Earnings Reports Give Stocks Big Boost

Sunday, July 26, 2009

U.S. stocks rose last week, leaving the Dow Jones industrial average with its best two weeks since 2000, as companies beat profit estimates and an increase in home resales signaled an economic recovery may be underway.

Caterpillar soared 24 percent as it reported earnings that tripled analysts' projections, and eBay rallied on results that signaled consumers' appetite for online commerce is rebounding. An index of home builders climbed 11 percent, led by Standard Pacific, as sales increased for a third straight month.

Microsoft dropped 8.3 percent on Friday, ending the Nasdaq composite index's 12-day winning streak, its longest since 1992.

The Standard & Poor's 500-stock index added 4.1 percent for the week to close at 979.26. The Dow jumped 349.30 points, or 4 percent, to 9093.24, topping 9000 for the first time since January and boosting its gain since July 10 to 12 percent. The Nasdaq gained 4.2 percent to finish at 1965.96.

"The rally's been a surprise to everyone, including the bulls," said Philip Dow, the Minneapolis-based director of equity strategy at RBC Wealth Management. "What's driving the market is positive earnings surprises, and the economic tea leaves are telling us the recovery is at hand."

Companies including Boeing and 3M reported second-quarter results that topped estimates, suggesting the worst recession in a half century is abating. Seventy-five percent of the companies in the S&P 500 that have released results surpassed predictions, according to data compiled by Bloomberg. That would be the highest rate ever for a full quarter, Bloomberg data going back to 1993 show.

The U.S. Treasury will auction $32 billion of three-month bills and $31 billion of six-month bills on Monday. They yielded 0.19 percent and 0.27 percent, respectively, in when-issued trading. One-month bills will be sold Tuesday.

-- Bloomberg News

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