Stocks closed higher Friday thanks to better-than-expected earnings from J.P. Morgan Chase (JPM) and a related rally in financial stocks that more than offset a disappointing batch of economic news.
The Dow Jones Industrial Average ($INDU) rose 55 points, or 0.5%, to 11,787, it's highest close since June 2008. The blue-chip index extended its winning streak to a seventh week after J.P Morgan Chase, the nation's second-biggest bank by assets, posted a 47% rise in fourth-quarter income and said it hopes to raise its dividend, sparking interest in financial stocks.
The return of big-bank profits has raised the likelihood of dividend increases from the money-center banks, which would be a boon for pension funds and retirees. Bank of America (BAC), the No. 1 bank by assets, and American Express (AXP) also helped lift the Dow.
Tech Stocks Get a Boost From Intel
The broader S&P 500 ($INX) rose 10 points, or 0.7%, to finish at 1,293. The financial sector led all gainers, follow
ed by energy stocks and the technology sector. Tech stocks, for their part, got a boost from Intel (INTC), which posted a beat-and-raise quarter after Thursday's closing bell. The tech-heavy Nasdaq Composite ($COMPX) added 20 points, or 0.7%, to close at 2,755.
Damping the mood a bit were a slew of economic reports coming up short of Wall Street's expectations. December retail sales rose to $380.9 billion, up 7.9% from a year ago, but up just 0.6% from November, the Commerce Department said. Excluding auto sales, totals were up 6.7% from 2009 and 0.5% from the month before, slightly less than analysts had expected.
Rising gasoline prices caused consumer sentiment to unexpectedly fall 1.8 points to 72.7 in January, according to the latest data from Thomson Reuters and the University of Michigan. Economists had forecast an increase to 75 from the now-revised 74.5 in December and 71.6 in November, according to a survey by Bloomberg.
Inflation Numbers Disappoint
Readings on headline consumer price inflation and business inventories also missed forecasters' mark, but industrial production and capacity utilization easily beat estimates.
Cort Gwon, director of research and trading at FBN Securities, said a successful bond auction by Portugal earlier in the week allowed investors to cast aside European debt fears for the moment and concentrate on fourth-quarter earnings.
"We had some very good earnings this week," Gwon says. "Intel had an [earnings per share] beat of about 10%. J.P. Morgan Chase beat earnings by about 12%.These two bellwethers showed that business is coming back."
For more on Gwon's take from the floor of the New York Stock Exchange (NYX), see the video above.