Federal Reserve Chairman Ben Bernanke did what he could for a second straight day to allay investors' fears that the central bank will do whatever is necessary to ensure a stable economy and spur investors to take risks by investing in equities.
In addition to Bernanke's comments, economic data from the housing sector continued to fuel optimism in the sector that things are finally turning around. Pending homes sales jumped 4.5% to their highest levels since April 2010 last month as buyers take advantage of historically low lending rates and a shrinking number of homes available for sale.
All told, the broad-based S&P 500 (^GSPC 1.14%) surged 19.05 points (1.27%) to close the day at 1,515.99 on the aforementioned news.
The biggest gainer within the S&P 500 was discount retailer Dollar Tree (DLTR 0.43%), which outran Wall Street's fourth-quarter earnings estimates. For the quarter, sales jumped 15.4% and EPS improved to $1.01 from the year-ago period when it earned $0.80 as traffic increased and shoppers purchased more per visit. Although Dollar Tree's first-quarter forecast might be construed as a bit weak given where current estimates are, dollar stores such as Dollar Tree are suddenly back in the driver's seat with tax refunds slow to get to consumers who need them and payroll taxes now taking a bigger bite out of taxpayers' checks. Target (TGT -0.28%)also reported its fourth-quarter results earlier today and its results failed to impress. Like Wal-Mart, slow refunds and tight budgets are hurting Target's store traffic and sending its customers scurrying to dollar stores for even better perceived bargins. Shares of Dollar Tree rose 10.5% on the day.
Electric utility AES (AES 3.41%) worked its way into the winner's column, gaining 6.3%, after reporting solid quarterly results. For the quarter, AES reported revenue of $4.64 billion and an adjusted profit of $0.32, which was 39% higher than the $0.23 it reported in the year-ago period. Wall Street had only been expecting $3.86 billion in revenue and $0.31 in EPS. Looking ahead, AES projects full-year EPS of $1.24-$1.32, but it expects its proportional cash flow to fall because of higher environmental costs. If you can stomach the high debt load and operational hiccups in international markets, AES could be a promising turnaround play.
Finally, the earnings bug reared its welcome head with heavy mining equipment manufacturer Joy Global (JOY), which leapt 5.8% today after its first-quarter results topped estimates. Overall, Joy's revenue rose by $1 to $1.1 billion as it turned in a profit of $1.33 per share. Both figures topped the $1.14 in EPS and $1.08 billion in revenue the Street anticipated. More importantly, while Joy doesn't expect any immediate impacts to its bottom line, it did note that global commodity markets are beginning to destock, which should help alleviate weak pricing, especially in the coal market. As long as China remains on track, Joy is a name to keep on your radar.
