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Dow Up 1.3% in Broad Rally

Stocks rebound after a Federal Reserve survey suggests much of the nation has seen decent growth despite high energy costs.

October 20, 2005|From Times Staff and Wire Reports

Stocks snapped back Wednesday, with the Dow Jones industrials gaining 128 points, as a reassuring assessment of the economy helped investors overcome disappointment over earnings at Intel and some other major firms.

Another drop in oil prices also encouraged buyers to jump into the market, where blue-chip share prices hit five-month lows last week.

Trading volume soared, and rising stocks outnumbered losers by nearly 2 to 1 on the New York Stock Exchange and on Nasdaq.

"There are some signs on the wall here that we may have hit the bottom of this market, and we could be ready to move up," said Chris Johnson, an analyst at Schaeffer's Investment Research in Cincinnati. "The big question, though, is how far we move up and how long it lasts."

The market picked up steam throughout the session as investors reacted to the Federal Reserve's latest "beige book" report on the economy. The report showed decent growth in most regions in September and early October, despite high energy prices and other effects of the Gulf Coast hurricanes.

The Dow rose 128.87 points, or 1.3%, to 10,414.13, its biggest percentage gain since Sept. 6.

The broader Standard & Poor's 500 climbed 17.62 points, or 1.5%, to 1,195.76, while the tech-focused Nasdaq composite added 35.24 points, or 1.7%, to 2,091.24.

The Russell 2000 index of smaller companies jumped 12.92 points, or 2.1%, to 638.28.

Intel's quarterly profit, issued after markets closed Tuesday, weighed on the market at the opening. The chip giant's sales forecast for the current quarter disappointed some investors.

But Intel recovered from a drop of 73 cents at the opening to end with a loss of just 3 cents, at $23.69.

The market's mood also improved as crude oil futures fell, after the Energy Department reported larger-than-expected inventories of oil, gasoline and heating oil in its weekly report on supplies. A barrel of light crude was quoted at $62.41, down 79 cents, in New York trading.

A calm bond market helped underpin stocks. The benchmark 10-year Treasury note yield edged down to 4.46%, from 4.47% on Tuesday.

The yield hit a six-month high of 4.50% on Monday.

The recent sell-off in bonds "is just losing some momentum," said Eric Hiller, chief interest-rate strategist at Bank of America Corp. The 4.5% level on 10-year Treasuries may prove to be a near-term ceiling, some analysts said.

Still, many bond and stock investors alike remain nervous about rising inflation and the risk of weaker-than-expected consumer spending in the fourth quarter.

Among the day's market highlights:

* A gauge of retailers climbed 2.8% for the second-biggest advance among 24 industry groups as the pullback in oil prices eased concern that higher fuel costs would crimp consumer spending. Target, the No. 2 U.S. discount retailer, rose $2.78 to $56. J.C. Penney, the second-largest U.S. department-store company, rallied $1.89 to $52.04.

* Teradyne, the world's biggest maker of semiconductor- testing equipment, rose 36 cents to $14.29. The company said excluding some items, it had third-quarter profit of 9 cents a share. Analysts, on that basis, expected a loss of 1 cent.

* Apple Computer gained $2.73 to $54.94. The company said it cut prices on PowerBook computers by as much as 13% and introduced updated PowerMac machines to capitalize on consumer interest from its iPod digital-music player.

* Bank of America rose 87 cents to $42.44. The No. 2 U.S. bank said quarterly profit, excluding some items, was $1.04 a share, more than the $1.02 analysts expected.

JPMorgan gained 96 cents to $34.73. The third-biggest U.S. bank said President James Dimon would become chief executive on Dec. 31, six months earlier than planned. The company also reported third-quarter profit excluding some items of 75 cents a share. Analysts, on average, expected 72 cents in a Thomson Financial survey.

* Knight Capital Group, the biggest matchmaker for buyers and sellers of Nasdaq stocks, added $1.02 to $9.25. Excluding some costs, the company reported third-quarter profit that was double analysts' estimates.

* Other stocks rising on earnings reports included Cheesecake Factory, up $3.89 to $34.88; Downey Savings, up $1.02 to $59.23; and Illinois Tool Works, up $1.01 to $82.39.

* Honeywell International declined $1.88, or 5.2%, to $34.05 for the worst performance in the Dow average. The world's largest maker of factory and airplane-cockpit controls expects fourth-quarter profit of 60 cents to 62 cents a share, compared with the 62 cents estimated in a Thomson survey.

* Kraft Foods slid $1 to $28.39. The company reduced its full-year earnings forecast after third-quarter profit missed analysts' estimates.

* Dow index member Altria Group gained $1.37 to $73.85 after reporting a 9% increase in profit. The conglomerate also says its Philip Morris USA division now boasts more than 50% of the cigarette market.

* Yahoo, the world's most-visited Internet site, added $2.21 to $35.91. The company boosted its 2005 revenue forecast, excluding some items, to $3.66 billion and $3.71 billion from an earlier prediction of $3.6 billion to $3.7 billion.

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