Stocks recover some lost ground on Dell earnings

AP News
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Posted: May 18, 2011 7:48 AM
Stocks recover some lost ground on Dell earnings

Strong earnings from computer maker Dell helped stocks rise on Wednesday, with commodity prices ticking higher as well after recent days' dramatic falls.

Sentiment across markets has been fragile of late, with investors worried about the pace of the global economic recovery, particularly in the U.S.

U.S. figures on Tuesday were downbeat, particularly a housing report showing the sector remains depressed. Hewlett Packard Co., the world's largest technology company by revenue, lowered its earnings outlook for the rest of the year.

Europe's debt crisis and uncertainty generated by the arrest of the International Monetary Fund's head Dominique Strauss-Kahn had also hurt market sentiment this week.

But investors were encouraged by a statement from Dell showing earnings in the three months to April 29 beat expectations thanks to strong corporate demand.

"This could help the stem the slide in U.S. equities," said Robert Kavcic, an analyst at BMO Capital Markets.

In Europe, the FTSE 100 index of leading British shares was up 0.9 percent at 5,912 while Germany's DAX rose 0.8 percent to 7,318. The CAC-40 in France was 1 percent higher at 3,979.

Wall Street was poised for a solid advance after a late rally on Tuesday helped limit the retreat _ Dow futures were up 0.3 percent at 12,479 while the broader Standard & Poor's 500 futures rose 0.4 percent to 1,331.

The main focus of attention later will be the minutes to the last rate-setting meeting of the U.S. Federal Reserve. Investors will be interested to see whether the Federal Open Market Committee is worried about the pace of the U.S. recovery following the recent soft data.

However, Marc Ostwald, market strategist at Monument Securities, said the minutes will have lost some of their capacity to shock after Fed chairman Ben Bernanke's first post-meeting press conference.

The prevailing view in the markets is that the Fed won't start start raising its super-low interest rates until later in the year at the earliest, in contrast to the European Central Bank, which has already raised its borrowing costs and is expected to do so again in July.

The divergence in the two banks' policies is one reason why the dollar has been so weak against the euro recently, though the reemergence of European debt worries have weighed on the single currency over the past couple of weeks.

By early afternoon London time, the euro was 0.2 percent lower at $1.4244. That is still a strong level but nine cents below the 18-month high achieved earlier in the month.

Jorg Kramer, chief economist at Commerzbank, reckons the Fed will wait until early next year before raising interest rates again.

"Its main motive for this reticence is the high unemployment rate, which, even though it has been falling in recent months, is still very high," Kramer said. "The only reason for the Fed acting at an earlier point would be if inflation expectations surprised and suddenly took off."

Earlier in Asia, Japan's Nikkei 225 index rose 1 percent to close at 9,662.08, on indications that factory production is recovering following the slump in the wake of the March 11 earthquake and tsunami.

Bank of America Merrill Lynch said a survey of fund managers for May showed investors growing more confident in Japan's ability to rebound from the disasters. In April's survey, respondents were divided evenly between those expecting the country's economy to weaken in the next year and those expecting it to strengthen. This month, a net 59 percent expected it to strengthen.

Elsewhere, South Korea's Kospi climbed 1.6 percent while Hong Kong's Hang Seng rose 0.5 percent to 23,011.14 and Australia's S&P/ASX 200 inched up 0.2 percent to 4,693.70.

Mainland China's Shanghai Composite Index rose 0.7 percent to 2,872.77 and the smaller Shenzhen Composite Index advanced 0.5 percent to 1,202.70.

Benchmark crude for June delivery was up $1.52 to $98.43 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 47 cents to settle at $96.91 per barrel on Tuesday.

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Pamela Sampson in Bangkok contributed to this report.