US stocks soar

Wall Street roared back to life today as investors refocused on earnings news, shaking off concerns about rising interest rates that have dogged the market for almost two weeks.

Upbeat reports from Caterpillar and United Parcel Service offered fresh evidence that the US economy is growing.

The surge in stocks was accompanied by a spike in volume as investors returned to the market in large numbers following two days of congressional testimony from Federal Reserve Chairman Alan Greenspan.

The Dow closed up 143.93, or 1.4%, at 10,461.20.

The broader gauges were also markedly higher. The Nasdaq gained 37.28 or 1.9% to 2,032.91.

The Standard & Poor’s 500 index rose 15.86, or 1.4%, to 1,139.85.

Greenspan’s message to Congress – that the economic recovery is stable and the expansion will likely continue – sounded positive but carried a painful implication for the market, as many investors interpreted it as confirmation that rates would probably rise before the end of the year.

For those who understood months ago that a rate hike was inevitable, the recent choppiness could have been a buying opportunity, said John Waterman, chief investment officer at Rittenhouse Asset Management. His firm repositioned itself months ago, lightening up on rate-sensitive financial stocks and cyclical names in favour of more defensive areas, such as health care.

“Days like today help to get people’s attention,” Waterman said. “People are more inclined to think, if they’re not in the market, they should get in.”

Investors had only to look to the day’s earnings for positive signals. Solid results from business-to-business shipper UPS and industrial equipment specialist Caterpillar, and a jump in advertising revenue at media conglomerate Viacom all bode well for the economy.

Reports from dozens of companies, including more than 70 listed on the S&P 500 and five Dow components, made today one of the busiest days of the earnings season.

Among the best gainers on the Dow, Caterpillar soared 3.39, or 4.2%, to 84.10, after more than tripling its earnings and surpassing analysts’ estimates. The world’s largest manufacturer of construction equipment also raised its outlook for the year.

American International Group, just added to the Dow this month, gained 50 cents to 73.70 after beating expectations, despite concerns that rising rates might hurt the financial sector. AIG’s profits jumped 36% over the year-ago period on strong performance at its life insurance and retirement services operations.

Viacom, the owner of CBS, MTV and Nickelodeon, was down 13 cents at 41.02, after reporting big gains in advertising profits at its cable and television businesses as well as a one-time tax adjustment. Viacom’s reliance on ad revenue has raised questions among analysts in the past.

UPS added 74 cents to 71.94 on earnings powered by strong international growth, especially in China. The world’s largest shipping company also issued a bright outlook, especially for its business interests in Asia.

Merck & Co was up 24 cents at 46.74 after the pharmaceutical company reported a 5% decline in first-quarter profits, due in part to the sale of Medco Health Solutions, its pharmacy benefit management firm. Excluding the lost income from Medco, Merck said its profits were up 5%, beating Wall Street estimates by a penny a share.

Decliners included AT&T, which shed 56 cents to 18.03 despite beating analyst expectations. The US’s largest long-distance phone, which recently lost its seat on the Dow, saw a 47% dive in quarterly profits, largely because of restructuring and other charges.

Advancing issues outnumbered decliners about 3 to 1 on the New York Stock Exchange. Volume was heavy.

The Russell 2000 index, which tracks smaller company stocks, was up 10.02 or 1.7%, at 593.24.