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Stocks Close Sharply Higher On Upbeat Earnings News - U.S. Commentary

After moving sharply higher in early trading on Wednesday, stocks continued to perform well throughout the trading session. The markets benefited from a positive reaction to the latest batch of earnings news, further recovering from the sell-off seen on Monday.

The major averages moved roughly sideways throughout the afternoon, closing firmly in positive territory. The Dow surged up 186.79 points or 1.5 percent to 12,453.54, the Nasdaq jumped 57.54 points or 2.1 percent to 2,802.51 and the S&P 500 climbed 17.74 points or 1.4 percent to 1,330.36.

With the upward moves, the Dow reached its best closing level in almost three years and the Nasdaq reached a two-month closing high.

The considerable strength that was visible on Wall Street was largely due to better than expected quarterly results and upbeat guidance from big-name companies such as semiconductor giant Intel (INTC).

After the close of trading on Tuesday, Intel reported first quarter adjusted earnings of $0.59 per share on revenues of $12.8 billion, while analysts had expected earnings of $0.46 per share on revenues of $11.6 billion. The company also forecast second quarter revenues of $12.8 billion, plus or minus $500 million.

Internet media giant Yahoo (YHOO) also moved higher after reporting first quarter earnings that fell to $0.17 per share from $0.22 per share in the year-ago quarter but still came in a penny above analyst estimates. Shares of Yahoo ended the day up by 4.7 percent.

Additionally, shares of United Technologies (UTX) turned in a strong performance after the industrial conglomerate reported stronger than expected first quarter earnings and revenue growth. The company also raised its full year earnings guidance.

Meanwhile, IBM Corp. (IBM) closed modestly lower even though the company reported better than expected first quarter earnings and revenues. Telecom giant AT&T (T) also ended the day in the red after reporting its first quarter results.

In other corporate news, AES Corp. (AES) announced that it has agreed to acquire DPL Inc. (DPL), the parent company of Dayton Power & Light, for $3.5 billion in cash. Shares of DPL showed a strong upward move on the news, rising by 9.4 percent.

Under the terms of the agreement, AES will pay $30 in cash for each share of DPL, representing a nearly 9 percent premium to DPL's closing price on Tuesday. Including the assumption of $1.2 billion in debt, the deal has a total value of $4.7 billion.

On the economic front, the National Association of Realtors released a report showing that existing home sales rebounded by more than expected in March after showing a steep drop in February.

NAR said existing home sales rose by 3.7 percent to an annual rate of 5.10 million in March after falling by 8.9 percent to a revised 4.92 million in February. Economists had expected existing home sales to increase to 5.00 million from the 4.88 million originally reported for the previous month.

Sector News

With Intel helping to lead the way higher, semiconductor stocks turned in some of the market's best performances on the day. The Philadelphia Semiconductor Index surged up by 4.3 percent, moving towards the high end of a recent trading range.

Most other technology stocks also showed notable moves to the upside, with electronic storage, networking, and software stocks posting particularly strong gains.

Among storage stocks, EMC Corp. (EMC) jumped by 4.6 percent to a nearly ten-year closing higher after reporting first quarter earnings that met analyst estimates. EMC also benefited from news that its majority-owned VMware (VMW) reported better than expected first quarter earnings.

Significant strength was also visible outside of the tech sector, with energy stocks posting strong gains amid a sharp increase by the price of crude oil. Crude for June delivery surged up by $3.17 to $111.45 a barrel following the release of a report showing an unexpected drop in crude oil inventories.

Most of the other major sectors also showed strong upward moves on the day, reflecting broad based buying interest. Defense, steel, and brokerage stocks posted notable gains.

On the other hand, some railroad and banking stocks bucked the uptrend by the broader markets, with CSX Corp. (CSX) and Wells Fargo (WFC) closing firmly in the red.

Dow Components

A vast majority of the Dow components ended the day in positive territory, contributing to the substantial gain posted by the blue chip index.

Intel turned in one of the Dow's best performances following the release of its quarterly results, surging up by 7.8 percent to its best closing level in well over a month.

Shares of United Technologies also showed a strong upward move in reaction to the company's results. United Technologies rose by 4.3 percent to a record closing high.

Boeing (BA), Johnson & Johnson (JNJ), and Caterpillar (CAT) were among the other Dow components that posted substantial gains. Notably, Boeing rose 2.6 percent to its best closing level in a year.

Meanwhile, Pfizer (PFE) and Bank of America (BAC) posted moderate losses on the day. As mentioned above, IBM and AT&T also ended the day in the red.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region showed strong upward moves over the course of the trading day on Wednesday. Japan's benchmark Nikkei 225 Index surged up by 1.8 percent, while Hong Kong's Hang Seng Index jumped by 1.6 percent.

The major European markets also saw considerable strength on the day. The U.K.'s FTSE 100 Index rose by 2.1 percent, while the French CAC 40 Index and the German DAX Index advanced by 2.5 percent and 3 percent, respectively.

In the bond markets, treasuries closed moderately lower amid the strength among stocks. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, closed up by 4.4 basis points at 3.40 percent.

Looking Ahead

Quarterly results are likely to remain on focus on Thursday, with Apple (AAPL), American Express (AXP), and Qualcomm (QCOM) among the companies that are due to release their results after the close of trading today.

Additionally, DuPont (DD), Honeywell (HON), McDonald's (MCD), Verizon (VZ), and Morgan Stanley (MS) are among the firms scheduled to report their results before the start of trading tomorrow.

Economic data is also likely to attract some attention, with traders likely to keep an eye on reports on weekly jobless claims, leading economic indicators, and Philadelphia-area manufacturing activity.

by RTTNews Staff Writer

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