U.S. stocks finished with strong gains Wednesday after big Internet portal Yahoo! Inc. delivered better-than-expected earnings and broker PaineWebber Group Inc. agreed to be acquired by Swiss banking giant UBS AG.
“Yahoo! saved the day,” said Barry Hyman, market strategist for Ehrenkrantz, King Nussbaum Inc. “It showed that advertising dollars on the Internet are strong, even given the problems that are out there. The PaineWebber news is dominating the rest of the market.”
The technology-laced Nasdaq composite index jumped 143.17 points, or 3.62 percent, to 4099.59 for its highest close in three months.
Yahoo! shares shot up $19.44 to $124.94 after reporting increases in both its second-quarter earnings and revenues that beat expectations. The earnings came out late Tuesday after the close of trading.
Other Internet companies basked in Yahoo!’s glow, with Internet service provider America Online Inc. rising $1 to $57 and CMGI Inc., an Internet venture capital firm, advancing $6.94 to $43.44.
The blue-chip Dow Jones industrial average rose 56.57 points, or 0.53 percent, to 10,783.76, lifted by its financial services components.
PaineWebber, which is not a Dow component, catapulted $16.94 to $66.87 after news of the merger, which would represent a 47 percent premium for the brokerage’s shares over their closing price on Tuesday.
J.P. Morgan & Co. gained $4.62 to $122.56. Analysts said the rally in the banking sector was sparked by news that UBS AG , the Swiss financial services group, had made a $10.8 billion cash-and-stock bid for PaineWebber, the No. 4 U.S. brokerage firm.
The broader Standard & Poor’s 500 index added 12.04 points, or 0.81 percent, to 1492.92.
Hugh Johnson, chief investment officer at First Albany Corp., said the market has been working its way higher since the June non-farm payroll data, released Friday, showed moderation in the U.S. economy. He said the Yahoo! earnings and the PaineWebber merger news came at a time when the market was beginning to break out of a trendless trading range.
Among other stocks moving on Wednesday, Rite Aid Corp. shares fell 62 cents to $6 after the No. 3 U.S. drugstore chain late Tuesday reported a loss of $1 billion for the year ended in February. The company also restated downward its earnings for the previous two years by more than $1 billion and announced Wednesday the sale of its pharmacy benefits management unit.
The stock of pharmaceutical company Biogen Inc., which makes the multiple sclerosis drug Avonex, slipped $1.87 to $68.12 after reporting slightly better-than-expected second-quarter earnings on Tuesday.
The yield on the 30-year U.S. Treasury bond stayed at 5.88 percent, the same as Tuesday’s close. The 10-year note slipped, pushing the yield up to 6.09 percent from 6.06 percent Tuesday.
The market continued to benefit from comments made Tuesday by Federal Reserve Chairman Alan Greenspan.
Speaking before the National Association of Governors, Greenspan talked up the country’s improved productivity, which some analysts took as a sign that inflation may be in check.
Many investors were still watching their moves ahead of another speech from Greenspan on Wednesday night at a conference organized by the Council on Foreign Relations.
In recent weeks, there have been signs that the pace of the economy is slowing down.
Investors have been growing more optimistic that the Fed will determine that rates are currently high enough to contain inflationary pressures.
“It’s a market conviction that the Fed may be taking its foot off the brakes,” said Tom Galvin, chief equity strategist at Donaldson, Lufkin & Jenrette Securities. “The lack of any strong talk out of Greenspan added further conviction that the days of credit tightening are limited.”
Advancing issues outnumbered decliners by a 4-3 margin on the New York Stock Exchange, where volume came to 671.58 million shares, up from 663.19 million shares on Tuesday.
“Yesterday, a strong day for value-biased stocks because of International Paper’s earnings. Today, we have Yahoo! pulling up the tech stocks,” said Brian Belski, vice president at U.S. Bancorp Piper Jaffray. “But the question is: What will tomorrow bring? There is still a lot of indecision in the market, and the performance has been very varied.”
