U.S. Stocks Power Back to Finish Sharply Higher -- FEC

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Date Posted: 05:13:43 07/18/12 Wed
Author: Fed chief Bernanke offers no signals for imminent stimulus
Subject: U.S. Stocks Power Back to Finish Sharply Higher

U.S. Stocks Power Back to Finish Sharply Higher
18/07/2012 6:54AM
--Stocks reverse early losses to finish higher after Bernanke testifies before Senate lawmakers

--Fed chief Bernanke offers no signals for imminent stimulus

--DJIA falls 82 in the morning, but stocks climb to session highs in afternoon trading

(Adds closing stock prices.)

By Chris Dieterich

NEW YORK--Stocks shook off the Fed chief's dour view of U.S. growth, reversing early losses on hopes central bankers might be forced to come to the economy's aid.

The Dow Jones Industrial Average rose 78.33 points, or 0.62%, to 12805.54. Blue chips fell hard after Federal Reserve Chairman Ben Bernanke gave few clues that the U.S. central bank would take imminent steps to support the U.S. economy, in testimony before the Senate Banking Committee. Investors said Mr. Bernanke's lack of specifics initially disappointed the markets.

"There wasn't any real deviation from what we've been hearing, which is that the Fed is standing by, watching, and will do something more if things deteriorate. What's tough to know is what level of deterioration we'll have to see before they step in," said Randy Frederick, director of trading and derivatives at Charles Schwab.

But the Dow industrials stormed back from an 82-point drop to trade firmly in the black, staging their biggest swing from negative to positive territory in nearly six months.

"Folks probably think we're closer to monetary easing in some form, though I don't think that's particularly healthy for the markets," said Michael Farr, president and chief investment officer at portfolio-management firm Farr, Miller & Washington, which has about $800 million in assets under management.

The Standard & Poor's 500-stock index gained 10.03 points, or 0.74%, to 1363.67, and the Nasdaq Composite Index added 13.10 points, or 0.45%, to 2910.04. All 10 of the S&P 500's sectors rose, lead by health-care and materials stocks.

A trio of bellwether stocks gained ground despite reporting falling profits compared with a year ago.

Coca-Cola advanced $1.21, or 1.6%, to $77.69, after the beverage giant reported second-quarter earnings and revenue that topped analysts' estimates.

Goldman Sachs Group gained 30 cents, or 0.3%, to 97.98 after the investment bank reported second-quarter earnings and revenue that exceeded expectations. Additionally, Goldman agreed to sell Goldman Sachs Administration Services, a hedge-fund administrator, to State Street for $550 million.

Johnson & Johnson rose 55 cents, or 0.8%, to 69.00 even after the drug and consumer-products company reported second-quarter revenue that fell short of analysts' expectations and lowered its 2012 earnings outlook.

Mattel soared 3.01, or 9.7%, to 34.05 and was the S&P 500's biggest gainer after posting a surprise 20% jump in second-quarter earnings, helped by higher sales for Fisher-Price preschool toys and American Girl dolls.

Mosaic Co. climbed 2.84, or 5.1%, to 58.21 after the fertilizer producer's quarterly results were better than expected, and the company doubled its quarterly dividend to 25 cents.

In U.S. economic news, consumer prices were flat in June, in line with expectations, as energy costs continued to fall. Investors have said the Fed might be less hesitant to roll out additional stimulus measures if inflation is lower. Industrial production picked up in June, rising slightly more than expectations, according to the Fed. Meanwhile, capacity utilization increased slightly but fell short of expectations.

Elsewhere, home builders' confidence in July had the biggest monthly jump in nearly a decade, another sign of optimism in the housing market.

On Wednesday, Mr. Bernanke will address the House Financial Services Committee in the second day of the Fed chief's semiannual monetary-policy address to Congress.

European markets edged lower, and the Stoxx Europe 600 slipped 0.3%, turning red at the start of Mr. Bernanke's testimony. Weighing on investor enthusiasm was weak data on economic expectations out of Germany and a profit warning from French telecommunications-equipment giant Alcatel-Lucent, which dropped 26 cents, or 19%, to 1.11 on the New York Stock Exchange.

Spain's government sold a batch of short-term Treasury bills at significantly lower yields than in June's auction.

Asian markets were broadly higher ahead of Mr. Bernanke's testimony. Japan's Nikkei Stock Average rose 0.4%, and China's Shanghai Composite advanced 0.6%.

In other corporate news, Yahoo fell four cents, or 0.3%, to 15.60 after the Internet company named longtime Google executive Marissa Mayer as president and chief executive Monday.

Elsewhere on the corporate-earnings front, J.B. Hunt Transport Services slumped 3.18, or 5.5%, to 55.15 after the trucking company reported second-quarter earnings that matched analysts' expectations, but revenue fell short of forecasts.

TD Ameritrade Holding declined 13 cents, or 0.8%, to 16.27 after the online-brokerage company's fiscal third-quarter earnings slumped 2.3% as revenue and average client trades declined.

Charles Schwab rose 34 cents, or 2.7%, to 13.01 after reporting that second-quarter earnings rose 16% as revenue improved and the online brokerage opened more accounts.

State Street fell 2.81, or 6.4%, to 41.33 after the company's second-quarter earnings fell 4.5% on lower foreign-exchange trading revenue and lower fees from its investment-management business.

Digital Generation surged 2.19, or 23%, to 11.80 after the advertising-management company said it was exploring strategic alternatives to maximize shareholder value, including a possible sale of the company.

Write to Chris Dieterich at christopher.dieterich@dowjones.com.

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 17, 2012 16:54 ET (20:54 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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