Stocks rose Wednesday, recovering from a sharp drop in the previous session, as investors latched onto encouraging economic news and bet on a solid fourth-quarter earnings period.
The Dow Jones industrial average jumped 111.19 points, to 10,538.37, more than making up for a 58-point drop on Tuesday. The Nasdaq composite index rose 14.69, to 2111.13. The Standard & Poor’s 500 index gained 9.30, to 1130.52.
The market embarked on a late-day rally after hearing some upbeat economic news.
The Commerce Department said the trade deficit unexpectedly shrank in November to $38 billion, the narrowest in 13 months, as the weaker dollar helped exports climb to a three-year high, prompting some economists to raise U.S. growth estimates.
The trade deficit with China narrowed to $10.8 billion from $13.6 billion, as imports fell and the Asian nation spent a record $3.3 billion on American products.
The Labor Department announced that the producer price index rose 0.3 percent in December, suggesting inflation was still under control. And the Federal Reserve said in its so-called beige book report that the economic rebound that began in the second half of last year was maintaining momentum into January.
Investors were also focused on coming earnings reports. More than half of the S&P 500 companies release quarterly results this month.
“I would expect to see rising estimates,” said James Luke, a money manager at BB&T Asset Management in Raleigh, N.C. “First-quarter earnings may be surprisingly good.”
But the S&P 500 has gone more than nine months without dropping 5 percent from its closing high, according to Ned Davis Research Inc. Those lofty levels have led some investors to predict that rising earnings are already accounted for.
“Even though the numbers are coming in pretty strong, it may be hard for the market to sustain a rally to new multiples,” said John Davidson, president and chief executive of PartnerRe Asset Management Co. “We’ve had a strong run to a pretty high level of [price-to-earnings] ratios.”
Delta reported fourth-quarter results Wednesday, the first major airline to do so, and disappointed Wall Street with higher-than-expected losses despite a year of cost-cutting measures. Still, shares rose 1 cent, to $12.15.
AT&T Wireless jumped 17 percent on reports that the cellular company is in talks to be acquired by Cingular Wireless, a joint venture of SBC Communications Inc. and BellSouth Corp. AT&T Wireless rose $1.44, to $9.99.
Sprint PCS Group rose 86 cents, or 14 percent, to $7.05. The American Stock Exchange’s North American telecommunications index rose 1.7 percent, and telecommunications companies had the biggest increase among the S&P 500’s 10 industry groups.
Rockwell Collins, a maker of cockpit instruments, added $2.39, or 8 percent, to $32.36, for the third-biggest jump in the S&P 500. The company boosted its 2004 earnings forecast.
Other makers of aerospace products also advanced. United Technologies, which makes Pratt & Whitney jet engines, climbed $2.45, to $95.85. Honeywell International, the biggest maker of airplane electronics, jumped $1.12, to $36.17.
General Electric, which makes jet engines, added 39 cents, to $32, and was the biggest contributor to the S&P 500’s gain. Goodrich, the world’s largest producer of aircraft-landing gear, added $1.80, to $31.55. Chicago-based Boeing rose 87 cents, to $43.11.
Traders were worried that the market’s latest rally would stall Thursday, when they expect tech stocks to take a hit after earnings reports late Wednesday from Intel Corp. and Yahoo Inc. failed to excite investors.
Both fell in after-hours trading despite posting increases in fourth-quarter earnings. Intel forecast a drop in revenue for the first quarter.
“The markets focus on the future,” said Jay Suskind, head trader at Ryan Beck & Co.
The Nasdaq 100 after-hours indicator was down 0.4 percent, pointing to a weak start for the tech sector Thursday.
