Strong returns from JPMorgan Chase's investment banking unit and… (Kiichiro Sato / Associated…)
Reporting from Los Angeles and New York — Two of America's corporate giants, Intel Corp. and JPMorgan Chase & Co., reported unexpectedly strong financial results this week, reinforcing Wall Street's optimism that basic business operations are improving.
The quarterly earnings reports from one of the nation's four major banking and investment operations and a technology industry bellwether helped push the major national indexes ever higher on their long march up from the depths of the recession last year.
The Dow Jones average of 30 blue-chip stocks rose nearly 104 points to 11,123.11, and the broader Standard & Poor's 500 index closed above the 1,200 mark for the first time in a year and a half.
"You have good news from Intel and JPMorgan -- really better than what anyone expected," said Art Hogan, the chief market strategist at Jefferies & Co. in New York. "Investors are celebrating that."
The markets were also buoyed by good economic data. The Commerce Department reported Wednesday that retail sales increased 1.6% in March from a month earlier, again beating the expectations of analysts. The increase was driven by strong demand for cars.
Data from the Labor Department suggested that inflation is not becoming a problem -- consumer prices rose only 0.1% during March.
JPMorgan's $3.3-billion profit showed how much quicker the economic recovery has been for Wall Street than it has for average Americans. The biggest boost came not from the retail bank, where ordinary customers have accounts, but from the firm's elite investing activities, which provided more than two-thirds of the bank's profit. Bond trading, the most profitable part of JPMorgan, has been aided by the low interest rates offered by the Federal Reserve.
JPMorgan, the first of the big banks to announce its earnings, said its net income for the three months ended March 31 rose 55% to $3.3 billion, or 74 cents a share, from $2.1 billion, or 40 cents, for the first three months of 2009.
The New York bank beat analysts' expectations, thanks to strong returns from its investment banking unit and the improving economic situation of ordinary borrowers. Analysts, on average, had figured JPMorgan would earn 64 cents a share, according to Bloomberg.
Intel, a leading technology company, said its profit for its fiscal first quarter that ended March 27 soared nearly fourfold to $2.4 billion, or 43 cents a share, up from $629 million, or 11 cents, for the same period last year.
Revenue rose 45% to $10.3 billion from $7.1 billion. The Santa Clara chip maker reported results after the markets closed Tuesday.
After its earnings call, Intel was the leading stock in the Nasdaq composite index, which rose 38.87 points, or 1.6%, to 2,504.86. Intel shares rose 75 cents, or 3.3%, on Wednesday to close at $23.52, the highest it has been since August 2008.
The company said interest in its latest PC microprocessor and newer mobile chips led to the best first quarter in its 42-year history.
"Demand for these new products has been incredible," said Intel Chief Executive Paul Otellini in a call with investors Tuesday.
Intel's strength may augur well for the rest of the technology industry, much of which either creates products with Intel chips or runs on Intel-based computers.
"Intel is definitely benefiting from PC demand, which is continuing to surprise," said Stacy Rasgon, an analyst at Sanford C. Bernstein & Co.
Other technology companies are looking flush too. Apple Inc.'s stock hit an all-time high Wednesday after an announcement that it had sold 500,000 of its new iPad tablet computers in the first week they were on sale.
In the financial realm, investors were cheered by JPMorgan's optimistic outlook on consumer lending. Home loans and credit card debt have continued to drag down the big banks, but JPMorgan's earnings suggest that the picture is improving. One positive indicator was 30-day credit card delinquencies, which were down from last quarter and from a year earlier.
"While the economy still faces challenges, there have been clear and broad-based improvements in underlying trends," JPMorgan CEO Jamie Dimon said in the earnings release. "We believe these improvements will continue and are hopeful they will gather momentum."
A continuing dark spot is the bank's mortgage operations. JPMorgan has been particularly hurt by the home loans it took on when it purchased Washington Mutual. In the first quarter, JPMorgan readied itself for $1.2 billion in losses from that portfolio.
JPMorgan was among the most successful banks in weathering the financial crisis. But Dimon has recently received negative media attention for his criticism of the financial reforms proposed by the Obama administration and Congress.
In the release Wednesday morning, Dimon emphasized the bank's support of the administration's goal of helping ordinary borrowers.
JPMorgan shares rose $1.86, or 4.1%, to $47.73.