Stocks rose on Wednesday as a scarcity of profit warnings fueled optimism over the corporate reporting season, enabling the market to regain its footing after a sharp drop the previous session.
Shares of fast-food company Yum Brands, which jumped 4.9 percent during the regular session, extended gains after the close when it reported higher quarterly earnings and raised its profit forecast for the year.
On Tuesday, major stock indexes fell more than 1 percent, on worries that widening troubles in the subprime mortgage industry would spread through the U.S. economy. Standard & Poor's and Moody's Investors Service began slashing ratings on more than $17.3 billion of mortgage-related debt.
We saw very few preannouncements, and that generally should bode well for earnings, said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
Energy companies were among the top gainers in the S&P 500 index, with Exxon Mobil Corp. leading advancers after Lehman Brothers increased the stock's price target.
The Dow Jones industrial average climbed 76.17 points, or 0.56 percent, to end at 13,577.87. The Standard & Poor's 500 Index advanced 8.64 points, or 0.57 percent, to finish at 1,518.76. The Nasdaq Composite Index rose 12.63 points, or 0.48 percent, to close at 2,651.79.
AN APPETITE FOR YUM
Shares of Yum, which owns Pizza Hut, Taco Bell and KFC, rose 2 percent to $35.10 in extended trading after closing at $34.41 on the New York Stock Exchange. Earlier in the day, investment bank UBS raised its rating on the stock and said the company could buy back stock.
Reuters Estimates puts earnings growth at 5.6 percent for the second quarter over the year-ago period, but many analysts expect the figure to rise as the reporting season heats up.
The three major stock indexes briefly pared gains in late trading after SLM Corp., the student loan company commonly known as Sallie Mae, said legislative proposals may threaten its pending $25 billion takeover.
The news sent a shiver through the market where recent gains have been fueled by a sharp increase in mergers and acquisitions.
There is fear out there about when the liquidity spigot stops, Ghriskey said.
Sallie Mae's shares slid 9.8 percent to $52.15 on the NYSE, and were the top negative influence on the S&P 500 index.
Meanwhile, Alcan Inc. has begun negotiating a $34 billion friendly offer from Rio Tinto PLC to fend off a hostile $28.6 billion bid from U.S. rival Alcoa Inc., according to newspaper reports.
Alcan's U.S.-listed shares rose 4 percent to $89.60 on the NYSE, while the stock of its unwelcome suitor Alcoa, a Dow component, gained 1.9 percent to $42.43 on the Big Board.
Shares of Chaparral Steel Co. shot up 10.5 percent to $83.67 on the Nasdaq after Gerdau Ameristeel Corp. said late on Tuesday it agreed to acquire Chaparral for $4.22 billion.
Shares of big manufacturers were among the Dow's biggest gainers, with Caterpillar Inc. climbing 1.2 percent to $82.17, and Honeywell International advancing 1.6 percent to $58.74.
Chevron Corp. shares rose 2 percent to $90.75 and hit a new lifetime high of $90.87, a day after the oil company said production for the first two months of the second quarter rose from output in the previous quarter. Exxon advanced 0.9 percent to $87.29.
U.S. crude oil futures slipped but still settled at $72.56 a barrel. On Tuesday, Brent crude hit an 11-month high of $76.63 in London.
Trading was fairly active on the NYSE, with about 1.53 billion shares changing hands, below last year's estimated daily average of 1.84 billion.
On the Nasdaq, about 2.05 billion shares traded, above last year's daily average of 2.02 billion.
Advancing stocks outnumbered declining ones by a ratio of about 9 to 7 on the NYSE and about 8 to 7 on Nasdaq.Indexes gain on earnings optimism; Yum up late.