Stocks up again on Disney, productivity

Business Materials 6 February 2008 23:12 (UTC +04:00)

( dpa )- Stocks regained some ground Wednesday as many investors, though still uneasy about the economy, decided 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 more than 6 percent.

Investors also received some positive economic data Wednesday - fourth-quarter productivity climbed by 1.8 percent and labor costs rose by a fairly low 2.1 percent. The results were worse than they were in the third quarter, when productivity shot up 6 percent and costs fell by 1.9 percent, but better than economists predicted.

The report alleviated some of Wall Street's anxiety about the shaky economy, at least for the time being. The stock market had plummeted Tuesday, giving the Dow 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.

"The market got a bit oversold. It was just one number - the market was acting viscerally," said Phil Orlando , chief equity market strategist at Federated Investors, noting that low trading volumes may have exaggerated the drop Tuesday. "There's no smoking gun here; there's one bad number, one good number. .... We're probably going to chop around here until investors get a better feel on this recession-or-no-recession question."

The Dow rose 49.99, or 0.41 percent, to 12,315.12, after slipping into negative territory briefly during early trading. The Dow fell 370 points, or 2.93 percent, on Tuesday.

Broader stock indicators also rose Wednesday after some fluctuation. The Standard & Poor's 500 index rose 5.96, or 0.45 percent, to 1,342.60, and the Nasdaq composite index rose 13.59, or 0.59 percent, to 2,323.16.

Government bond prices declined as investors gave stocks another try. The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.62 percent from 3.56 percent late Tuesday.

Though the stock market's recovery and the Labor Department's productivity numbers were reassuring given Tuesday's slide, they were "nothing to get too excited about," said John O'Donoghue , co-head of equities at Cowen & Co.

"You'll find pockets of differentiation in the economy, but the overarching theme is that things are slowing down," O'Donoghue said.

Corporate profits from the fourth quarter have been all over the map, but generally, earnings have been decent outside the financial and consumer discretionary sectors.

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 50 cents, or 3.3 percent, to $15.90.

And late Tuesday, JDS Uniphase Corp., which makes communications test and fiber -optic network equipment, said its fiscal second-quarter earnings of fell slightly year-over-year but widely surpassed Wall Street estimates. JDS Uniphase shot up $2.90, or 28.5 percent, to $13.06.

Though politics are not a priority on Wall Street right now, they could soon come into play. 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 dropped $1.72 to $86.69 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies rose 5.80, or 0.83 percent, to 707.38.

Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 658.5 million shares.

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 rose 0.13 percent, Germany's DAX index rose 1.22 percent, and France's CAC-40 rose 0.83 percent.