NEW YORK, Jan 18 – U.S. stocks opened higher on Friday as a higher-than-expected profit forecast from IBM and earnings from General Electric Co buoyed investor sentiment, a day after a sharp sell-off.
The dollar gained against the yen on Friday as rising equity markets calmed investors, prompting a few to edge back into relatively risky carry trades.
In carry trades, market players use low-yielding currencies such as the yen to finance purchases of assets offering higher returns. Those trades are more attractive when stock markets rise, supporting investor risk appetite.
Investors also took small comfort from a financial package U.S. President George W. Bush is expected to propose on Friday which is aimed at cushioning the economy from a downturn.
U.S. Treasury Secretary Henry Paulson on Friday said that there was an urgent need for a fiscal stimulus program to give the slowing economy a boost but said it was not in danger of stalling.
Stocks rose in Europe and futures pointed to a rebound on Wall Street.
“There is recognition that equities are not in free fall,” said Michael Woolfolk, senior currency strategist at Bank of New York Mellon. “Concern on the U.S. dollar lifted.”
Early in the New York session, the dollar rose 0.7 percent to 107.49 yen. The euro was up 0.8 percent against the yen at 157.75 yen.
Investors cautioned that the dollar’s problems are not over yet with the longer-term outlook for the U.S. economy remaining bleak.
“I can’t remember the last time the data has been this bad and the continued problems in banks mean that in the medium-term the U.S. economy will continue to struggle,” said Colin Asher, currency strategist at Nomura in London.
The euro was up 0.1 percent on the day at $1.4672 well off its all-time high just below $1.50 set in November as expectations increased that the European Central Bank may cut rates this year.
“The market is definitely nervous about any risk of the ECB signaling that rates have peaked and that’s keeping us in relatively tight ranges,” said Adam Cole, global head of currency strategy at RBC Capital Markets.
Helping lift some of the gloom surrounding the U.S. economy, Bush’s plan is to introduce tax rebates for families and breaks for businesses that could cost up to $150 billion.
Federal Reserve Chairman Ben Bernanke, in testimony before the House of Representatives’ Budget Committee on Thursday, also backed the idea that the struggling economy needed rescue.
“There is still some feel good coming from yesterday’s speech from Bernanke,” said Bank of New York Mellon’s Woolfolk.
Bernanke reiterated a down assessment of the U.S. economy that he gave last week, which investors saw as a signal that the U.S. central bank was willing to cut the benchmark federal funds rate aggressively from the current 4.25 percent this month.
Interest rate futures have already fully priced in a half-percentage point cut from the Fed at its regular policy meeting on January 29-30, and saw a 50-50 chance of an even broader 75 basis point cut.
Markets also turned more bearish on the UK economy as weak retail data figures prompted investors to price in a higher probability of imminent rate cuts and to sell the pound.
“More people are now starting to price in the possibility of a 50 basis-point cut at the February MPC meeting,” said Asher at Nomura, adding that he did not think this was likely.
Sterling/dollar was down 0.5 percent at 1.9606.
US STOCKS-Wall St opens higher on IBM, GE optimism
NEW YORK, Jan 18 – U.S. stocks opened higher on Friday as a higher-than-expected profit forecast from IBM (IBM.N: Quote, Profile, Research) and earnings from General Electric Co (GE.N: Quote, Profile, Research) buoyed investor sentiment, a day after a sharp sell-off.
The Dow Jones industrial average .DJI was up 98.77 points, or 0.81 percent, at 12,257.98. The Standard & Poor’s 500 Index .SPX was up 7.14 points, or 0.54 percent, at 1,340.39. The Nasdaq Composite Index .IXIC was up 13.77 points, or 0.59 percent, at 2,360.67. (Reporting by Ellis Mnyandu; Editing by Kenneth Barry)
US STOCKS-Wall Street gains with IBM, GE
– U.S. stocks rose on Friday, with the Dow industrials advancing 1 percent, helped by a higher-than-expected profit forecast from IBM (IBM.N: Quote, Profile, Research) and earnings from General Electric Co (GE.N: Quote, Profile, Research) that met Wall Street expectations.
Technical charts showed the market at its most oversold level since October 2002, on a weekly basis, which added to the rebound.
IBM was among the top gainers on the Dow and S&P 500, with its shares up 4.3 percent at $105.23. The world’s largest computer services company said late on Thursday it expects 2008 earnings well above analysts’ estimates.
The Dow Jones industrial average .DJI was up 144.37 points, or 1.19 percent, at 12,303.58. The Standard & Poor’s 500 Index .SPX was up 11.47 points, or 0.86 percent, at 1,344.72. The Nasdaq Composite Index .IXIC was up 22.12 points, or 0.94 percent, at 2,369.02.
GE shares rose 3.6 percent to $34.42, also boosting the Dow and S&P. The company, an economic bellwether, posted a rise of 4 percent in quarterly profit.