Techs, financial stocks push market higher

Investors shrugged off inflation concerns, worries about a slowing economy and even $100 crude oil as they pushed stocks higher today.

Instead, they focused on three things: Hewlett-Packard's (HPQ, news, msgs) terrific first-quarter earnings, stronger financial stocks and gains among energy shares.

As a result, the Dow Jones industrials finished up 90 points, 0.7%, to 12,427. The Nasdaq Composite Index climbed 21 points, or 0.9%, to 2,327, and the Standard & Poor's 500 Index added 11 points, or 0.8%, to 1,360.

The market rally came despite crude oil's jump to close at a record high of $100.74, up 73 cents from Tuesday and its second close above $100. During the session, crude peaked at $101.32.

Crude's move into record territory is already having an effect at the gas pump. AAA's daily survey of retail gasoline prices today showed regular unleaded averaging $3.053 a gallon, up 2.1 cents from Tuesday and up from $3.010 a month ago. There were anecdotal reports of prices jumping 10 cents a gallon or more in a day.

There was disagreement on how high crude will move. Walter Zimmerman of ICAP United told CNBC this afternoon that crude could move to $107 a barrel in the new few weeks and possibly to $120. But Oppenheimer's Fadel Gheit suggested the market was grossly overbought by speculators and could blow off.

• Video: Is $107 crude's next stop?

While crude was hurting consumers, it wasn't hurting energy stocks. Dow component ExxonMobil (XOM, news, msgs) was up 1.3% to $88.10. Chevron (CVX, news, msgs), which just joined the Dow on Tuesday, was up 1.8% to $86.34. The big star of the day, however, was Hewlett-Packard, whose shares jumped 7.9% to $47.44 on the strength of its 38% profit gain for the first quarter, reported after Tuesday's close.

H-P was the top performer among the 30 Dow stocks and second among S&P 500 stocks -- after home builder D.R. Horton (DHI, news, msgs), up 8.1% to $15.45.

H-P's impact was felt across technology today. IBM Corp. (IBM, news, msgs) jumped 2.7% to $107.85, second-best among Dow stocks. Apple (AAPL, news, msgs) was up 1.3% to $123.82, and Dell Inc. (DELL, news, msgs) rose 2.4% to $19.75.

Chip manufacturing equipment maker KLA-Tencor (KLAC, news, msgs) was up 5.6% to $42.31. Intel (INTC, news, msgs) added 1.1% to $20.38. The Philadelphia Semiconductor Index ($SOX.X) rose 2.7% to 352.42.

Financial stocks moved higher on hopes for a solution to the financial crisis facing bond insurers.

Ambac Financial Group (ABK, news, msgs) was unchanged at $9.94. MBIA (MBI, news, msgs) was up 4.1% to $12.18.

Plus, Citigroup (C, news, msgs) was up 0.7% to $25.49, and Lehman Bros. (LEH, news, msgs) added 3.4% to $55.39. The Standard & Poor's Banking Index ($BIX.X) was up 1.6% to 264.50; the Amex Securities Broker/Dealer Index ($XBD.X) shot up 2.4% to 192.67.

Gains for Hewlett-Packard, IBM, ExxonMobil and Chevron alone were worth 73 points to the Dow on the day. But 23 of the 30 Dow stocks were higher, along with 364 stocks in the S&P 500 and 79 of the stocks in the Nasdaq-100 Index ($NDX.X). The latter was up 1.3% to 1,787.

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$100.74	$100.01	$0.73	9.80%	4.96%
Heating oil (per gallon)	$2.7546	$2.7614	-$0.0068	8.68%	3.97%
Natural gas (per million BTU)	$8.9650	$8.9770	-$0.0120	11.04%	19.80%
Unleaded gasoline (per gallon)	$2.5852	$2.6031	-$0.0179	11.96%	3.79%

Notes from the Fed: More rate cuts are coming

The market also took a bit of cheer from a gloomy Federal Reserve.

