US stocks: S&P hits 4-year high, rally on earnings

NEW YORK - US stocks climbed on Thursday, with the Standard & Poor's 500 Index riding its longest rally since November to a four-year high, helped by strong earnings reports and data showing that consumer inflation remained in check in June.

The Nasdaq and the S&P 500 extended gains for a sixth day in a row, with the Nasdaq posting its highest close for 2005.

Shares of Apple Computer Inc. and Genzyme Corp., drove the Nasdaq higher, while General Motors Corp. led the 30 stocks in the blue-chip Dow average.

"The second quarter was really a very good quarter," said Michael Metz, chief investment strategist at Oppenheimer & Co., of New York.

"It certainly looks like the economic expansion is self-sustaining and it looks for the moment like we should have a good second half. Not terrific, but good enough."

The Dow Jones industrial average rose 71.50 points, or 0.68 per cent, to end at 10,628.89. The Standard & Poor's 500 Index advanced 3.21 points, or 0.26 per cent, to close at 1,226.50. The technology-laced Nasdaq Composite Index gained 8.71 points, or 0.41 per cent, to end at 2,152.82.

Apple shares rose 6.3 per cent, or US$2.40, to US$40.75 after the maker of Macintosh computers and iPod digital music players posted better-than-expected earnings a day earlier.

Also in the tech sector, Advanced Micro Devices Inc. gained 3.3 per cent, or 63 cents, to US$19.88 on the New York Stock Exchange after the company posted an unexpected profit.

Biotech firm Genzyme Corp. reported a 58 per cent jump in second-quarter profits, well ahead of expectations. Its shares rose 6.5 per cent, or US$3.965, to US$65.30.

Shares of GM rose 3.2 per cent, or US$1.13, to US$37 on the NYSE after investment bank and brokerage Lehman Brothers said GM may expect a gain of more than 50 per cent in retail sales.

More than a week into the rally, analysts wondered how much longer stocks can keep their momentum.

"We got the earnings from Apple and now people are wondering, 'What's next?"' said Paul Nolte, director of investments at Hinsdale Associates, a boutique money management firm in Hinsdale, Illinois, with US$50 million under management.

"We've rallied six days now in a row and people are looking for the next bit of good news. We've gotten some pleasant surprises now from a variety of companies. We're going to need to see more of that."

The earnings news wasn't all good, though.

US hotel operator Marriott International Inc. missed estimates. Its shares slid 3.6 per cent, or US$2.50, to US$67.90.

Top US mortgage lender Countrywide Financial Corp. warned it may miss second-quarter forecasts. Its shares eased 0.2 per cent, or 6 cents, to US$38.53.

Government data showed US retail sales surged an unexpectedly large 1.7 per cent in June while the consumer price index was unchanged from May. The core CPI, excluding volatile food and energy prices, inched up 0.1 per cent for a second straight month.

Crude oil futures for August delivery fell US$2.21 to settle at US$57.80 a barrel on NYMEX, easing fears that high petrol prices would erode consumer spending and corporate profits.

"Oil is a surprise positive today," Oppenheimer's Metz said. "I don't think anyone came in today thinking it was going to be down US$2-plus." Trading was heavy, with 1.57 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.87 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

The number of shares advancing in value exceeded the number declining by a ratio of 6 to 5 on the NYSE and by about 8 to 7 on Nasdaq.

- REUTERS