Retailers Lead Stocks Higher
Insurers Bounce on Bailout Plan; Ryder Drops
Stocks halted a two-day skid on Wednesday as hopes that retailers will report improved sales trumped worries about economic growth.
The Dow Jones Industrial Average, which had declined almost 230 points in the previous two sessions, climbed 47.55 points, or 0.6%, to 7837.11. The S&P 500-stock index rose 9.61 points, or 1.2%, to 825.16, powered ahead by a 2.8% surge in its consumer-discretionary sector.
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Family Dollar Stores shares rose 6% and Bed, Bath & Beyond shares surged 24% after upbeat earnings reports. Home Depot, the Dow component, was up 2.8%. Many large retailers will report March same-store sales on Thursday.
The Nasdaq Composite Index, which has outpaced the other major indexes this year, climbed 29.05 points, or 1.9%, to 1590.66.
Many investors are jittery about first-quarter earnings season, but a few are clinging to their recent optimism, betting that stocks adequately factored in the risks of bad corporate reports during the market's swoon that led to the March 9 bear-market lows.
Alan Valdes, a trader on the NYSE floor for brokerage Hilliard Lyons, pointed to the relatively tame performance of Alcoa on Wednesday as evidence that the market may be able to weather earnings season relatively well. The aluminum maker rose 3.5% despite swinging to a first-quarter loss on sagging aluminum prices and the global slowdown.
"No question, we're going to see more announcements like this. But it's already priced in," said Mr. Valdes. "If we get any real surprises, they'll have to be to the upside."
Other earnings news was mixed Wednesday. Transportation company Ryder System declined 18% after it warned that its first-quarter earnings will be much leaner than expected. Transportation and materials had been among the sectors leading the market's recent month-long jump from its bear-market lows.
A Wall Street Journal report that the Treasury Department will make federal bailout money available for some struggling life-insurance companies helped rally those stocks. Hartford Financial Services Group, Genworth Financial and Lincoln National surged.
Consolidation in the ailing construction sector also cheered investors. Pulte Homes and Centex said they will combine in a $1.3 billion stock-for-stock deal that would create the nation's largest home builder. Pulte shares declined 10%, while Centex surged 19%.
"I'm starting to emerge from the bear camp," said Hugh Johnson, chief investment officer at Johnson Illington Advisors, a portfolio-management firm based in Albany, N.Y. "But we're not really doing anything yet. Like a lot of investors, I think, we're waiting until after this holiday-shortened week to see what's in the earnings reports, especially the financials."
Mr. Johnson said he's been encouraged lately by the way that economically sensitive sectors have led the market, often outpacing safe-haven plays like health care and utilities.
Traders said volume was light as participants began to take off ahead of a series of religious holidays. Passover begins at sundown on Wednesday. Major U.S. exchanges will be open on Thursday but shuttered for Good Friday.
Stocks were sapped of some of their momentum after minutes of the Federal Reserve's last interest-rate policy meeting three weeks ago showed that officials marked down their economic forecasts, with a slow recovery not expected until next year amid rising joblessness.
But some participants took heart from data from the Commerce Department which said that U.S. wholesalers in February made the biggest cut ever in their inventories amid rising sales.
Economists traditionally keep a close eye on stockpiles of goods as an indicator of whether a recession is on the way or about to end. Falling inventories suggest healthy consumer activity, which constitutes more than two-thirds of U.S. economic activity and acts as a key driver of corporate profits.
Peter Cardillo, chief market economist at Avalon Partners in New York, called the inventory decline "impressive" and said it lent credence to the idea that the market downturn may be nearing an end.
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