Stocks Move Higher on Earnings News
Stocks ended the week on cheery note, as earnings news from Microsoft («www.businessweek.com») and Countrywide Financial («www.businessweek.com») helped push the major indexes up by at least 1% despite record oil prices and the weak dollar. Shares of oil companies also bounced up, helping fuel Friday’s rally.
Investors were also cheered by a newspaper report that Merrill Lynch («www.businessweek.com») could be in for new leadership after its CEO allegedly angered his board members by discussing a major merger without their knowledge.
On Friday, the Dow Jones industrial average rose 134.78 points, or 0.99%, to 13,806.70. The broader S&P 500 index moved up 20.88 points, or 1.38%, to 1,535.28. The tech-heavy Nasdaq composite index jumped 53.33 points, or 1.94%, to 2,804.19.
In the energy markets, December NYMEX crude was up $1.40 per barrel at $91.86, after touching a record $92.22 per barrel in overnight trading. Action Economics says prices are being pushed higher by supply concerns, the weakness of the U.S. dollar and geopolitical concerns in the Middle East, especially new U.S. sanctions on Iran. Meanwhile, gold hit a 27-year-high of $787.50 per ounce, and the dollar’s value fell, reaching $1.44 per euro.
As crude oil pushes ever closer to the $100 mark, higher energy costs could be “very devastating for the consumer,” which makes up 70% of economic activity in the U.S., notes Eric Thorne of Bryn Mawr Trust Wealth Management. So far, however, investors haven’t been focused on oil prices, focusing more on the aftermath of this summer’s financial crisis, Thorne says.
Countrywide Financial («www.businessweek.com»), as the nation’s largest mortgage lender, was hit hard by the recent credit crisis. Yet Countrywide shares shot up 32% after Countrywide announced its quarterly earnings results. Countrywide reported a loss of $2.85 per share in the third quarter, a $1.2 billion loss, but expects to return to profitability in the fourth quarter. Overall, thrifts and mortgage finance companies rose 5.57% on Friday, recovering a fraction of their share prices’ big losses this year.
Microsoft («www.businessweek.com») jumped 9.5% after reporting earnings of 45 cents per share last quarter, up from 35 cents a year ago. Revenue rose 27%, helped by sales of its new Windows operating system software and its “Halo” video game. Microsoft shares, trading around $35, returned to levels not seen since 2001.
Merrill Lynch («www.businessweek.com») shares moved up 8.5% on news that chief executive Stan O’Neal may be on the way out. O’Neal floated the idea of a merger with a large bank, Wachovia («www.businessweek.com»), a foray that angered Merrill’s board, according to people close to the beleaguered Wall Street firm, reports the New York Times. The speculation comes a few days after Merrill reported huge losses from the credit crisis in its quarterly earnings announcement.
Shares of oil and gas refining company Tesoro («www.businessweek.com») jumped 12.7% to $63.83 on word that Tracinda Corp. plans to make a cash tender offer for up to 21.875 million shares of stock at a price of $64.00 per share. The Tesoro deal and the rise in oil prices helped push stocks in the oil and gas refining and marketing industry up 3.3%.
Friday’s session ends a week of wild swings in stock prices as the market reacted strongly to earnings reports, economic data and even rumors. “It seems to be very much a news-driven market right now,” says Randy Frederick, director of derivatives at Charles Schwab. That’s a sign of uncertainty about the economy, he adds: “People are having a hard time getting a read on where this market is headed.”
Also Friday, a survey of consumer confidence showed falling home prices are having an impact on the American mood. “