Minutes from the Fed's Jan. 29-30 meeting (.pdf file) -- plus minutes from conference call meetings on Jan. 9 and Jan. 22 -- show Fed officials are increasingly concerned about the deteriorating economy at least in the first half of the year.

But the policymakers believe the economy will be showing much more strength in the second half.

What the minutes from the Federal Open Market Committee mean: The Fed is prepared to keep cutting rates to minimize the impact of a slowing economy, at least for now.

And the central bank is willing to put up with more inflation to get the economy going. The minutes do show, however, that, when growth was resumed, "a reversal of a portion of the recent easing actions, possibly even a rapid reversal, might be appropriate."

The FOMC is scheduled to meet on March 18. Most Fed watchers see the committee cutting its key federal funds rate to 2.5% from 3% now.

The bad news on inflation

The market opened badly this morning, with the Dow down as many as 110 points in the first 40 minutes of trading, and inflation was the problem.

Consumer prices rose 0.4% in January, according to a Labor Department report released this morning -- slightly higher than the 0.3% rise economists had expected. Core prices, which exclude food and energy, rose 0.3%, also ahead of the expected 0.2% rise.

Rising inflation is a concern for the Fed, and a slowing economy compounded by an increase in inflation could make things difficult at its next Federal Open Market Committee meeting.

• Get free, real-time stock quotes on MSN Money

"I think we have a situation of stagflation, where we have modest growth and recessionary pressures," Frederic Dickson, chief market strategist at DA Davidson, told CNBC this morning. "Pricing of oil and pricing of food are very much on investors' minds. It's treacherous waters, but there are still some opportunities available" in the markets, Dickson said.

In another economic report released this morning, the Commerce Department said that housing starts rose 0.8% in January to a seasonally adjusted annual rate of 1.01 million.

Meanwhile, December housing starts were revised to show a 14.8% drop to 1 million -- a 16-year low.

• Video: Inside today's economic data

Building permits, a gauge of future construction, fell 3% to a 1.05 million rate for January.

"We don't think housing has hit bottom yet," said Douglas Porter, deputy chief economist at BMO Capital Markets, to Bloomberg News. "Until we get some stabilization in sales or even a mild improvement, it's likely that construction will continue to weaken."

PC sales drive Hewlett-Packard profits

Hewlett-Packard said it earned $2.13 billion, or 80 cents per share, up 38% from the $1.55 billion, or 55 cents per share, a year ago. Excluding charges, H-P earned 86 cents per share, topping analysts' estimates of 81 cents per share.

• Video: H-P's stellar numbers

Revenue at the tech bellwether rose 13% to $28.5 billion, also ahead of Wall Street's estimate of $27.6 billion.

Overseas sales were a big part of the picture: Revenue rose 22% to $4.9 billion in the Asia-Pacific region, compared with 8% growth (to $11.2 billion) in the Americas.

"The U.S. consumer was not quite as robust as we've seen in the past," Chief Executive Officer Mark Hurd said on a conference call with analysts late Tuesday, "but globally we saw a pretty strong market."

Hewlett-Packard said that sales of personal computers jumped 24% in the quarter and that the company's software division saw sales rise 11% to $666 million.

H-P said it will earn 83 cents to 84 cents per share excluding items, ahead of The Street's expectation of 82 cents per share. For the full year, H-P expects to earn between $3.50 to $3.54 per share, above the consensus estimate of $3.36 per share.

Hewlett-Packard's forecast for the current quarter should help boost sentiment in the tech sector. "Their guidance was much more bullish than we thought it would be, particularly with what we've seen out of Cisco Systems (CSCO, news, msgs), Pacific Crest Securities analyst Brent Bracelin told Bloomberg News. "Their outlook suggests that things aren't as bad as people thought."

But American Technology Research analyst Shaw Wu suggested that H-P's performance is specific to the company, rather than the broader tech sector. "I think this (quarter) is more indicative of what Mark Hurd has done to instill a culture of success and execution at H-P," Wu told The Associated Press.

• Video: CEOs with vision

H-P has topped Wall Street's estimates ever since Hurd replaced Carly Fiorina as CEO in April 2005.

