Thursday, May 25, 2006

Stocks Rise on GDP, Housing Data

News Article
May 25, 2006

Business Week Online

Stocks Rise on GDP, Housing Data

Major indexes posted a second straight day of gains after solid economic reports failed to fan inflation fears. Also in focus: Wal-Mart and eBay

Stocks finished higher Thursday, boosted by tame economic reports and a pair of analyst upgrades. Bulls were looking for the start of a near-term uptrend, but they'll need to see price strength driven by increasing volume to have confidence the rally has legs, says Standard & Poor's Equity Research.

The Dow Jones industrial average rose 56.19 points, or 0.51%, to 11,173.74, paced by General Motors (GM ). The broader Standard & Poor's 500 index added 10.44 points, or 0.83%, to 1,269.01. The tech-heavy Nasdaq composite was up 18.74 points, or 0.86%, to 2,187.92.

In legal news, a jury found Enron founder Ken Lay and former Enron CEO Jeffrey Skilling guilty of conspiracy and fraud relating to their role in the energy company's collapse. Skilling was found not guilty on counts involving insider trading.

Economic reports were in focus Thursday. First-quarter gross domestic product (GDP) was revised from 4.8% to 5.3%. The number is lower than forecast and signals firm growth without igniting inflation fears, says S&P Equity Research. The closely watched PCE price index held steady at 2.0%.

Separately, existing home sales fell 2% to 6.76 million in April. The figure was almost exactly in line with forecasts, says Action Economics.

Federal Reserve Chairman Ben Bernanke stressed the significance of "forward looking" monetary policy in a letter to Congress's Joint Economic Committee. His remarks contained little fresh information, says Action Economics, but major indexes reached higher after the news.

On the economic docket Friday, April personal income is expected to rise 0.8%, while consumption increases 0.7%, says Action Economics. The University of Michigan's final May reading for consumer sentiment is seen holding at the preliminary reading of 79.0, down from April's 87.4.

Analyst upgrades helped give stocks a lift Thursday. Wal-Mart (WMT ) was higher after Banc of America upgraded the retail giant from neutral to buy.

Meanwhile, eBay (EBAY) rose sharply after Prudential raised its recommendation on the company from neutral to overweight. The Internet auctioner also unveiled a partnership with Yahoo (YHOO ).

Credit-card issuer MasterCard (MA ) was sharply higher in its debut on the New York Stock Exchange.

Drugmaker Genentech (DNA ) rose on news it filed for regulatory approval to market its Avastin antibody as a breast cancer treatment.

In earnings news, TiVo (TIVO ) was lower after the maker of digital video recorders late Wednesday posted higher earnings and issued in-line guidance.

Computer hardware company Network Appliance (NTAP ) declined modestly after reporting quarterly results that were in line with expectations.

Software maker Opsware (OPSW ) was down on a report of a first-quarter loss. Also in Silicon Valley, Blue Coat Systems (BCSI ) tumbled after guided first-quarter revenue lower than some analysts expected.

Pet supply chain Petco (PETC ) dipped after posting higher earnings but lower revenues.

On the M&A front, Alabama bank Regions Financial (RF ) was modestly lower on news of a $10 billion merger with rival AmSouth Bancorp (ASO ).

Among other stocks in focus, retailer Kohl's (KSS ) was lower after Deutsche Bank trimmed its rating on the stock from buy to hold.

In the energy markets Thursday, July West Texas Intermediate crude oil futures closed up $1.46 at $71.32 a barrel.

European markets finished higher. In London, the Financial Times-Stock Exchange 100 index rose 90.6 points, or 1.62%, to 5,677.7. Germany's DAX index climbed 118.83 points, or 2.13%, to 5,706.06. In Paris, the CAC 40 index advanced 79.51 points, or 1.63%, to 4,949.53.

Asian markets finished lower. Japan's Nikkei 225 index fell 213.45 points, or 1.34%, to 15,693.75. In Hong Kong, the Hang Seng index dropped 125.75 points, or 0.79%, to 15,696.89. Korea's Kospi index tumbled 37.62 points, or 2.82%, to 1,295.76.

Treasury Market

Treasuries drifted in a tight range for most of the session, weakening after soft demand for a five-year auction and new of Bernanke's letter. Prices for 10-year Treasury notes fell to 100-13/32 with a yield of 5.07%, while 30-year bonds dropped to 89-26/32 for a yield of 5.17%.

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