NEW YORK – Wall Street edged higher in a volatile session on Thursday, torn between strong corporate earnings and a surge in the US dollar.
The market swung in a wide range throughout the day as investors reacted to gyrations in the currency markets and as relatively strong earnings took a back seat.
But by the end of the session, the fundamental picture seemed to win out. The Dow rose, helped by McDonald's Corp and Travelers Cos Inc, both of which hit 52-week highs after stronger-than-expected results.
"Companies are continuing to show that they are continuing to make money in a low nominal GDP environment and that they are very good at it and they can continue to do so," said Paul Zemsky, head of asset allocation at ING.
Investors have been trading the dollar and equities against each other recently as expectations the Federal Reserve will pump billions into the economy have pressured the greenback while lifting stocks.
Commodity-linked stocks have been among the most sensitive to the trade. Occidental Petroleum Corp fell 2.7% to $78.80 while the S&P energy index edged lower as oil dropped more than 2% to under $81 per barrel.
"The trade has been: Weak dollar is good for commodities and is good for any risk-related assets like equities. On dollar weakness, buy those things; on dollar strength, get out of those things," said Bill Strazzullo, partner and chief investment strategist at Bell Curve Trading in Boston.
The euro and the popularly traded S&P E-mini futures contract have tracked each other closely in the last month. In the past 22 sessions, they have had a positive correlation coefficient of 0.89.
The euro had earlier climbed to a high around $1.4050 but later was trading down 0.3% to $1.3920.
The Dow Jones industrial average gained 38.60 points, or 0.35%, to 11,146.57. The Standard & Poor's 500 Index gained 2.09 points, or 0.18%, to 1,180.26. The Nasdaq Composite Index gained 2.28 points, or 0.09%, to 2,459.67.
Banking stocks were weak as investors continued to wrestle with confusion in the mortgage market and the chance Bank of America might have to buy back mortgages bonds. The stock fell 3.3% to $11.36 and has lost nearly 16% over the last 7 days.
"People have been talking about Bank of America for the last few days, and they're going to continue to talk about bank of America until they get better direction from management," said Weston Boone, vice president listed trading at Stifel Nicolaus Capital Markets.
McDonald's gained 1.3% to $78.44 after it beat expectations for quarterly profit and same-store sales growth in September.
Travelers gained 0.6% to $54.98 after the largest publicly traded US property casualty insurer easily beat estimates as premiums rose in its personal insurance lines.
Stocks rose nearly 1% earlier but the gains were trimmed by afternoon trade as the US dollar gained ground. The dollar was up 0.4% against major currencies, while the euro fell 0.3%.
Online auctioneer eBay rose 6% to $27.19 and Netflix, the movie rental and streaming service, jumped 12.8% to $172.69 after both reported upbeat results late Wednesday.
Home Depot Inc rose 3.5% to $31.81. Stifel Nicolaus reiterated its "buy" rating on the stock, citing attractive valuations after a meeting with company executives.