Mortgage applications decline

The number of U.S. mortgage applications plummeted 23% last week, according to the Mortgage Bankers Association.

The group's applications index fell to a reading of 822.8 from a reading of 1,063.5 a week earlier. It was the steepest weekly drop since the week ending July 25, 2003.

Applications for home purchases fell a seasonally adjusted 11.5% last week, while applications to refinance existing mortgages dropped 28%.

Interest rates on 30-year fixed-rate mortgages rose last week to an average of 6.09% as longer-term interest rates moved higher. The yield on the 10-year Treasury note, from which most mortgage rates are generated, has moved from 3.55% at the end of January to 3.92% today.

AT&T, Verizon downgraded

Two major telecommunications companies were downgraded by analysts at Credit Suisse this morning as the industry gears up for what looks like a big-time price war.

AT&T (T, news, msgs) and Verizon Communications (VZ, news, msgs) were cut to "neutral" from "outperform," analyst Christopher Larsen wrote in a note to clients.

Verizon was off 0.3% to $35.24 on the news. AT&T was down 4.3% to $34.36. It was the worst performer among the 30 Dow stocks and second-worst S&P 500 performer.

• Top Stocks blog: Would you pay $100 for wireless?

"We believe the trends that have driven the sector over the last couple of years could weaken in 2008," Larsen wrote. He added that "the higher risk of increasing wireless competition and a difficult economic environment" make the companies less attractive.

AT&T was also downgraded to "neutral" from "outperform" at Robert W. Baird.

What started the downgrade process was Verizon's announcement that it would offer a $100-a-month plan that would make the most sense for heavy cell-phone users. T-Mobile added text to its plan, and everyone expects Sprint (S, news, msgs) will undercut the industry with a plan priced at $60 to $80 a month.

• Verizon, rivals offer all-you-can-talk plans

Sprint shares fell 5.6% to $8.71, making it the worst performer among S&P 500 stocks today.

Sharper Image files for bankruptcy

Consumers might soon have trouble finding that body-massaging lounge chair or that R2-D2 interactive droid.

High-end gadget retailer Sharper Image (SHRP, news, msgs) is filing for Chapter 11 because of declining sales. The company has reported losses since the beginning of 2005, and sales have plunged 48% to under $400 million.

The company said it will continue to conduct business as usual; Chapter 11 allows businesses time to restructure its debt obligations.

Shares plunged 72% to 41 cents.

Short hits from the markets -- 4 p.m.

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	2.175%	2.170%	0.005	16.31%	-30.73%
5-year Treasury note yield	2.993%	2.900%	0.093	5.91%	-13.37%
10-year Treasury note yield	3.917%	3.875%	0.042	7.64%	-2.92%
30-year Treasury bond yield	4.644%	4.655%	-0.011	6.66%	4.15%
Currencies
U.S. Dollar Index	76.260	76.075	0.185	1.30%	-0.57%
British pound in dollars	$1.9429	$1.9493	-0.0064	-2.45%	-2.33%
Dollar in British pounds	£0.5147	£0.5130	0.0017	2.51%	2.39%
Euro in dollars	1.4719	1.4734	-0.0015	-1.02%	0.71%
Dollar in euros	€ 0.6794	€ 0.6787	0.0007	1.03%	-0.70%
Dollar in yen	¥108.12	¥107.82	0.30	1.61%	-3.33%
U.S. dollar in Canadian dollars	$0.988	$1.017	$0.0048	-1.14%	-0.47%
Canadian dollar in U.S. dollars	$1.013	$0.983	-$0.0041	1.16%	0.49%
Commodities
Gold	$937.80	$929.80	$8.00	3.50%	11.91%
Copper	$3.7190	$3.7330	-$0.01	5.09%	22.30%
Silver	$17.7600	$17.5080	$0.25	3.75%	19.03%
Crude oil (NYMEX) (per barrel)	$100.74	$100.01	$0.73	5.49%	4.96%

By Charley Blaine and Elizabeth Strott, MSN Money