US stocks rebounded on Thursday as bargain-hunters rushed to buy into market weakness and called a halt on a three-day losing run.
Consumer stocks surged in volatile trading after reassuring earnings guidance from JC Penney and Gap helped offset earlier disappointment with Wal-Mart (NYSE:WMT)'s January sales figures.
The sharp upswing bore some of the hallmarks of an over-sold bounce and was led by beaten-down financial, energy and telecoms stocks. The rally stemmed a slide of almost 5 per cent on the S&P 500 this week.
In spite of a broad-based rally a weak sales outlook from Cisco (NASDAQ:CSCO) continued to weigh on some large-cap technology companies. Utilities stocks also lagged.
The S&P 500 closed up 0.8 per cent at 1,336.91, having fallen 0.7 per cent before rebounding as much as 1.6 per cent. The Dow Jones Industrial Average rose 0.4 per cent to 12,247 and the Nasdaq Composite gained 0.6 per cent to 2,293.30.
"I think the most likely scenario is that we reached a low in January and we are now in the base-building process," Marc Pado, chief market strategist at Cantor Fitzgerald, said.
A broad range of retailers rallied after JC Penney, up 8.5 per cent at $47.44, said same-store sales declined less than forecast and fourth-quarter earnings would be at the high end of its forecast range. Gap's shares also rebounded, up 7.2 per cent at $19.65 after its earnings outlook also pleased investors.
Elsewhere retail sales figures were generally disappointing, as consumers faced with falling house prices reined in their discretionary spending. However, the S&P retail index climbed 3.7 per cent to 403.51 as analysts said weaker consumer spending was already priced in to many retail shares,
Wal-Mart's same-store sales rose only 0.5 per cent in January, much less than the 2 per cent increase Wall Street had expected, and its February sales forecast also offered little cause for excitement. The shares fell in early trading but later closed up 2.1 per cent at $49.84.
Upmarket retailer Nordstrom (NYSE:JWN) rose 3.7 per cent to $37.67 in spite of reporting a 6.6 per cent decline in same-store sales. Macy's, up 4.9 per cent at $25.11 had reported a 7.1 per cent sales drop on Wednesday.
Technology stocks also pared early losses caused by a cautious sales outlook from Cisco. The networking company said quarterly profit rose 7.2 per cent to $2.06bn, in line with analysts' estimates, and projected 10 per cent sales growth for the fiscal third quarter, below expectations. The shares rose 1.3 per cent to $23.38.
Many investors consider Cisco a bellwether for the sector and its cautious outlook kept shares in a some of large-cap tech companies under pressure. IBM fell 1.2 per cent to $102.34 and Hewlett Packard gave up 3.9 per cent to $40.50.
There was mixed news on the employment front. Weekly jobless claims fell 22,000 to 356,000, but the reading was still far higher than many analysts had predicted. Jobless claims had surged the previous week to the highest reading in more than two years, but this time the market was expecting a figure of about 340,000. The four-week moving average of first time claims rose 8,500 to 335,000.
"On balance, initial jobless claims have drifted higher, although at this point they remain below levels typically associated with outright recession," economists at Bear Stearns said.
Pending home sales fell a weaker-than-expected 1.5 per cent in December, according to the National Association of Realtors, and were down 24.2 per cent from the previous year. Homebuilder DR Horton rose 1.6 per cent to $15.04 after it posted a narrower-than-expected $128.8m quarterly loss.
Consumer products group PepsiCo (NYSE:PEP) said fourth-quarter profit fell 30 per cent to $1.26bn from a year ago, when results were improved by a tax benefit. However, revenues rose 17 per cent to $12.35bn and the shares put on 5.5 per cent to $70.41.
Rating agency Moody's said fourth-quarter earnings fell 54 per cent to $127.3m as revenues from structured finance slumped. However, the result was slightly better than analysts had forecast and the stock surged 10.4 per cent to $37.
Financial companies closed broadly higher after Jamie Dimon,chief executive of JP Morgan, said a possible downgrade of a key bond insurer would not be "that big a deal" for the banking industry. JP Morgan's shares rose 3.2 per cent to $45.11
Exchange operators also enjoyed a bounce after an analyst said the market overreacted to a Department of Justice call for ownership for clearing houses to bebroken off from futures exchanges. CME Group rose 8.8 per cent to $528.01 after falling 17.6 per cent the previous day.
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