Among other stocks making big moves.
-- UnitedHealth Group Inc., the nation's largest health insurer, surged $4.50, or 6.8 percent, to $70.73 after reporting earnings that beat analysts' estimates.
-- Johnson Controls Inc., which makes heating and ventilation systems for buildings, surged $2.92, or 7.8 percent, to $40.27 after the company said its fiscal third-quarter net income climbed 33 percent as revenue improved.
-- Dell Inc. rose 27 cents, or 2.2 percent, to $13.16, after the company delayed a vote on founder Michael Dell's plan to take the computer maker private. Activist investor Carl Icahn and the Southeastern Asset Management fund, which own 13 percent of the company combined, have made a competing proposal.
-- Sherwin Williams Co. fell $13.20, or 7.2 percent, to $169.90, after the paint and coatings maker announce disappointing second-quarter results and issues a weak outlook for the current quarter. The company also said that Mexican regulators had rejected its bid to buy a paint company there.
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