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Date Posted: 10:00:06 05/16/13 Thu
Author: Thursday 16/5/2013===66 trade 11/2/2013
Subject: Tech stocks led Thursday's advance

U.S. Stocks Advance; Cisco Earnings Trump Weak Data
17/05/2013 2:21AM

By Chris Dieterich

NEW YORK--Technology stocks pushed most U.S. stocks higher, as an upbeat earnings report from Cisco Systems countered a slate of weak economic reports.

The Dow Jones Industrial Average rose seven points, or 0.1%, to 15283 in midday trading. The Standard & Poor's 500-stock index fell less than one point, or 0.1%, to 1658, flirting with its 10th record-high close in 11 sessions.

Tech stocks led Thursday's advance, as the Nasdaq Composite Index rose 10 points, or 0.3%, to 3483. Cisco jumped 12% to a more than two-year high after the blue-chip network-equipment maker reported quarterly earnings and revenue that topped analyst expectations, and projected growth in revenue and profit in the current quarter.

Investors looked past some dour signals from the economy, in part because signals for slower growth increases the likelihood that the Federal Reserve will continue its stimulus measures, traders said.

"Cisco is powering the Nasdaq, and that in combination with the view that the Fed will stay the course is taking the whole market up," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Genuity, noting trading volumes were heavier than average. "The market refused to go down, and the reason is there's so much cash on the sideline," he said.

Initial claims for jobless benefits rose 32,000 last week, which was more than forecast, to a seasonally adjusted 360,000. It was the biggest one-week increase since November.

Housing starts for April declined 16.5%, far worse than expected and the weakest such reading since November. Separately, the Federal Reserve Bank of Philadelphia's May index of business activity unexpectedly fell.

April's consumer-price index, a key reading on inflation, fell 0.4% on the month, more than forecast. Weaker growth, paired with a tame reading on inflation, supports the case that the Fed needs to keep buying Treasury bonds to hold down interest rates and spur the economy.

"The inflation report has been gathering a bit of attention because it looks like we're heading for deflation, and that's a support for the equity market," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co.

Investors expressed little concern about Thursday's downbeat economic reports as the market roars higher.

"I don't think the data today will change the market momentum," said John Fox, director of research at Fenimore Asset Management and co-manager of the $820 million FAM Value Fund. Mr. Fox said that his fund has been buying small retailer stocks in the second quarter.

"We've got central bankers providing stimulus all over the world, and in the background, the economy is getting better. It might look weak relative to other downturns, and the pace of job recovery is slower than in the past, but it is recovering. Every chart you look at goes up and to the right."

Japan's gross domestic product grew 3.5% in the first quarter on an annualized basis, topping expectations of 2.8%, a sign that the government's aggressive stimulative policies are taking hold. Japan's Nikkei Stock Average rose to 5½-year highs in intraday trading, closing down 0.4%. China's Shanghai Composite rallied 1.2%.

In Europe, the Stoxx Europe 600 fell less than 0.1%. Data showed the euro zone's trade surplus in March rose to the highest level since the inception of the common currency in 1999.

The soft batch of economic data triggered gains for U.S. government bonds, as the yield on 10-year Treasury bonds fell to 1.875%. The dollar lost ground against the euro and rose against the yen. May gold futures slumped 0.9% to $1,384 a troy ounce, on track for a sixth-straight decline. June crude-oil futures rose 0.9% to $95.18 a barrel.

Wal-Mart slid 2.1% after the world's largest retailer reported quarterly earnings that fell shy of forecasts and provided a downbeat second-quarter outlook.

Both classes of Berkshire Hathaway's shares slipped after Standard and Poor's Ratings Service cut its rating by one notch, citing the company's dependence on its core insurance operations for most of its dividend income.

Tesla rose 7% after the car maker said it plans to sell stock and convertible notes to repay debt and for corporate purposes, taking advantage of a recent rally in its stock price.

Kohl's climbed 5% after the retailer's earnings beat the company's estimates and provided current-quarter earnings roughly in-line with expectations.


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


(END) Dow Jones Newswires

May 16, 2013 12:21 ET (16:21 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

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