Stronger-than-expected earnings from IBM helped to push the Dow Jones Industrial Average to a record close above 14,000 for the first time -- just two days after the Dow broke above that level on an intraday basis. The S&P 500 also closed at a record high and the tech-heavy Nasdaq composite hit fresh 6 1/2-year highs with strength in networking, software and storage stocks.
"The large forces, such as liquidity which is very high and recent earnings are overcoming problems like subprime," according to Vinny Catalano, global investment strategist at Blue Marble Research. "So far it looks like the bias is still to the upside."
Information technology continued to lead the charge as the best performing sector. IBM was the biggest percentage gainer on the Dow, rising more than 5% to its highest level in nearly six years. IBM reported strong broad-based revenue after the bell Wednesday, helping the stock rise solidly today.
Further boosting the Dow, Honeywell rose after the diversified manufacturer posted a quarterly profit above Wall Street's forecasts and announced plans for a share repurchase of up to $3 billion. Honeywell cited strong demand from the aerospace and construction industries as the reason for the profit rise.
A close above Dow 14,000 was in doubt mid-session after Federal Reserve Board chairman Ben Bernanke gave specific figures on subprime losses. The gains eroded further after FOMC minutes showed the Fed remained worried about inflation.
"It's the Fed's job to contain inflation so they will always say that," Bill Nichols, senior managing director of equity trading at Bear Stearns, told CNBC.com. "If anything, the market action today has to be considered positive."
Bernanke estimated losses tied to subprime mortgages would range between $50 billion and $100 billion. The Fed Chairman testifed before Congress for a second day, this time before the Senate Banking Committee.
Not all Dow stocks rose today. Alcoa fell almost 4%. The Australian newspaper reported that Alcoa is no longer a target of interest for BHP Billiton .
Among other movers today:
Bank of America said its second-quarter earnings rose 5%, helped by growth in fee income. The No. 2 U.S. bank by assets said net income rose to $1.28 a share, beating analysts' estimates of $1.20 a share, according to Thomson Financial.
Union Pacific also beat analysts' expectations, saying quarterly net profit rose due to improved efficiency and strong pricing. The railroad company reported net income of $1.65 a share, compared to the $1.62 a share forecast by analysts, according to Reuters Estimates
Wyeth said second-quarter net income rose to 90 cents a share, excluding special items. That was above Wall Street expectations. The drugmaker also raised its profit forecast to a range of $3.48 to $3.56 a share, excluding items.
Motorola posted a quarterly loss as revenue fell amid weak phone sales. The company, which has been hurt by price competition and a lack of advanced phones, reported a loss of 2 cents a share. Motorola warned last week that it would post a quarterly loss from continuing operations.
There is quite a bit of economic news today. The Labor Department said jobless claims fell last week by 8,000 to 301,000. The Conference Board's measure of leading economic indicators fell 0.3% in June compared to a rise of 0.2% in May, suggesting a possible softening in the economy later this year. The Philadelphia Federal Reserve's index of business activity in the mid-Atlantic region fell to 9.2 in July from 18.0 in June, reflecting slower growth.
New York light sweet crude futures traded above $75 a barrel after the government yesterday reported an unexpected draw down in gasoline supplies in the U.S.
European Stocks Finish Higher
European shares closed higher Thursday as solid earnings, a late rally in Asian markets and a rally in the U.S. distracted investors from concerns about weakness in the U.S. subprime-mortgage market.
The London FTSE-100, Paris CAC-40 and Frankfurt DAX were in positive territory.
Drug maker Roche reported a 29% jump in first-half net income, up to 5.9 billion Swiss francs ($7.1 billion). Shares of Roche gained on the news.
The Swiss company also announced Severin Schwan, its current diagnostics chief will succeed Franz Humer as the new CEO in March 2008.
Humer told CNBC that he is confident the purchase of American pharmaceutical company Ventana would be successful, saying that he would go ahead with a hostile takeover if necessary.
Shares of software-maker SAP also got a boost after it beat market expectations with an 18% rise in second-quarter software license sales, lifting its revenue to $986 million for the period.
And telecom company Vodafone said group revenue rose 7.5% to $17.03 billion in the first quarter, compared to the same period last year. Shares of Vodafone gained.
Meanwhile, the ongoing battle to takeover Dutch bank ABN Amro continued, as Britain's Barclays said it may add a cash component to its current offer for the bank. The move comes after a sweetened bid from a Royal Bank of Scotland-led consortium Monday.
Asian Markets Rebound
Asian markets recovered some ground in the afternoon session Thursday on resource stocks and optimism over earnings. Australia, Japan and South Korea all finished the session higher.
Tokyo's Nikkei 225 Average closed stronger as expectations of consolidation jacked up consumer finance stocks while earnings hopes lifted Chugai
Pharmaceutical and others. Shares of consumer finance companies surged in the last trading hour as a source close to the matter said Japanese consumer lenders Promise and Sanyo Shinpan are considering a merger that would create the industry's largest player. But Tokyo Electric Power fell sharply after a newspaper reported on Thursday that the government may order an earthquake-hit nuclear plant to stay shut for more than a year while a safety study is carried out.
South Korea's KOSPI ended higher, snapping a two-day losing streak, as stronger-than-expected earnings lifted chemical firm LG Chem and mobile phone maker LG Electronics.
In Australia, the S&P/ASX 200 Index shrugged off a weak lead from Wall Street to finish higher, as a jump in oil prices lifted energy firms while Macquarie Bank gained on an upbeat earnings outlook.
China's Shanghai Composite Index was weaving in and out of negative territory as higher-than-expected inflation data aggravated worries about interest rate hikes but falls were limited by strength in finance stocks after strong debuts for two banks. Consumer prices in China rose 4.4% in the year to June, exceeding forecasts and reinforcing expectations of further monetary tightening to stave off overheating. In addition, official data showed China's annual GDP growth surged to 11.9% in the second quarter from 11.1% in the first three months, easily beating market forecasts and leaving the economy firmly on course for the fifth straight year of double-digit expansion.
Hong Kong blue chips rebounded, led by China Mobile, while China plays declined as Sinopec slid on margin concerns amid advancing crude prices. Reaction to China's latest strong economic data was greeted with relief, with the market having largely factored in a possible interest rate increase by the country's central bank.
Weak property stocks kept Singapore's Straits Times Index subdued in cautious trade, while small cap stocks recovered slightly after the previous session's slump.