Stocks were off the highs of the session, although the market remained higher, as investors digested a number of largely positive earnings reports, as well as a mixed batch of economic news.
The Dow Jones Industrial Average rose more than 40 points, retreating after rising more than 100 points earlier. The move comes a day after stocks rallied on a previous batch of positive earnings results.
Home Depot, McDonald's,and United Technologies led the blue-chip index higher. Bank of America and Caterpillar slipped.
The S&P 500 Index and the Nasdaq also gained. TheCBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 20.
Among the key S&P 500 sectors, consumer discretionary, consumer staples, and industrials rose, while telecom stocks fell.
The positive mood to the market is the result of good earnings reports, solid economic data, technical factors, and stepped-up mergers and acquisitions activity, according to Uri Landesman, president of Platinum Partners, a New York hedge fund.
Among technical factors, the S&P 500 has been trading within a range of 1,160 to 1,185. If this broad-based gauge of the market closes above 1,185 on Thursday, the index will then likely test 1,200, Landesman said. That would put the index within striking distance of its 2010 high.
From there, Landesman said it's possible the S&P 500 would top 1,300 by the end of the year.
Landesman noted, however, that trading volume remains relatively low considering the rally, as retail investors sell, and institutional investors buy. "It’s not like you’re seeing a huge wave of buying through this rally," he said.
The dollar , which has had a strong effect on the stock market in recent weeks, continued to fall against a basket of currencies after a brief rise earlier in the week.
Caterpillar , a barometer of health in the construction and housing industries, easily beat expectations with its earnings and raised its full-year outlook, although its stock was trading lower. The company attributed emerging market growth for its boost in profitability, and said growth in the U.S. and Europe is likely to be about 2.5 percent next year.
AT&T fell although it matched analyst expectations of 55 cents per share. Fellow Dow component Travelers also beat estimates and saw its shares mover higher premarket. McDonald’s gained nearly 2 percent after it exceeded estimates by four cents a share.
Kellogg was one of the few to disappoint with earnings, as the cereal maker struggled with a recall of some packages of Corn Pops, Honey Smacks, Froot Loops and Apple Jacks cereals, as well as weak sales for some brands. Kellogg now anticipates 2010 earnings per share to rise between 4 percent and 5 percent.
Continuing the good news for airlines, Southwest Airlines posted a profitfor the third-quarter Thursday, compared with a loss a year earlier, as demand returned.
Also United Continental's shares rose after reported better-than-expected profits at United and Continental, the airlines that merged to form the new company on Oct. 1. The company said capacity in the fourth quarter would rise 3-4 percent.
Shares of JetBlue , meanwhile, fell despite posting record third-quarter profits and revenues.
Among regional banks, profits for the third-quarter doubled at PNC Financial ServicesGroup on lower loan losses, and the sale of a back-office unit to Bank of New York Mellon . Revenue at the bank fell 8 percent, however.
SunTrust Banks also had a surprise boost in third-quarter profits.
Eli Lilly posted better-than-expected profits, thanks to costs savings, but revenues fell short of estimates. The drugmaker earned $1.3 billion, or $1.18 a share, compared with $942 million, or 86 cents a share a year ago when Lilly had several special charges. Global revenue rose to $5.65 billion, shy of the $5.77 billion expected by analysts.
UPS , meanwhile, also posted better-than-expected third-quarter profits and revenues, thanks to growth in international air freight and cost controls.
And shares of Union Pacific fell despite posting better-than-expected profits on rising volumes for rail travel. The company also said it was beginning to rehire furloughed workers, and to hire new employees, according to Reuters.
Nokia , meanwhile, topped earnings for the third quarter, thanks to demand for cheap smartphones. The wireless phone maker also said it would cut up to 1,800 jobs.
Shares of Xerox rose after posting a doubling in third-quarter profits, ahead of expectations, on strong revenues.
Ebay shares soared to the top of the S&P 500 after reporting quarterly profit and revenue that beat expectations after the close on Wednesday. Netflix also sky-rocketed after it reported strong results Wednesday as it added subscribers.
Swiss bank Credit Suisse said earlier on Thursday its third-quarter net profit tumbled 74 percent as sluggish equities trading halved investment banking earnings from the previous quarter.
Banking shares came under pressure in Europe after the Credit Suisse numbers. Uncertainties about company earnings and economic numbers prompted investors to move into food, beverages and personal goods shares, traditionally seen as defensive.
Meanwhile, Goldman Sachs is considering paying back the $5 billion Warren Buffett's Berkshire Hathaway invested in the investment bank during the financial crisis, according to the Wall Street Journal, citing people familiar with the situation.
And KKR shares jumped after news the firm is launching a new long-short public equities unit with nine traders from Goldman Sachs' proprietary trading desk. The group, led by Bob Howard, begins at KKR in January.
Shares of the New York Times rose after news an investor group is interesting in buying the Boston Globe, a year after the publishing group decided to no longer pursue a sale of the newspaper group, according to the Wall Street Journal.
In economic news, the Philadelphia Federal Reserve Survey, a measure of factory activity in the U.S. Mid-Atlantic region, came in lower than expected at 1.0 in October, after a reading of minus 0.7 in September, though a reading above zero indicates expansion and suggested a slight improvement after two months of contraction.
Also, the Leading Economic Index rose 0.3 percent last month, after a revised 0.1 percent gain in August and a 0.2 percent increase in July, according to the Conference Board.
Initial claims for unemployment benefits fell23,000 to 452,000 for the week ended Oct. 16, the Labor Department said Thursday. The forecast was for claims to drop to 455,000, down from a revised 475,000 the week before, according to analysts surveyed by Reuters.
Investors also digested data showing China's growth cooled in the third quarter even as inflation edged higher.
The major indexes in Europe were broadly higher, as money moved into defensive stocks.
On the Calendar Next Week:
THURSDAY: ECB Meeting, natural gas inventories, money supply, Kansas City Fed President Hoenig speaks, CBO Director Elmendorf speaks; after-the-bell earnings from American Express and Amazon.
FRIDAY: G20 Finance Ministers & Central Bank Governor's Meeting; before-the-bell earnings from Verizon, Exelon, Ingersoll-Rand and Schlumberger.
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