Closing Bell: Upbeat Earnings, Economic News Push Stocks to New Records

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Earnings gains at major U.S. companies and encouraging economic news pushed stocks to record levels Thursday.

The Dow Jones industrial average (^DJI) rose 78 points, or 0.5 percent, to 15,547, while the Standard & Poor's 500 (^GPSC) index climbed 8.5 points, or 0.5 percent, to 1,689. The Nasdaq composite (^IXIC) added 1.3 points, or 0.04 percent, to 3,611.

A drop in weekly claims for unemployment benefits signaled a healthier economy and persuaded investors to buy stocks. Separately, the Federal Reserve Bank of Philadelphia said manufacturing activity in the mid-Atlantic region grew in July at the fastest pace in more than two years.

Among companies reporting second-quarter earnings, Morgan Stanley (MS) was a standout, rising $1.16, or 4.4 percent, to $27.70. The New York-based bank reported sharply higher earnings driven by investment banking gains. IBM rose $3.44, or 1.8 percent, to $197.99 after its profit beat analyst forecasts as software sales grew.

Investors also kept an eye out for comments from Fed chairman Ben Bernanke, who appeared before the Senate Banking Committee. Bernanke said that Congress could do more to help the U.S. economy this year but has instead focused on reducing the federal deficit.

In his second appearance before lawmakers this week, Bernanke told senators that the Fed's low interest-rate policies have carried "an awful lot of the burden" of driving economic growth.

Bernanke gave stocks a lift Wednesday when he said that there was no "preset course" for ending the Fed's $85 billion-a-month bond-buying program, and that any change would depend on how well the economy is doing. Investors have worried that the central bank might reduce its stimulus before the economy was strong enough.

In commodities trading, the price of oil rose $1.56, or 1.5 percent, to $108.04 a barrel. The price of gold gained $6.70, or 0.5 percent, to $1,284.20 an ounce.

Mortgage-buyer Freddie Mac said the average on the 30-year loan slipped to 4.37 percent. That's down from 4.51 percent last week but is still near the highest level in nearly two years.

The Conference Board's index of leading indicators remained at 95.3 in June. The flat reading followed increases of 0.2 percent in May and 0.8 percent in April. The longer-term trend has been positive: the index increased 1.7 percent in the first six months of this year. That's better than the 1.1 percent rise in the previous six months.

Dell (DELL) delayed its planned vote on founder Michael Dell's plan to take the slumping computer maker private. The formal shareholder vote was rescheduled for July 24. The delay suggests the the board needs more time to rally support, and is a significant setback for Michael Dell and the company's board, which has spent the past five months trying to persuade shareholders to approve the buyout proposal. Dell's stock rose 24 cents, or 1.9 percent, to $13.12.

Among other stocks in the news:
  • EBay (EBAY) fell $3.86, or 6.7 percent, to $53.52 after its CEO John Donahoe said late Wednesday that economic weakness in Europe and Korea will "continue to be a challenge" in the second half of the year.
  • Intel (INTC) fell 91 cents, or 3.8 percent, to $23.24 after the world's largest maker of computer chips predicted flat sales amid a decline in PC sales. The company's earnings and revenue fell in the second quarter.
  • Men's Wearhouse (MW) is buying the Joseph Abboud brand for about $97.5 million in cash in a deal that will broaden the company's roster of exclusive brands. The news follows the retailer's decision to fire its founder George Zimmer as executive chairman last month. The stock rose 20 cents, or 0.5 percent, to $39.15.
  • Profit at grocery store chain Safeway (SWY) fell in the second quarter, but adjusted results topped Wall Street expectations. The stock rose 1.67, or 6.8 percent, to $26.32.
  • UnitedHealth Group (UNH), the nation's largest health insurer, surged $4.32, or 6.5 percent, to $70.55 after reporting earnings that beat analyst estimates.
  • Johnson Controls (JCI), which makes heating and ventilation systems for buildings, surged $3.09, or 8.3 percent, to $40.43 after the company said its fiscal third-quarter net income climbed 33 percent as revenue improved. The earnings beat Wall Street expectations, and the company provided a fourth-quarter earnings forecast above analyst estimates.
What to watch Friday:

These major companies are scheduled to report quarterly financial results:
  • General Electric Co. (GE)
  • Honeywell International Inc. (HON)
  • ManpowerGroup (MAN)
  • Whirlpool Corp. (WHR)
-Compiled from staff and wire reports.



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Morgan Stanley Profit Boosted by Investment Banking

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Timur Emek/dapd
Morgan Stanley says that second-quarter earnings beat analyst expectations, fueled by gains in its investment bank.

The bank says it earned $898 million after excluding the benefit of an accounting gain, a leap from $337 million a year earlier.

That worked out to 45 cents a share after stripping out the benefit of the gain as well as a charge the bank took for finishing its purchase of the brokerage Morgan Stanley Smith Barney. Financial analysts polled by FactSet had expected 43 cents. Analyst expectations generally strip out one-time items.
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Revenue totaled $8.3 billion before the accounting gain, up 26 percent from a year earlier. That beat the $7.9 billion that analysts had expected.

Revenue in the investment bank jumped 40 percent after excluding the accounting gain, boosted as the bank sold and traded stocks for clients. Revenue from selling and trading bonds for clients, a unit where performance has been uneven, also improved. The bank also made more from advising companies on mergers and acquisitions, and from underwriting stock and bond offerings.

Profit rose in the wealth management unit, which advises mostly small and medium-sized businesses and wealthy individuals.

Morgan Stanley's (MS) expenses rose, increased partly by higher litigation costs.

The bank's stock price leaped more than 4 percent in pre-market trading, up $1.21 to $27.75.



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