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Strong results at Intel pull stocks sharply higher – Wall Street

This article was posted on Jul 15, 2009 and is filed under Market News

NEW YORK (AP) — Investors are betting on the economy again.

Strong earnings and an upbeat forecast from Intel Corp. pulled investors into the stock market Wednesday as hopes grew that the economy could be starting to recover. The chip maker’s results signal that computer sales are picking up faster than had been expected.

That welcome sign for the economy was enough to draw out buyers after a month of little direction in the stock market. Major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which rose 180 points.

Investors also latched onto a report showing that industrial companies cut production far less in June than they had in previous months. The Federal Reserve said output at the nation’s factories, mines and utilities slipped 0.4 percent last month after sliding 1.2 percent in May.

John Lekas, senior portfolio manager at Leader Capital in Portland, Ore., said Intel’s second-quarter results and third-quarter forecast are giving investors a sign that the economy could be gathering strength.

“This is the first step toward recovery,” he said. Lekas cautions, however, that a rebound will likely be slow.

Even a slow recovery was good news for investors who have been worried in the past month that a strong stock market rally earlier this spring was based on too optimistic a view about a quick economic comeback.

In midday trading, the Dow rose 183.72, or 2.2 percent, to 8,543.21. The Standard & Poor’s 500 index rose 20.24, or 2.2 percent, to 926.08, while the tech-heavy Nasdaq composite index gained 49.34, or 2.7 percent, to 1,849.07.

More than eight stocks rose for every one that fell on the New York Stock Exchange, where volume came to 421.3 million shares, compared with 360.2 million traded at the same point Tuesday.

Stocks also surged overseas after Intel’s strong results came out. In afternoon trading, Britain’s FTSE 100 jumped 2.6 percent, Germany’s DAX index rose 3.1 percent, and France’s CAC-40 gained 2.9 percent. Hong Kong’s Hang Seng index gained 2.1 percent.

A report showing higher than expected consumer price inflation in June did little to affect stock prices but it did send bond prices lower for a third straight day.

The Labor Department’s Consumer Price Index rose 0.7 percent last month as gasoline prices surged. It was the fastest increase in 11 months and slightly worse than economists’ projections of 0.6 percent. The bond market is highly sensitive to signs of inflation, which erodes the value of a bond’s fixed returns over time.

The renewed surge in stock prices also robbed Treasurys of some of their safe-haven appeal as investors became more willing to take on risk. Bonds also fell on Tuesday after a report showing sharper-than-expected wholesale price inflation in June.

The 10-year Treasury note, a widely used benchmark for mortgages and other loans, fell 24/32 point, pushing its yield up to 3.57 percent from 3.47 percent late Tuesday.

Intel’s upbeat report followed strong earnings earlier Tuesday from Goldman Sachs Group Inc. Goldman kicked off earnings in the banking industry by easily topping analysts’ earnings predictions. The Wall Street banking giant said it earned $2.72 billion, after paying preferred dividends, only two quarters after posting a steep loss during the peak of the credit crisis.

Investors will now set their sights on three other major banks — JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — reporting second-quarter results later in the week to see if the broader sector is actually recovering from the malaise that beset the sector late last year.

JPMorgan Chase, Bank of America and Citigroup all have strong retail banking operations, unlike Goldman, that could pose problems as loan defaults continue to rise. Moderation in loan defaults could be a sign the economy is strengthening as customers are better able to repay loans.

Investors are getting a fresh round of earnings reports Wednesday.

Abbott Laboratories, a drug and medical-device company Abbott Laboratories said its profit fell 3 percent, but earnings met expectations. The stock fell $1.43, or 3.1 percent, to $45.06.

American Airlines parent AMR Corp. reported a smaller loss than analysts expected, sending its own shares and those of other airlines higher. AMR rose 8 cents, or 1.9 percent, to $4.26.

The dollar fell, and gold prices rose. Light, sweet crude rose $1.31 to $60.83 per barrel on the New York Mercantile Exchange.

Commodities stocks gained as the dollar weakened and commodity prices rose.

In other trading, the Russell 2000 index of smaller companies rose 14.01, or 2.8 percent, to 510.53.

source: Yahoo finance

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