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Strong Earnings Reports Boost Stocks

Posted on: Thursday, 15 July 2004, 06:00 CDT

NEW YORK - A surprise drop in wholesale prices and another round of strong earnings reports gave stocks a modest lift Thursday as investors' worries over inflation and corporate profits eased somewhat.

According to the Labor Department, the producer price index dropped 0.3 percent in June, a strong sign that inflation may not be as large an issue as some had feared. Economists expected a 0.2 percent rise in prices, but falling food and energy prices sent prices lower.

Investors were also cheered by better-than-expected earnings from financial companies as well as a handful of technology stocks.

In the first hour of trading, the Dow Jones industrial average rose 7.74, or 0.1 percent, to 10,216.54.

Broader stock indicators were modestly higher. The Standard & Poor's 500 index was up 1.03, or 0.1 percent, to 1,112.50 and the Nasdaq composite index climbed 3.80, or 0.2 percent, to 1,918.68

Economic news drove much of the buying, backed up not only by the wholesale price drop, but also by strong sales and inventory reports. The Commerce Department said inventories rose 0.4 percent in May, while sales climbed 0.7 percent, signs that businesses are increasing their investments and that consumers are rewarding their efforts.

Jobs, however, continues to be an area of concern. First-time jobless claims rose by 40,000 for the week to 349,000. The Labor Department blamed seasonal adjustments at the nation's automakers for the rise.

Despite a massive one-time charge to settle lawsuits over the WorldCom scandal, Citigroup managed to beat Wall Street estimates for the second quarter by 5 cents per share. And Wachovia exceeded expectations by 2 cents per share on record quarterly earnings. Citigroup was up 20 cents at $45.30, while Wachovia slipped 2 cents to $44.67.

The long-suffering technology sector received a boost from a pair of positive earnings reports. Apple Computer Inc. surged $3.36 to $32.94 after beating Wall Street expectations by 2 cents per share, thanks to strong sales of its iPod music players and its laptop computers. Flash memory producer SanDisk Inc. surged past estimates by 8 cents per share on an 85 percent jump in revenue. SanDisk climbed $4.95 to $24.93.

In other earnings news, PepsiCo Inc. fell 73 cents to $52.68 after meeting analysts' estimates but showing weakness in its Quaker brand products.

Advancing issues outnumbered decliners by more than 4 to 3 on the New York Stock Exchange, where volume came to 141.99 million shares, compared to 157.88 million on Wednesday.

The Russell 2000 index of smaller companies was up 2.28, or 0.4 percent, to 562.02.

Overseas, Japan's Nikkei stock average rose 0.5 percent. In afternoon trading, Britain's FTSE 100 was down 0.3 percent, Germany's DAX index lost 0.4 percent, and France's CAC-40 fell 0.3 percent.

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