Led by chip maker Intel Corp., stocks jumped considerably on Wednesday as the first waves of second quarter corporate earnings soundly beat analyst expectations. The Dow Jones industrial average was up 256 points, or 3.1 percent, while the technology-heavy NASDAQ composite index rose 63 points, or 3.5 percent. The broader S&P 500 index saw advances of 3.0 percent.
Intel released solid second quarter earnings. The company posted a net loss due to a $1.45 billion fine imposed by the European Union, but earnings from operations topped analyst estimates.
Intel manufactures computer chips for personal and business computers, mobile devices, and other electronics.
“While the global economic environment is still recovering, our customers signaled increased confidence for a seasonal second half with their ordering patterns,” Intel CEO Paul Otellini said in a conference call with analysts. “Globally we saw strength in Asia-Pacific, particularly China, where [its] stimulus programs continue to generate meaningful growth in [its] PC market. The U.S. also had a strong quarter.”
Intel also projected up third quarter revenues by $1 billion over analyst consensus, a sign that the company expects computer purchases to ramp up, especially among consumers.
While the “Enterprise PC volumes remain weak,” said Otellini, the quarterly results “Reflect improving conditions in the personal-computer market segment, with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half.”
Intel shares jumped $1.22, or 7.3 percent on Wednesday trading, leading the tech sector higher. Rival chipmaker Advanced Micro Devices increased 8.7 percent, while Motorola Inc. gained 7.1 percent.
Gannett Company, the largest U.S. newspaper publisher, also saw its second quarter profits beat analyst expectations. The publisher of USA Today said its profit of 46 cents a share was easily better than the $10.03 loss per share posted during the same period last year.
Gannett had cut compensation across the line and recently closed the Tucson Citizen to save costs. The McLean, Va.-based publisher owns more than 80 newspaper titles.
Shares of the company rose $1.01, or 29 percent on Wednesday.
In the battered airline industry, American Airlines parent AMR Corp. saw its second quarter loss shrink from last year, helped by aggressive cost cutting and streamlining of its routes.
AMR reported a $390 million loss, or $1.39 loss per share compared to a $5.83 loss per share during the same period last year. The company is the first U.S. airline to released second quarter results, and its optimistic earnings boosted airline shares on Wednesday.
The global recession has sapped both consumer and business travel demand and airlines spent the majority of last year and this year cutting capacity and travel perks.
AMR shares rose 4.3 percent on Wednesday.
Goldman’s Loot
Earlier this week investment bank Goldman Sachs Group Inc. reported its largest quarterly profit ever—$3.44 billion—as its rivals have either weakened or disappeared. Most of the profits came from trading gains, the company said.
While Goldman looks like the juggernaut of its heyday, some analysts believe that investors should err on the side of caution when bidding up bank stocks. Goldman typically takes on a lot of risk but also has the experience and capital cushion to manage it, while other banks have remained conservative as most sectors are still experiencing effects from the U.S. recession.
Investors needed some good news after doubts about the U.S. economic recovery during the last few weeks trimmed most of the market gains achieved in April and May.
“The fact that Intel and Goldman Sachs, two enormous players globally, have positive numbers and positive surprises does give the market some buoyancy,” Knight Equity Markets Managing Director Peter Kenny told Bloomberg in an interview.
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