Stocks waver on mixed earnings and economic data

By Andrea Tse

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U.S. stocks staged a mighty comeback in the final hour of trading Wednesday as a message from European leaders in support of Greece assuaged investor fears that the country is on a path to exit the eurozone.

Joe Bell, senior equity analyst at Schaeffer's Investment Research, sees a bumpy ride ahead for stocks in the intermediate term.

"We're going to continue to see some volatility on uncertainty until we can get a little more clarity out of Europe," said Bell. For now, he thinks that U.S. economic indicators have taken a backseat to "much larger things" such as Europe and global slowdown concerns.

On Thursday, the Labor Department reported that initial jobless claims for the week ended May 19 came in at 370,000, in line with the expectations of economists surveyed by Thomson Reuters. The prior week's figure was upwardly revised to 372,000. The four-week moving average was 370,000, a decrease of 5,500. Continuing claims for the week ended May 12 was 3.26 million, down by 29,000.

The Department of Commerce reported that durable goods orders rose 0.2% in April, less than the 0.5% increase expected by economists. March's drop was revised to a 3.7% decline from a 3.9% fall.

"I think that the U.S. economy is going to continue to grow, I think we're going to avoid recession," said Alan Gayle, senior strategist at RidgeWorth Investments. Gayle has been bullish for most of the year, but is now worried that corporate profits will be pressured going into the second half of the year.

He says that next Friday's jobs report will help the markets determine the overall economic direction. The general view is that the weather helped the jobs situation in the first two months of 2012 and hurt it in the second two months; therefore, it's likely that "we're going to get a 'clean' number in the May jobs report."

London's FTSE closed up 1.6%, and the DAX in Germany finished up 0.5%, even after a Markit's flash purchasing managers' index showed that private-sector output across the eurozone shrank in May at its most rapid pace since mid-2009.

During Wednesday's summit of European Union leaders, there was a lot of emphasis placed on the wish to see Greece stay in the eurozone, but the leaders remained steadfast on the necessity of the country abiding by the terms of the existing bailout agreement. Meanwhile, German Chancellor Angela Merkel and other countries with pristine credit ratings continued to reject proposals for jointly issued eurobonds.

The Hang Seng index in Hong Kong settled down 0.6% and Japan's Nikkei average closed flat as the HSBC flash Purchasing Managers Index for China fell to 48.7 in May from 49.3 in April.

The benchmark 10-year Treasury was falling 10/32, raising the yield to 1.771% and the greenback was down 0.08%, according to the dollar index, all signs of some easing in risk aversion.

Commodities were gaining, with the July crude oil contract up $1.32 at $91.22 a barrel and June gold futures rising $20.30 to $1,568.70 an ounce.

In corporate news, Costco Wholesale (COST), the warehouse retailer, reported fiscal-third-quarter​ earnings Thursday of $386 million, or 88 cents a share, up from year-earlier profit of $324 million, or 73 cents. Including higher membership fees, total revenue rose 8% to $22.32 billion. Analysts were calling for earnings of 87 cents a share on revenue of $22.21 billion.

Jewelry company Tiffany (TIF) lowered its 2012 earnings guidance to be between $3.70 a share and $3.80 a share from previous estimates of between $3.95 a share and $4.05 a share.

H.J. Heinz (HNZ), the ketchup maker, said that the company's fourth-quarter net earnings fell to $175.3 million, or 54 cents a share from $223.9 million, or 69 cents a share the prior year.

Facebook (FB) shares were extending the previous session's rebound after two-straight days of steep declines. The stock price still remains well below its $38 initial public offering price as the company's IPO becomes the focus of two congressional inquiries and a growing number of lawsuits amid accusations that important information about Facebook's growth prospects were withheld before the debut.