The stock market finally showed signs of life Wednesday, as a sharp drop in oil prices and a reassuring assessment of the economy helped investors overcome their disappointment over Intel’s earnings and troubling sales forecasts.
The Dow Jones industrial average surged 128.87 points, or 1.2 percent, to 10,414.13. The Standard & Poor’s 500 index climbed 17.62, or 1.5 percent, to 1195.76. The tech-focused Nasdaq composite index gained 35.24, or 1.7 percent, to 2091.24.
Intel’s profits, announced after trading Tuesday, and a warning of slow fourth-quarter sales rattled investors who had hoped for more bullish forecasts from corporate America.
But the market drew solace from the Federal Reserve, which in its regular “beige book” breakdown of the economy said many parts of the country are still seeing decent growth despite high energy prices.
“The Fedspeak until now has been a major wet blanket on this market,” said Michael Holland of Holland & Co. in New York. “But the economy is in really good shape. The beige book is one more piece of evidence of that.”
Stocks also got a boost from falling oil futures after the Energy Department reported larger-than-expected inventories of oil, gasoline and heating oil. Crude for November delivery fell 79 cents to settle at $62.41 a barrel on the New York Mercantile Exchange.
Although investors were eager to buy after the market’s poor performance this month–the Dow was down nearly 3 percent until Wednesday’s rally–they remain nervous about rising inflation and consumer spending for the fourth quarter and beyond, leading analysts to wonder whether the rally can be sustained.
“There are some signs on the wall here that we may have hit the bottom of this market, and we could be ready to move up,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati.
Bonds built on the previous session’s gains, with the yield on the 10-year Treasury note falling to 4.46 percent from 4.47 percent late Tuesday.
In earnings news, Intel’s revenue came in below estimates despite strong laptop computer sales. But it was the fourth-quarter outlook, which included warnings of slower sales, that caused nervous investors to sell off the stock. Intel was down nearly $1 in early trading, but finished off just 3 cents, at $23.69.
“Intel signaled that earnings growth is slowing, but we expected that,” said Jack Ablin, chief investment officer at Harris Private Bank. “The real question is how much it’s going to slow, what companies are going to get hit, which ones aren’t. We’ll know more when more earnings reports come in.”
The disappointment over Intel was mitigated by other positive earnings reports in the tech sector.
Yahoo jumped $2.21, or nearly 7 percent, to $35.91, after beating estimates by 1 cent a share on a 47 percent jump in sales. Schaumburg-based Motorola added 85 cents, or more than 4 percent, to $21.02 on news that quarterly profits tripled. Both reports came out late Tuesday.
Altria Group and J.P. Morgan Chase helped propel the Dow higher.
Altria gained $1.37, to $73.85, after reporting a 9 percent increase in profits. The conglomerate also said its Philip Morris USA division now has more than 50 percent of the U.S. cigarette market.
J.P. Morgan Chase took advantage of a strong stock market in the third quarter, which boosted its quarterly earnings 78 percent from a year ago. The stock added 96 cents, to $34.73.
Bank of America rose 87 cents, to $42.44, after posting a 10 percent increase in quarterly profits on the strength of its credit card and mortgage businesses.
A gauge of retailers climbed nearly 3 percent for the second-biggest advance among 24 industry groups in the S&P 500.Jim Miller is on assignment.
