FOX Business: The Power to Prosper
Returning from a rare two-day break, the bulls bid Wall Street to fresh two and-a-half-year highs on Wednesday as new deal-making and earnings beats from Dell and Deere inspired the markets.
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The Dow Jones Industrial Average rose 61.53 points, or 0.50%, to 12288.17, the Standard & Poor's 500 gained 8.31 points, or 0.63%, to 1336.32 and the Nasdaq Composite jumped 21.21 points, or 0.76%, to 2825.56. The FOX 50 added 4.57 points, or 0.48%, to 949.76.
After largely overcoming the Egyptian crisis earlier this month, Wall Street managed to similarly shrug off a brief scare on Wednesday after crude oil neared $86 a barrel after Israel said Iranian warships transited the Suez Canal for the first time in decades. Similarly, traders didn't seem fazed by new data showing underlying wholesale prices in the U.S. rose by the most in two years, focusing instead on a surprise surge in housing starts.
“I am so shocked about the way the market absorbed the Egyptian crisis. Couple that with these earnings, there is nothing to hold the market back,” said Jason Weisberg, senior vice president at Seaport Securities. “It would have to be a catastrophic geopolitical event to derail the market. It just says the market is going to rip.”
Encouraged by a more bullish economic forecast from the Federal Reserve, the $20.1 billion buyout of Genzyme (NASDAQ:GENZ) and solid results from Dell (NASDAQ:DELL) and Deere (NYSE:DE), the blue chips landed at their highest level since June 13, 2008. The rally marked a solid rebound from the benchmark index's first back-to-back declines since January 20.
“The markets continue to get support from any kind of positive news, even if it’s not going to blow the cover off the ball,” said Jonathan Corpina, senior managing partner at Meridian Equity Partners.
Most of the Dow's 30 stocks advanced, led by JPMorgan Chase (NYSE:JPM) and Hewlett-Packard (NYSE:HPQ), which saw spillover buying from Dell's results. The index's weakest links were Verizon (NYSE:VZ) and Wal-Mart (NYSE:WMT).
The Nasdaq Composite climbed close to 1% and closed at its best level since October 31, 2007 amid strong gains for tech stocks Electronic Arts (NASDAQ:ERTS) and Research in Motion (NASDAQ:RIMM).
Wall Street hit session lows as the report of Iranian warships in the Suez Canal allowed geopolitical concerns to briefly resurface. After nearly topping $86 a barrel on the news, crude oil settled up just 67 cents a barrel, or 0.79%, to $84.99. Gold gained $1.10 a troy ounce, or 0.08%, to $1,374.70.
Buying regained steam as the Fed released minutes from its last meeting that revealed the central bank upgraded its economic outlook.
While Fed officials didn’t see enough economic improvement to end their controversial $600 billion bond buying program, they now see 2011 gross domestic product rising 3.4% to 3.9%, up from 3.0% to 3.6% previously. The Fed also lowered its 2011 jobless rate forecast to 8.8% to 9%, down from 8.9% to 9.1%.
Corporate America's impressive earnings season continued this week as Dell's stock surged almost 12% after the PC maker solidly beat expectations with fourth-quarter EPS of 53 cents, compared with estimates for 37 cents. Dell's sales also rose to $15.7 billion, matching forecasts from analysts.
Likewise, Deere's (NYSE:DE) EPS of $1.20 and sales growth of 27% to $6.12 billion blew away estimates, prompting the world's largest tractor maker to hike its full-year forecast.
Traders were also encouraged by drug heavyweight Sanofi-Aventis (NYSE:SNY) finally reaching a $20.1 billion deal to acquire biotech giant Genzyme for $74 a share, up from $69 previously. The companies had been battling over price for months.
Likewise, Trian Group bid about $7.6 billion for discount retailer Family Dollar (NYSE:FDO) in a deal that carries a premium of at least 25%.
