The Dow reached a six-year closing high after Merril Lynch upgraded its rating on the giant automaker. Boeing, Colgate-Palmolive and PepsiCo posted higher profits
Stocks finished higher Wednesday, supported by solid corporate earnings and an analyst upgrade of General Motors (GM ). Investors shrugged off the Federal Reserve's Beige Book report, after weathering inflation fears fanned by surges in March durable goods orders and new home sales, says Standard & Poor's Equity Research.
The Dow Jones industrial average climbed 71.24 points, or 0.63%, to 11,354.49, a six-year closing high. The broader Standard & Poor's 500 index rose 3.68 points, or 0.28%, to 1,305.42. The tech-heavy Nasdaq composite gained 3.33 points, or 0.14%, to 2,333.63.
Investors were responding Wednesday to upbeat General Motors (GM ) news. The automaker was higher after Merrill Lynch raised its recommendation on the stock from sell to neutral.
A new set of economic data was also in focus. The Fed's Beige Book said the economy continued to expand, but held mixed messages on inflation, says S&P Equity Research.
Still, the Beige Book did little to change expectations of future interest rate hikes, some analysts say. "There's nothing here that jumps out as being anecdotal evidence of a picture materially different than what the data have suggested," says Keith Hembre, chief economist at First American Funds. "We pretty much remain in the data-driven situation with regard to Fed moves."
Federal Reserve Chairman Ben Bernanke is set to testify before the House of Representatives Joint Economics Committee on Thursday, with first-quarter gross domestic product (GDP) and employment cost index (ECI) out on Friday.
Some analysts say they expect Bernanke's testimony to be upbeat on the economy but skimpy on rate clues. "Among the issues he's likely to center on are the importance of lags from past tightening, risks of overshooting, Bernanke's assessment of inflation prospects in the wake of a higher-than-expected CPI for March, and how he thinks about renewed energy price pressures," says Edward McKelvey, senior economist at Goldman Sachs.
In other economic data Wednesday, new home sales surged 13.8% to a 1.2 million units in March, well above expectations, says Action Economics. Durable orders in March jumped 6.1%, also handily topping forecasts.
Investors were also sifting through earnings reports. Toothpaste seller Colgate-Palmolive (CL ) and soft-drink maker PepsiCo (PEP ) were all higher after posting increases in first-quarter profits, while aerospace contractor Boeing (BA ) was modestly lower.
In the oil industry, ConocoPhillips (COP ) was lower despite its own first-quarter profit increase. Exxon Mobil (XOM ) posts quarterly results Thursday, followed by Chevron (CVX ) on Friday.
Other companies due to report earnings Thursday include Aetna (AET ), Bristol-Myers Squibb (BMY ), Gateway (GTW ), Raytheon (RTN ) and XM Satellite Radio (XMSR ).
Elsewhere Wednesday, telecom conglomerate AT&T (T ) rose on news the company will offer a movie delivery services to its high-speed Internet subscribers.
Online retailer Amazon (AMZN) was higher after the company said its sales may rise to $10.5 billion and profit excluding items may increase to $520 million in 2006.
On the M&A front, software giant Microsoft (MSFT) reportedly will announce next week an acquisition of privately held ad-placement company Massive, in a deal valued at $200 million to $400 million.
Meanwhile, electronics maker Sanmina-SCI (SANM) was sharply higher after the company issues an earnings forecast for this quarter that exceeded the estimates of some analysts.
In the energy markets Wednesday, June West Texas Intermediate crude oil futures closed down 95 cents at $71.93, after a weekly inventory report showed a modest decline of 200,000 barrels.
European markets finished modestly higher. In London, the Financial Times-Stock Exchange 100 index rose 17.7 points, or 0.29%, to 6,104.3. Germany's DAX index bounced 28.32 points, or 0.47%, to 6,107.12. In Paris, the CAC 40 index was up 16.98 points, or 0.32%, to 5,252.32.
Asian markets finished higher. Japan's Nikkei 225 index rose 85.64 points, or 0.5%, to 17,055.93. In Hong Kong, the Hang Seng index added 94.89 points, or 0.57%, to 16,672.66. Korea's Kospi index climbed 20.07 points, or 1.4%, to 1,451.22.
Treasury yields climbed in the wake of the strong durable goods report. Prices for 10-year Treasury notes fell to 95-11/32 with a yield of 5.11%, while 30-year bonds dropped to 89-22/32 for a yield of 5.18%.