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Oracle Earnings Boost Stocks To Strong Finish

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The Associated Press

Published: September 22, 2007

NEW YORK - Stocks rose soundly Friday, capping a strong week for Wall Street, as investors drew confidence from strong results at Oracle Corp. and a continued sense lower interest rates should help bolster the economy.

Oracle's report that quarterly profits rose 25 percent as sales grew at their fastest pace in seven years offered fresh evidence that some sectors of the economy continue to hum along even as areas such as housing cause consternation for many investors.

Oracle rose 93 cents, or 4.4 percent, to $21.98 after its earnings report.

Wall Street found renewed optimism this week after the Federal Reserve lowered interest rates a larger-than-expected one-half percentage point Tuesday. The central bank also lowered the rate it charges to lend directly to banks by the same amount.

'As much as we often underestimate the depth of our problems it's also natural for us to underestimate the depth and robustness of our economy. There are many industry segments that are very healthy,' said Robert Brown, chief investment officer at Richmond, Va.-based Genworth Financial Asset Management, pointing to stronger-than-expected earnings reports. He said although Wall Street's exuberance over Fed rate cuts is understandable, investors are blithely looking past some of the concerns the economy faces.

The Dow Jones industrial average rose 53.49, or 0.39 percent, to 13,820.19.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 7.00, or 0.46 percent, to 1,525.75, and the Nasdaq composite index rose 16.93, or 0.64 percent, to 2,671.22.

For the week, the Dow was up 2.9 percent, and the S&P 500 index added 2.8 percent. It was the best weekly showing for the indexes since March. Nasdaq rose 2.7 percent, its best weekly gain since last month.

Friday's session brought 'triple-witching,' a once-a-quarter occurrence when investors face simultaneous expiration of contracts for stock index futures, index options and stock options. Such days often bring higher-than-normal volume as investors jockey for new positions, although analysts noted Friday's volume wasn't heavy considering the expirations.

Gains, Inflation Woes Drain Bonds

Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.63 percent from Thursday's close of 4.69 percent. Treasurys have sold off for three straight sessions amid concerns about the possibility of increasing inflation and the prospect of Saudi Arabia lightening its U.S. government holdings. The gains on Wall Street have also drained some money out of the bond market.

Brown contends the stock and bond markets have diverged; the equity market is regarding the Fed's rate cut as providing adequate liquidity to propel stocks to new highs.

'These rates cuts are not turning bad debt into good debt, and this rate cut is not changing the housing debacle's impact on slowing economic growth,' he said.

Fed Voices Limits On Bailout

Stocks pulled off their highs Friday afternoon after Fed Governor Kevin Warsh cautioned the central bank wouldn't bail out Wall Street simply to protect profits but that the Fed was focused on protecting the economy.

November's contract for crude oil fell 16 cents to settle at $81.61 a barrel on the New York Mercantile Exchange. On Thursday, October's contract, now expired, closed at an all-time high above $83.

With no major economic reports, Wall Street looked to corporate news.

Harman International Industries closed down $27.25, or 24 percent, at $85 after the Washington-based maker of upscale audio equipment confirmed reports that two private equity firms backed out of an $8 billion buyout deal to acquire it.

New York-based cosmetics maker Estee Lauder Cos. rose $1.95, or 4.8 percent, to $42.58 amid takeover rumors.

Joy Global Inc. rose 91 cents to $49.59 after the Milwaukee-based mining equipment company affirmed earnings and revenue forecasts.

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