Stocks rise as financial, consumer stocks gain

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Investors encouraged by a good batch of earnings reports moved back into stocks after a two-day slide.

Stocks rose Thursday as easing worries about loan losses at banks made financial stocks look attractive. The Dow Jones industrial average rose 120 points and logged the biggest gains of major indexes after a number of companies that make up the indicator reported earnings that surpassed expectations.

At the same time, a disappointing forecast from online retailer eBay Inc. weighed on the technology-heavy Nasdaq composite index.

A rising dollar hurt commodity prices, which weighed on energy and materials stocks.

The moves came after a late-day slide pushed major indexes lower on Wednesday. Lingering concerns over whether investors had been too optimistic about an economic rebound fed into the drop.

Investors poring over earnings reports for insight into the strength of the economy found encouragement from PNC Financial Services Group Inc. and Fifth Third Bancorp, which each said the number of bad loans aren’t mounting as fast as they had been. That pushed financial stocks higher.

Consumer stocks rose after clothing retailer J. Crew Group Inc. raised its earnings forecast for its fiscal third quarter because of stronger sales and profit margins.

Dow components 3M Co., Travelers Cos., AT&T Inc. and McDonald’s Corp. posted stronger results than analysts had forecast. and helped lift the index.

Jeffrey Beamer, Portfolio Manager of Lacerte Capital in Dallas, said the reports showing improved profits but still-weak revenue raise questions about how long the market will be able to hold its gains of the past seven months. Cost-cutting, he noted, can only help so much.

“You may look great this quarter but what are you going to do in the coming quarters,” Beamer said. “If the earnings aren’t just really solid we could get a decent pullback here.”

In midafternoon trading, the Dow rose 120.08, or 1.2 percent, to 10,069.44.

The broader Standard & Poor’s 500 index rose 8.67, or 0.8 percent, to 1,090.07. The Nasdaq rose 10.07, or 0.5 percent, to 2,160.80.

Three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 715.6 million shares compared with 709.1 million traded at the same point Wednesday.

Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.41 percent from 3.39 percent late Wednesday.

Mixed economic data contained the market’s advance. The Labor Department said workers filing for unemployment benefits for the first time rose more than expected last week. New unemployment benefits claims rose to 531,000 last week from 520,000 the previous week. Economists had expected only a slight increase, according to Thomson Reuters.

A private forecast of economic activity rose for the sixth straight month in September. The Conference Board’s index of leading economic indicators rose 1 percent last month after a 0.4 percent gain in August. Economists expected an increase of 0.8 percent last month, according to Thomson Reuters.

The day’s mixed earnings signals continue to show an economy in flux.

Credit card lenders American Express Co. and Capital One Financial Corp. should provide clues into whether consumers are still struggling to repay loans, which has been a major problem for nearly the entire financial sector for the past two years. Both report after the market closes.

Among companies reporting earnings, eBay fell $1.35, or 5.4 percent, to $23.68.

PNC Financial rose $6.71, or 14.9 percent, to $51.67 and Fifth Third rose 49 cents, or 4.9 percent, to $10.60.

J. Crew rose $5.04, or 13.4 percent, to $42.78.

3M, the manufacturer, advanced $2.80, or 3.7 percent, to $79.13, while insurer Travelers added $2.84, or 5.9 percent, to rise to $50.86. AT&T rose 15 cents, or 0.6 percent, to $26.09. McDonald’s rose $1.65, or 2.8 percent, to $59.98.

Crude fell 74 cents to $80.63 per barrel on the New York Mercantile Exchange, while gold fell.

The Russell 2000 index of smaller companies rose 2.94, or 0.5 percent, to 608.05.

Overseas markets fell after Wednesday’s slide in U.S. stocks. Britain’s FTSE 100 fell 1 percent, Germany’s DAX index dropped 1.2 percent, and France’s CAC-40 fell 1.4 percent. Japan’s Nikkei stock average fell 0.6 percent.

Copyright 2009 The Associated Press.