A raft of strong earnings reports buoyed investors’ lagging confidence and sent stocks sharply higher Tuesday, with the Dow Jones industrial average turning in its best showing of the year.
Wall Street bellwether Merrill Lynch & Co. Inc. posted a record year, while U.S. Steel Corp. swung to a profit. And despite slumping profits at drug makers Johnson & Johnson and Merck & Co., their earnings met or surpassed analysts’ forecasts, showing resiliency in the embattled pharmaceutical sector.
“I’m not sure there’s any one particular thing we can point to here. We’re getting deep into earnings season, and these companies are showing growth in bottom line results,” said Joseph Battipaglia, chief investment officer at Ryan Beck & Co. “We’ve had a one-third correction from the November and December rally, and investors are coming back in now to buy on the dip.”
However, the market’s gains were somewhat deceptive. Declining issues outnumbered advancers by a slim margin on the New York Stock Exchange and advancers outpaced decliners by only 8 to 7 on the Nasdaq Stock Market — signs that investors are picking their stocks very carefully and are quick to sell underperfomers.
The Dow rose 92.95, or 0.9 percent, to 10,461.56. The Dow had risen more than 141 points earlier in the session before losing ground, but still posted its best one-day jump since Dec. 21.
Broader stock indicators saw more modest gains. The Standard & Poor’s 500 index was up 4.66, or 0.4 percent, at 1,168.41, and the Nasdaq composite index climbed 11.25, or 0.56 percent, to 2,019.95.
The plethora of earnings reports helped investors overcome ongoing fears about the upcoming Iraqi elections and oil prices that continued to climb toward $50 per barrel. A barrel of light crude was quoted at $49.64, up 83 cents, on the New York Mercantile Exchange.
A strong consumer confidence reading also helped boost stocks. The Conference Board’s consumer confidence index for January came in at 103.4, up from December’s reading of 102.7 and better than the 101.3 analysts expected.
“I think the market definitely responded to the consumer confidence figures,” said Stuart Freeman, chief equity strategist for A.G. Edwards & Sons. “Investors are thinking, well, the consumer still feels good, so spending on part of the consumer can continue, and that certainly drives the economy.”
The Russell 2000 index of smaller companies was up 1.97, or 0.33 percent, at 606.50.
Overseas, Japan’s Nikkei stock average fell 0.11 percent. In Europe, Britain’s FTSE 100 closed up 0.64 percent, France’s CAC-40 gained 0.87 percent for the session, and Germany’s DAX index rose 0.76 percent.
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