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U.S. stocks surged Thursday morning following yet another strong batch of earnings, and despite several weak economic indicators. The Dow Jones industrial average rose about 200 points, or 2%, while the Nasdaq composite jumped 2.3% and the S&P 500 soared 2.1% by noon trading. And stocks were even higher earlier.Earnings results continued to impress Wall Street. This morning, such heavy weights as Caterpillar (CAT), 3M (MMM), UPS (UPS) and AT&T (T) all topped earnings estimates and raised their outlooks. Shares of all four were generally higher in morning trade. Meanwhile, General Motors said it is acquiring auto financier AmeriCredit (ACF) for $3.5 billion.
Meanwhile, economic data continued to show weakness. Weekly jobless claims jumped, but it may have been due to seasonal factors. Still, the employment picture has not been encouraging, with high (official) unemployment rate at 9.5%. Existing home sales fell 5.1% in June, and are expected to keep dropping, indicating that the housing market is far from being out of the woods and could be a drag on any economic recovery. Still, that number was better than forecast.
And all this is happening just as Federal Reserve Chairman Ben Bernanke continued to warn Congress in his second day of testimony that the economy remains fragile with much uncertainty. He cautioned Congress against cutting stimulus. But the market already reacted to Bernanke's testimony Wednesday.
Discounting the economic data and having already reacted to Bernanke's testimony, it seems investors decided that the positive corporate earnings from so many sectors do not indicate a slowdown in the economic recovery. And even if there is a weakness in the economy, it is not affecting companies' profits in general. Well, at least for now.
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