Economic news helps rally stocks once again as the Dow ($INDU) breaks through resistance. This blue chip index added 49.86 points on the session to close at 10,522.59. The S&P 500 ($SPX) tacked on 5.18 points to 1,219.94.The Nasdaq ($COMPQ) was able to gain 15.91 points to close at 2,160.22. Volume remained very heavy with the NYSE trading 1.99 billion shares and the Naz turning over 2.35 billion shares. Market breadth was positive by a 16-to-15 and 17-to-14 margin on the Big Board and Naz respectively.
Economic news was the big story Thursday with Fed Chairman Greenspan speaking and a slew of key reports released this morning. This included the productivity data for the third quarter, as well as the ISM Non-mfg. Index and data on retail sales. A positive court ruling for Merck (MRK) also sparked gains in stocks. Earnings news was mixed on the session, as it usually is, with shares of Comcast (CMCSA) falling, while Qualcomm (QCOM) saw a solid advance.
CMCSA shares fell five percent after the company announced earnings of 10-cents a share, equal to the year ago figure. Estimates were for CMCSA to make 14-cents a share, so the news resulted in a lower stock price. However, QCOM shares tacked on nine percent Thursday following its earnings report. The company announced that earnings rose by 37 percent and it also provided a positive sales outlook. Shares of Verizon (VZ) were lower on the session by two percent after announcing that revenues fell 12 percent in the third quarter.
Fed Chairman Greenspan stated today in his testimony before the Joint Economic Committee that inflation was in check, but the future was unclear. This left the door open for further rate hikes, although productivity data helped ease some inflationary concerns. Productivity rose 4.1 percent in the third-quarter, helping push unit labor costs down 0.5 percent. However, real compensation fell 1.4 percent, which is good for businesses and for inflation, but not so good for consumer spending.
Merck shares rose 3.77 percent on the session to close at $29.48 after winning a key litigation battle. The company was cleared of blame for a heart-attack of a short term Vioxx user. Though this could curtail some of the current lawsuits for short term cases, analysts still believe long-term users will be apt to sue.
Today’s gains for the Dow allowed it to finally break through its 200-day moving average resistance. This puts all three major market indices above their key moving 50-day and 200-day moving averages. With strong volume accompanying recent strength, the bulls have to feel good about the situation. However, Friday’s job report could play a key role in trading, so we’ll have to see how the week ends up.
Jody Osborne Senior Staff Writer & Options Strategist Optionetics.com ~ Your Options Education Site
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