Stocks advanced Thursday after jobless claims beat and Alcoa kicked off the earnings season with exactly what analysts wanted to see: better-than-expected revenue.
The Dow Jones Industrial Average gained 61.29, or 0.6 percent, or 9,786.87. The S&P 500 rose 0.8 percent and the Nasdaq gained 0.6 percent.
The number of workers filing new claims for jobless insurance fell to a nine-month low last week, down 33,000 to a seasonally adjusted 521,000 last week, the Labor Department reported.
In other economic news, wholesalers pared inventories for a 12th straight monthin August, while the sales gain was the largest in more than a year.
Stocks had waned yesterday as anxiety about earnings season brewed but Alcoa sparked a fresh round of optimism after the bell yesterday when it beat on both profit and revenue forecasts.
Alcoa shares rose 1.1 percent.
The Dow was up more than 100 points right around lunchtime but pared some gains after the Treasury's $12 billion auction of 30-year bonds was met with mediocre demand. The high yield was 4.009 percent and the bid-to-cover ratio was 2.37.
The financial sector was the best performer today, even though some big-name banks finished lower — the S&P financial index gained 1 percent. American Express topped the Dow, up 2.9 percent.
Rounding out the Dow's top three were Home Depot and DuPont — both stocks gained more than 2.5 percent.
Bank of America-Merrill Lynch put out a note today with six reasons why investors should stay bullish on stocks, including the fact that earnings are on track for sustainable year-over-year growth starting in the fourth quarter, and that valuations remain attractive.
Homebuilders rallied as Congress is mulling a possible extension of the $8,000 first-time homebuyer's tax credit, which is set to expire on Nov. 30. Analysts are growing more optimistic about the sector, citing the winning combinationof rising home prices, falling mortgage rates and continued government intervention.
The average rate on the 30-year mortgage dropped to 4.87 percentthis week, down from 4.94 percent last week, Freddie Mac reported earlier.
Among the sector's biggest winners, Lennar jumped 9.2 percent, while Hovnanian gained 8.3 percent.
Techs were right back up there today, as investors are growing more optimistic about the recovery — and tech spending. Dell rose 3 percent and Palm gained 3.5 percent.
Adobe rose 3.2 percent to $34.33 after a Robert W. Baird analyst upgraded his rating on the stock to "outperform" from "neutral" amid expectations that the software maker's earnings will recover in the second half of 2010. Baird raised its price target on the stock to $40; Deutsche Bank raised its target to $44.
Pepsico beat earnings expectations and the company affirmed its full-year outlook but shares fell 1.3 percent as the earnings beat was largely due to cost-cutting measures and revenue actually declined.
That's how it's going to go down this quarter: Traders are over the cost-cutting beat and are now looking for signs of improvement in revenue, not just an improved bottom line due to cost-cutting measures.
And that's exactly what the scoreboard showed: Alcoa rose after beating on revenue, while Pepsi took a hit after its revenue miss.
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Exhibit C: Barnes & Noble shares tumbled 12 percent after the bookseller predicted lackluster same-store sales for fiscal 2010. That came as a disappointment as the company's recent purchase of College Booksellers was expected to juice sales.
"Despite what mathematically looks like an accretive acquisition, our concern is that Barnes & Noble has doubled its exposure to technology change by acquiring another retailer that may be even more vulnerable to digitization than its core," Credit Suisse analyst Gary Balter wrote in a research note.
Outside of the rapidly digitizing book sector, retailers rallied as many beat September sales expectations, helped by a late Labor Day and delayed back-to-school shopping. Plus, a cool September helped several retailers that are more impacted by weather.
Macy's and Target were among the early winners, posting smaller declines than expected. Target also went so far as to say third-quarter earnings would beat expectations. Macy's shares gained 5.1 percent, while Target advanced 1.7 percent.
Abercrombie & Fitch shares jumped 5.5 percent after the teen chain, which has taken a beating in recent months, reported its sales dropped just 18 percent, far less than the 21 percent expected.
IBM, however, faltered. The company is the subject of a Justice Department antitrust probe regarding its behavior in the mainframe computer market. IBM says there is no basis for any such claims.
It's been an active season as well for mergers and acquisitions, but one deal faces troubles: In a provisional ruling, Britain's competition regulator said a deal between Ticketmaster Entertainment and Live Nation could lead to higher prices and less competition. The US Justice Department also is examining the deal, which was announced earlier this year.
Across the pond, the European Central Bank and Bank of England, as expected, both held the line on lending rates. The decisions come a day after Australia's central bank raised its lending rate — and hopes for the recovery.
Gold continued to barrel higher, jumping nearly $12 to settled at $1,056.30 an ounce. Earlier, it hit an intraday high of nearly $1,063.
Gold's relentless ascent comes as the dollar continues to fall against major currencies, prompting one gold watcher to wonder: Is gold the canary in the coal mine for the dollar?
Oil, meanwhile, continued to trade in a tight range, settling at $71.69 a barrel.
Volume was light, with 1.28 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 11 to 4.
Still to Come:
THURSDAY: Chevron update after the bell
FRIDAY: Market peak 2-year anniversary (Dow at 14,164.53); international trade
Send comments to cindy.perman@nbcuni.com.
