Wall Street rises tentatively following big drop Tuesday

February 6, 2008 7:54:56 AM PST
Stocks rose tentatively Wednesday as investors, still uneasy about the economy, wrestled with whether to buy back into a market battered a day earlier by recession worries.Better-than-expected profit results from Walt Disney Co. handed Wall Street some good news. Disney posted a 26 percent decline in profit late Tuesday, but the results beat expectations. The company - one of the 30 companies that make up the Dow Jones industrials - reported a 9 percent rise in revenue, thanks in part to the success of brands such as ESPN, "High School Musical" and "Hannah Montana."

Disney shares rose nearly 4 percent.

But Wall Street is still anxious about the shaky economy. The stock market had plummeted Tuesday, giving the Dow on its biggest percentage drop since Feb. 27, 2007, after the Institute for Supply Management reported a surprising January contraction in the U.S. service sector - news that bolstered the argument that the nation is in recession.

Government data Wednesday was more positive - fourth-quarter productivity rose by a better than expected 1.8 percent and that labor costs rose by a fairly low 2.1 percent. The results were worse than they were in the third quarter, though, when productivity shot up 6 percent and costs fell by 1.9 percent.

The Dow rose 30.08, or 0.25 percent, to 12,295.21.

Broader stock indicators also rebounded. The Standard & Poor's 500 index rose 3.68, or 0.28 percent, to 1,340.32, and the Nasdaq composite index rose 5.53, or 0.24 percent, to 2,315.10.

Government bond prices declined. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.60 percent from 3.56 percent late Tuesday.

In other earnings news, Time Warner Inc. posted a profit decline in its fourth quarter. But excluding the effect of a year-ago gain from the sale of AOL's online access business in Europe, profit rose due to better results at the media conglomerate's cable TV and movie operations.

Time Warner rose 15 cents to $15.55.

Toll Brothers Inc. said revenues fell 22 percent during its fiscal first quarter, and that is not "seeing much light at the end of the tunnel."

Toll fell 42 cents, or 2 percent, to $21.45.

And late Tuesday, the fiscal second-quarter earnings of JDS Uniphase Corp., which makes communications test and fiber-optic network equipment, fell slightly year-over-year but widely surpassed Wall Street estimates. JDS Uniphase shot up $2.76, or 27 percent, to $12.92.

In addition to earnings, investors will be paying attention Wednesday to speeches by Fed officials Jeffrey Lacker, Randall Kroszner and Charles Plosser, as well as Treasury Secretary Henry Paulson, who will be testifying before the Senate Budget Committee.

Politics could also come into play on Wall Street in the coming days and weeks. Investors have been trying to determine who the presidential nominees will be, and while Republican John McCain and Democrat Hillary Clinton are leading the delegate counts after Tuesday's primaries, nothing is certain yet.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude oil rose 35 cents to $88.76 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies was up 0.24, or 0.03 percent, at 701.82.

Overseas stocks were mixed. Japan's Nikkei stock average dropped 4.7 percent and Hong Kong's Hang Seng index fell 5.4 percent. In Europe, Britain's FTSE 100 slipped 0.15 percent, Germany's DAX index rose 0.72 percent, and France's CAC-40 rose 0.69 percent.


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