Investors had a surge of optimism today ahead of the first major fourth-quarter earnings reports, sending stocks sharply higher and carrying the Dow Jones industrial average up more than 110 points.
Wall Street managed to shake off its nervousness from earlier in the week, investing heavily in blue chips and tech stocks in the hopes that Intel and other major firms come through with positive earnings results.
According to preliminary calculations, the Dow closed up 110.96, or 1.1% at 10,538.14, more than making up for a 58-point drop yesterday.
Broader stock indicators also closed higher. The Nasdaq composite index was up 14.69, or 0.7%, at 2,111.13. The Standard & Poor’s 500 index was up 9.09, or 0.8%, at 1,130.31.
Analysts were looking to Intel in particular to see if today’s gains could be sustained.
“Intel is going to have to blow out its numbers if we want to continue this rally tomorrow,” said Todd Leone, managing director of equity trading at SG Cowan Securities. ”If not, you can probably expect a decent sell-off.”
Apple and Yahoo were also expected to report earnings later.
“What we’re hoping to see out of Intel and the others isn’t about the actual quarter, but the outlook for this year,” said Jay Suskind, head trader at Ryan Beck & Co. “The quarterly outlook seems fine, but the markets focus on the future.”
Earlier in the day, Delta Airlines disappointed Wall Street with higher-than-expected losses despite a year of cost-cutting measures. Nonetheless, Delta shares rose.
Investors were buoyed by positive economic data. The Commerce Department said the trade deficit shrank to $38bn (€30bn) in December, the lowest level in a year and lower than Wall Street analysts expected. In addition, the Labour Department said wholesale prices rose by 0.3% in December, suggesting inflation is still in check.
The news helped investors offset Tuesday’s losses, which Brian Pears, head equity trader at Victory Capital Management, saw as a sign of resilience in the market’s overall recovery.
“Everybody was talking about the market was being overbought, and we got some selling yesterday that didn’t really seem to have a good reason behind it,” Pears said. ”It’s nice to have a day of buying after that. It makes everyone less nervous.”
Advancing issues outnumbered decliners 9 to 5 on the New York Stock Exchange. Where volume came was moderate.
The Russell 2000 index of smaller companies closed up 4.96, or 0.8% at 586.12.