Better-than-expected earnings at Intel sent investors pouring back into the market Wednesday, sending stocks higher in early trading.
Chipmaker Intel Corp.’s report after the market closed Tuesday lifted investor confidence because its sales figures suggest consumers are purchasing computers at a faster rate than anticipated, a potential sign the economy is recovering.
Consumer spending accounts for more than two-thirds of economic activity. Increased spending by consumers is widely seen as a key to an economic recovery.
Just as important as quarterly results, Intel’s third-quarter sales prediction was bigger than analysts’ forecast, a further indication that the chipmaker believes the personal computer market has bottomed and a recovery is under way.
Investors “want to see consumer demand coming back and inventories being reloaded,” John Lekas, senior portfolio manager at Leader Capital in Portland, Ore. Intel’s second-quarter sales results and third-quarter forecast provide evidence of that demand, he added.
“This is the first step toward recovery,” Lekas said. However, Lekas cautioned that a recovery is likely to be slow as earnings reports overall are likely to be mixed, and companies still have to work on restructuring balance sheets and reducing costs.
The Dow Jones industrial average rose 100.96, or 1.2 percent, to 8,460.45. The Standard & Poor’s 500 index rose 11.59, or 1.3 percent, to 917.43, while the Nasdaq composite index gained 30.99, or 1.7 percent, to 1,830.72.
In another sign the recession is easing, a new report showed industrial companies cut back production again in June, but not nearly as much as they have been in previous months.
The Federal Reserve said production at the nation’s factories, mines and utilities fell 0.4 percent last month, after declining 1.2 percent in May.
Investors were little swayed by a Labor Department report Wednesday that showed consumer prices rose 0.7 percent in June, its fastest pace in 11 months as gasoline costs surged. Economists were predicting a rise of 0.6 percent after a 0.1 percent gain in May.
The Consumer Price Index, which measures the cost to consumers of buying goods, is a key measure of inflation.
The report helped push Treasury bond prices slightly lower and yields up. The bond market is sensitive to signs of inflation, which can depress the value of outstanding bonds.
Copyright 2009 The Associated Press.