Optimism over economy drives Wall Street higher

Dow Jones: 12,342.66 (+57.51) S&P 500: 1,319.55 (+5.03) Nasdaq: 2,764.65 (+4.43)US STOCKS rose yesterday, trimming a second straight weekly drop for the Standard and Poor's 500 Index, and oil rallied after data on consumer confidence and manufacturing topped economist estimates.

Optimism about the health of the economy grew after a gauge of consumer sentiment rebounded from a 16-month low and US industrial production rose more than forecast. The data helped the market reverse an early drop spurred by lower-than-estimated profit at Google.

Oil jumped to almost $110 a barrel in New York.

“The economy continues to expand and the recovery is sustaining,” said Russ Koesterich, the San Francisco-based head of investment strategy for scientific active equities at BlackRock, which oversees $3.56 trillion as the world’s largest asset manager. “It’s not going to be a bad earnings season. It’s just that a lot of the good news is already baked in. It’s going to be a choppy market with an upward bias.”

Merck gained 1.9 per cent to $34.51. The second-biggest US drugmaker will split sales for the arthritis drug Remicade with Johnson and Johnson, ending an arbitration dispute that helped drive Merck shares down over the past year.

Charles Schwab advanced 2.1 per cent to $18.61. The brokerage beat estimates, helped by interest revenue and higher fees for managing assets.

Mattel climbed 4.1 per cent to $26.80. The maker of Barbie dolls posted first-quarter earnings excluding some items that exceeded analysts’ average estimate by 6.4 per cent, Bloomberg data show.

Google slumped 8.3 per cent to $530.70. A first-quarter hiring binge and increased marketing led to the biggest jump in operating expenses in three years at the operator of the world’s biggest search engine.

Bank of America fell 2.4 per cent to $12.82. The largest US lender by assets reported first-quarter profit excluding some items of 17 cents a share, missing the average analyst estimate by 35 per cent.

Higher oil prices and supply disruptions from Japan’s March 11th earthquake prompted JPMorgan’s Thomas Lee, to cut his 2011 profit estimate for the S&P 500. – (Bloomberg)