Stocks rebound from drop as earnings reports boost confidence about pace of economic recovery

Earnings reports push stocks higher after slide

NEW YORK — Earnings reports gave investors some reassurance about the economic recovery and drew them back into the stock market one day after a big drop.

The Dow Jones industrial average gained 50 after dropping 94 on Thursday.

Reports from The Walt Disney Co. as well as retailers Abercrombie & Fitch Co. and J.C. Penney Co. offset worries about a disappointing consumer confidence report and an increase in the nation’s trade deficit that was bigger than forecast.

Disney said late Thursday that higher revenue at its cable, broadcast and movie studio units helped produce an 18 percent increase in its fiscal fourth-quarter profit. Abercrombie’s results were better than expected, while J.C. Penney raised its profit and sales forecasts.

The news also helped ease concerns about an 18.2 percent increase in the trade deficit in September. The $36.5 billion deficit was the largest since January and more than the $31.7 billion imbalance economists had expected.

The wider deficit was driven by a big rise in imports, led by a jump in oil shipments. That overwhelmed a fifth consecutive increase in exports. Exports are expected to continue to rise as the dollar weakens, which makes U.S. exports less expensive to overseas buyers.

The market briefly stumbled after a report that consumer confidence fell. The preliminary Reuters/University of Michigan consumer sentiment index for November came in at 66.0, down from 70.6 in October. That made investors nervous that cautious consumers wouldn’t step up spending at the holidays.

Stocks pared their gains as the dollar pulled off its lows of the day. The dollar’s steady decline since March, due largely to record-low U.S. interest rates, has encouraged investors to move money out of dollars and into higher-yielding assets like stocks and commodities.

Lawrence Creatura, equity market strategist and portfolio manager at Federated Clover Capital Advisors, said investors were able to look past the consumer confidence figure and instead focused on earnings reports from retailers because they are a more reliable indicator about the economy.

“It’s probably safe to say that investors are rationally more focused on what consumers do rather than what they say,” he said.

In late afternoon trading, the Dow rose 50.10, or 0.5 percent, to 10,247.57. The Dow’s drop Thursday broke a six-day winning streak, as oil prices tumbled on fresh signs of weak energy demand and a stronger dollar.

The broader Standard & Poor’s 500 index rose 3.32, or 0.3 percent, to 1,090.47. The Nasdaq composite index rose 10.30, or 0.5 percent, to 2,159.32.

The ICE Futures US dollar index, which measures the dollar against other currencies, fell 0.2 percent after rising the past two days.

Gold rose, while oil fell 59 cents to settle at $76.35 a barrel on the New York Mercantile Exchange.

Doug Roberts, chief investment strategist at ChannelCapitalResearch.com, said investors are cautious about putting more money in stocks after the steep gains in the past eight months.

“The market is trying to figure out where it wants to go,” he said.

The S&P 500 index has jumped 60.7 percent in the past eight months from a 12-year low.

Disney rose $1.33, or 4.6 percent, to $30.38 after posting its results.

Abercrombie said its third-quarter profit fell 39 percent on an ongoing slump in sales. But results from the teen retailer were better than analysts had expected. It rose $3.43, or 9.3 percent, to $40.19.

J.C. Penney said its net income dropped 78 percent during the third quarter on a big pension-related expense. Sales at stores open at least a year, a key gauge for retailers, slid 4.6 percent. But the company boosted its profit and sales outlook. It gained $1.79, or 6.1 percent, to $31.18.

Bonds were mixed. The yield on the 10-year note, which moves opposite its price, fell to 3.43 percent from 3.45 percent late Thursday. The government wrapped up $81 billion in bond auctions for the week on Thursday.

Two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 688.5 million shares compared with 707.7 million shares traded at the same point Thursday.

The Russell 2000 index of smaller companies rose 1.36, or 0.2 percent, to 581.68.

Overseas, Japan’s Nikkei stock average slipped 0.4 percent. Britain’s FTSE 100 rose 0.4 percent, Germany’s DAX index advanced 0.4 percent, and France’s CAC-40 lost 0.1 percent.