Stocks open higher; traders hope for ECB action
(AP) NEW YORK - Faced with Facebook, Starbucks and Mario Draghi, the market chose to focus on Draghi.
For a second day, the U.S. stock market powered higher on optimism generated by a pledge from the European Central Bank chief, who vowed Thursday to do whatever necessary to preserve the euro.
There were troubling signs too, but they market shrugged them off. The government reported that the U.S. economy's growth rate slowed in the second quarter as recession-weary consumers pulled back on spending. Facebook dropped 16 percent and Starbucks fell 12 percent after reporting results that disappointed investors.
Bond trading also reflected investors' optimism. The yield on the benchmark 10-year Treasury note jumped to 1.51 percent from 1.44 percent late Thursday. That means investors are shedding low-risk assets like U.S. government bonds and putting their money to work in other places, like the stock market.
The Dow Jones industrial average rose 86 points to 12,974 in the first half-hour of trading. Merck jumped $1.48 to $44.81, the biggest gain in the Dow average, after the drug maker beat analysts' forecasts for income and revenue.
The Standard & Poor's 500 rose 11 points to 1,371. The Nasdaq composite index was up 19 at 2,912.
Draghi's remarks were influential because many investors fear that the results would be dire if the 17 countries that use the euro were split apart. Weaker countries like Greece and Spain would likely plunge into an economic tailspin.
Germany's finance minister, Wolfgang Schaeuble, followed Draghi's remarks with what amounted to a cautious endorsement. In a statement, Schaeuble said he welcomed Draghi's pledge to secure the euro. But he also made sure to place responsibility on the individual European countries, saying that they are responsible for implementing their own "necessary measures." He was referring to painful spending cuts that weaker countries like Greece have resisted and stronger countries like Germany have insisted on.
Spain reported that its sky-high unemployment rate shows no signs of abating. Almost 25 percent of workers there are unemployed, and the proportion rises to 53 percent for workers younger than 25.
Among other companies making big moves:
- Amazon (AMZN) jumped more than 6 percent, rising $13.98 to $233.99. The online retailer reported a steep drop in earnings but analysts were expecting the decline, which was caused mostly by costs related to buying a warehouse technology company.
- Starbucks (SBUX) reported higher revenue and net income. But investors were disappointed that the company cut its outlook for the current quarter, worried over slowing traffic in June and July. It is also considering closing unprofitable stores in Europe. Starbucks fell $5.94 to $46.47.
- Facebook (FB), in its first quarter as a public company, reported a 32 percent jump in revenue. That might be welcome news at many companies, but it was lower than previous quarters. And revenue growth is especially important for a newly public company like Facebook, which didn't turn a profit but did attract investors who were willing to bet on fast-growing revenue. The stock dropped $4.03 to $22.82. It has not traded above its initial pricing of $38 since May 18, its first day as a public company.