US stocks boosted by corporate earnings growth

Wall Street surged higher today, carrying the Russell 2000 to a record close as Wall Street welcomed encouraging economic data and a continuation of double-digit corporate earnings growth.

The Standard & Poor’s 500 and Nasdaq composite indexes again reached their best closing levels in more than four years.

Investors embraced the Commerce Department’s report that consumer spending rose 0.8% in June, the largest increase since April.

Incomes also grew at a nice clip, which dovetailed with an improved jobs picture in June, when the unemployment rate fell to 5%, a nearly four-year low.

Another Commerce Department report showed orders at US factories rose 1% in June, in line with expectations.

Strong corporate earnings again drove stock prices. Earnings are on track to grow 10.74% for the second quarter, which would be the 13th straight quarter of double-digit earnings growth.

Since the early July start of earnings season, the market has gained 3.7%, reversing the 1.70% loss for the first half of the year, according to data from Standard & Poor’s.

As the market has recovered from its March 2003 lows, 84% of that gain has been attributable to higher corporate earnings, said David Darst, chief investment strategist of Morgan Stanley’s Individual Investor Group.

“We’re finally starting to see the markets wake up to the fact that the economy is in pretty good shape,” said John Caldwell, chief investment strategist for McDonald Financial Group, which is part of Cleveland based KeyCorp. ”Most of the data continues to be good.”

The Russell 2000 index of smaller companies rose 5.71, or 0.84%, to an all-time high of 688.51

The Nasdaq composite index rose 22.77, or 1.04%, to 2,218.15. The index last closed above 2,200 in June 2001. The Standard & Poor’s 500 index hit a new four-year high for the sixth time since July 14. The index rose 8.77, or 0.71%, to 1,244.12

The Dow Jones industrial average rose 60.59, or 0.57%, to 10,683.74.

Crude oil futures, one of Wall Street’s persistent worries this summer, closed higher. A barrel of light crude settled at US$61.89 (€50.74), up 32 cents, on the New York Mercantile Exchange.

Bonds fell, with the yield on the 10-year Treasury note at 4.33, up from 4.32 late on Monday, its highest level since April. The US dollar rose against the euro. Gold prices were flat.

In company news, Unocal Corp. rose 16 cents to 64.53 after China’s state-owned oil company CNOOC Ltd. withdrew its US$18.5bn (€15.17bn) offer, opening the way for Chevron Corp. to complete its planned US$17.4bn (€14.27bn) acquisition of Unocal.

CNOOC rose 4.15 to 73.49; Chevron rose 1.13 to 59.56.

Marsh & McLennan Companies Inc., the nation’s largest insurance brokerage, said lower earnings in its insurance services and investment management divisions as well as restructuring charges reduced profits 57% in the second quarter, but the results were better than analysts expected. The stock fell 40 cents to 28.56.

Manufacturing conglomerate Tyco International Ltd. slid 2.96 to 27.86 after the company issued guidance below Wall Street targets for the fourth quarter and full year. Banc of America, Merrill Lynch and Wachovia all downgraded the stock.

DaimlerChrysler AG rose 1.37 to 50.74 after it said US sales rose by 25% in July and it would continue to offer employee discounts to car buyers.

Investors also liked the possibility of more executive change at the company. The Wall Street Journal reported that Eckhard Cordes, head of DaimlerChrysler AG’s Mercedes Car Group, offered his resignation last week after being passed over for the company’s top spot.

The report, which the company refused to comment on, said German regulators are investigating possible insider trading at the company.

Cordes sold 4.4m in DaimlerChrysler shares after DaimlerChrysler’s CEO, Juergen Schrempp, said last Thursday he would step down at the end of the year.

General Motors Corp. fell 33 cents to 36.53 after the company decided to extend a discount plan that gives customers a chance to buy cars at the prices its employees pay through to September 6. The move reverses an earlier GM decision to end its program and matches moves by Ford Motor Co. and DaimlerChrysler AG to extend similar discounts. Ford rose 3 cents to 10.88.

Advancing issues led decliners by nearly 2 to 1 on the New York Stock Exchange where volume was 1.52bn shares, up from 1.33bn at the same time on Monday.