Wall Street typically cheers M&A developments, interpreting companies' willingness to spend as a sign of confidence in the economy and the markets.
“M&A activity is a shining beacon for value. It’s a telltale sign that there is a.) a lot of cash to be put to work and b.) a lot of value out there,” said Weisberg.
Positive Reaction to Data
Wall Street managed to shrug off a Labor Department report showing core producer prices, which exclude food and energy, rose 0.5% in January, more than doubling forecasts from economists and marking the hottest read since October 2008. Including food and energy, prices jumped 0.8%, slightly less than estimates. Traders have been on the lookout for any alarming signs of a spike in inflation due to the strengthening economy. They may be reserving judgment until Thursday's read on consumer prices.
On the other hand, the Commerce Department said U.S. housing starts jumped 14.6% to a rate of 596,000 in January, blowing away forecasts for a rise of just0.2%. The surprise surge in starts lifted home construction-related stocks, especially insulation and roofing maker Owens Corning (NYSE:OC) and modular home manufacturer Cavco Industries (NASDAQ:CVCO). However, the government also said building permits slid 10.4% to 562,000.
Separately, the Fed said U.S. industrial production unexpectedly declined 0.1% in January, surprising economists who had expected a rise of 0.5%.
Borders (NYSE:BGP), the second-largest U.S. bookstore chain, filed for Chapter 11 bankruptcy protection and is expected to close about 30% of its stores. Borders struggled badly to compete with growing competition from Amazon.com (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT). The bookseller secured $505 million in DIP financing from General Electric's (NYSE:GE) GE Capital.
Family Dollar (NYSE:FDO) leaped 21% after confirming it has received a takeover bid from billionaire investor Nelson Peltz’s Trian Group for $55 to $60 a share. The discount retailer said its board will review the bid, which puts an implied value of $7.6 billion on the company.
Nasdaq OMX Group (NASDAQ:NDAQ), the parent of the Nasdaq Stock Market, has hired investment bankers as it scrambles to respond to the Deutsche Bourse buyout of NYSE Euronext (NYSE:NYX), FOX Business's Charles Gasparino reported. Internally, Nasdaq is talking about a partnership with the IntercontinentalExchange (NYSE:ICE), which is almost twice its size.
Abercrombie & Fitch (NYSE:ANF) posted a non-GAAP profit of $1.38, surpassing the $1.32 analysts projected and driving its stock up 7.6%. The teen apparel retailer said its sales jumped 23% to $1.15 billion amid a 13% increase in same-store sales.
La-Z Boy (NYSE:LZB) surged 29% a day after the company solidly topped estimates with EPS of 19 cents. Analysts had called for EPS of 11 cents. La-Z Boy's revenue of $292 million met forecasts.
Comcast (NASDAQ:CMCSA) surpassed estimates with a quarterly profit of 35 cents a share on revenue of $9.7 billion. Analysts had expected the cable giant would earn 32 cents a share. Comcast also hiked its quarterly dividend.
Cablevision (NYSE:CVC) grew its fourth-quarter profits by 45% to 38 cents a share on revenue of $1.87 billion. The cable operator also boosted its stock buyback plan by $500 million.
United Continental Holdings (NYSE:UAL) canceled 96 United Airlines Boeing 757 aircraft due to unscheduled maintenance on the planes' computers.
Devon Energy (NYSE:DVN) beat the Street with a non-GAAP profit of $1.57, but missed estimates with $2.14 billion. Analysts had expected EPS of $1.40 on revenue of $2.3 billion.
The U.K.'s FTSE 100 advanced 0.80% to 6085.27, Germany's DAX gained 0.19% to 7414.30 and France's CAC 40 jumped 1% to 4151.26.
In Asia, Japan's Nikkei 225 closed up 0.57% to 10808.30, Hong Kong's Hang Seng soared 1.12% to 23157 and China's Shanghai Composite climbed 0.85% to 2923.90.