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Markets rebounded from day’s initial losses as investors overlooked weak consumer and labor data to focus on strong earnings numbers. Also lifting the mood was news that Time Warner Cable was being bought by Comcast. However, the day’s gains were kept in check as Cisco Systems’ dismal sales outlook weighed on all indices. The gains extended Nasdaq’s bullish run into the sixth day. The Dow and S&P 500 have returned to the green zone after they ended in the red on Wednesday, which came after the benchmark’s four-day upward rally. For a look at the issues currently facing the markets, make sure to read today’s Ahead of Wall Street article
The Dow Jones Industrial Average (DJI) gained 0.4% to close Thursday’s trading session at 16027.59. The Standard & Poor 500 (S&P 500) moved up 0.6% to finish at 1829.83. The tech-laden Nasdaq Composite Index inched up 0.9% to move up to 4240.67. The fear-gauge CBOE Volatility Index (VIX) dropped 1.1% to settle at 14.14. Total volume on the New York Stock Exchange was 3.3 billion shares. Advancers outpaced the decliners on the NYSE; as for 71% stocks that gained, 25% stocks closed lower.
All three indices opened in the red yesterday. Markets were witness to two dismal reports, which most likely kept the benchmarks in negative territory. The U.S. Department of Labor reported an 8,000 jump in initial claims from prior week to 339,000 for the week ending Feb 8. This also compared unfavorably with consensus estimate of initial claims coming in at 330,000.
Initial jobless claims measure the amount of filings for state jobless benefits. A higher number obviously paints a dull picture for the economy and this data was accompanied by another round of dismal retail sales numbers. The U.S. Census Bureau announced a 0.4% month-on-month fall in advance estimates of U.S. retail and food services sales in January to $427.8 billion. This was the biggest fall since Jun 2012. This was contrary to consensus estimate of retail sales remaining flat. However, retail sales rose 2.6% year on year and total sales from Nov 2013 through Jan 2014 improved 3.4% from year-ago period.
However, investors chose to look beyond dismal data and benchmarks moved into positive territory. Time Warner Cable Inc.’s (NYSE:TWC) shares gained 7.0% after Comcast Corporation (NASDAQ:CMCSA) reached an agreement to buy Time Warner for $45.2 billion. Also helping to lift the mood were some encouraging quarterly numbers from The Goodyear Tire & Rubber Company (NASDAQ:GT) and CBS Corporation (NYSE:CBS) among others.
Goodyear’s shares jumped 11.5% after it reported an 89.7% surge in earnings of 74 cents a share in the fourth quarter of 2013. This also beat the Zacks Consensus Estimate of 63 cents. Including special items, the company reported a profit of $228 million or 84 cents per share in the quarter, up from the breakeven achieved a year ago. Goodyear’s shares hit their highest level in about six years.
Separately, CBS continued its strong performance in 2013 and reported fourth quarter adjusted earnings of 78 cents a share, up 22% year over year and beating the Zacks Consensus Estimate of 76 cents. CBS’ shares added 4.5%. However, Whole Foods Market, Inc. (NASDAQ:WFM) trimmed its sales forecast for 2014. This was the second guidance cut in three months and shares of this grocery stores operator dropped 7.2%.
Also, Cisco Systems, Inc. (NASDAQ:CSCO) projected lower quarterly revenues. Shares of Cisco were down 2.5%; a major drag on the indices. The company expects revenues to decrease between 6% and 8% year over year for third quarter fiscal 2014. Non-GAAP gross margin is expected to be 61%–62% and non-GAAP operating margin is expected to be 26.5%–27.5% of revenues.
Benchmarks not only rebounded to green zone from the day’s initial loss but also moved to positive territory after finishing mostly lower on Wednesday. Wednesday’s close in the red, largely due to a guidance cut from The Procter & Gamble Company (NYSE:PG) and Lorillard, Inc.’s (NYSE:LO) dismal fourth-quarter results, had halted benchmarks’ four-day bull run. During this four-day positive rally, markets received a boost after unemployment hit a post-recession low and Fed Chairwoman Janet Yellen assured interest rates would continue to be low.