Investor confidence in the United States raced ahead today as the Standard & Poor’s 500 index and Nasdaq composite index both reached four-year highs.
It happened as investors, undeterred by oil prices nearing $60 per barrel, welcomed a raft of strong earnings reports.
The earnings, led by DaimlerChrysler and Bristol-Myers Squibb, further fuelled investors’ confidence in the stability of the economy.
They also helped Wall Street look past a slight rise in first-time jobless claims reported by the Labour Department and another sharp rise in oil prices. A barrel of light crude settled at $59.94, up 83c, on the New York Mercantile Exchange.
The question on many investors’ minds, however, was how high the markets can go, and whether the economy over the second half of the year will support those higher share prices.
“Obviously, we had a nice day yesterday, so now I tend to think that we’re digesting all these earnings and figuring out whether we can move higher,” said Jay Suskind, head trader at Ryan Beck.
“The news has been very good, but now the market’s pricing in the second half of the year even more.”
The S&P 500 climbed 6.93, or 0.56%, to 1,243.72, its best close since June 12, 2001. The Nasdaq gained 12.22, or 0.56%, to 2,198.44 for its best showing since June 8, 2001.
The Dow Jones industrial average rose 68.46, or 0.64%, to 10,705.55, its highest level since March 15.
Bonds gained ground after the previous session’s sell-off, with the yield on the 10-year Treasury note falling to 4.20% from 4.26% late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.
The market’s reaction to second-quarter earnings was notable given the response to first-quarter results in April, when the stock markets dropped considerably.
“This time around, we’re seeing a strong reaction to very positive reports,” said Todd Salamone, director of trading and vice president of research at Schaeffer’s Investment Research in Cincinnati.
“A lot of economic questions are still out there, but it looks like with these earnings, people are thinking that we’ll be okay through the third quarter, at least.”
DaimlerChrysler surged 9.8%, or $4.29 to $48.26 after the company also posted slightly improved earnings. The stock was also helped by CEO Juergen Schrempp’s announcement that he would leave by the end of the year.
Drug maker Bristol-Myers Squibb rose 7c to $25.17 as the company posted a 91% surge in second-quarter income. Bristol-Myers credited strong sales of new drugs for the better-than-expected quarter. The company surpassed analysts’ forecasts by 11c per share.
Dow component Exxon Mobil said the recent surge in crude oil and natural gas prices were critical to its record second-quarter earnings, which rose 32% from a year ago. Although the energy company missed Wall Street’s profit forecasts by a penny per share, Exxon Mobil added 40c to $60.
Stronger sales helped defence contractor Northrop Grumman raise its earnings 23% in the second quarter. Northrop, which also increased its full-year earnings forecasts, beat Wall Street’s expectations by 12c per share. The company’s stock nonetheless lost 52c to $56.18.
Health insurer Aetna added $3.78 to $78.40 after the company saw a 43% jump in quarterly profits thanks to higher membership levels, cost cutting and strong underwriting results.
Earnings per share were right in line with analysts’ expectations, but Aetna’s full-year outlook was slightly lower than Wall Street’s forecasts.
Drug maker AstraZeneca said its CEO, Tom McKillop, will retire at the end of the year as well. The company also saw a 50% rise in quarterly profits. AstraZeneca climbed $2.03 to $44.14.
Advancing issues outnumbered decliners by more than five to two on the New York Stock Exchange, where volume came to 1.56 billion shares, compared with 1.48 billion on Wednesday.
The Russell 2000 index of smaller companies was up 8.16, or 1.21%, at 683.04.