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Stocks End Higher After Data, Earnings, Fed

Kevin O'Shaughnessy

U.S. Market
Stocks rose Wednesday following a number of economic-data and corporate-earnings reports. Focus was also on the Fed's beige book, which revealed that economic conditions continued to improve from late May through the early part of this month.

Industrial production in the United States for June rose 0.2%, seasonally adjusted, compared with May's reading, and capacity utilization of 79.1% remained the same versus May's number. Each reading was 10 basis points lower than economists had expected, but production was still 4.4% higher year over year and a sign that industries are still increasing their output, albeit at a slow pace.

The producer price index for last month increased 0.4%, seasonally adjusted, coming in ahead of expectations and reversing the 0.2% monthly decline from the previous month. Gasoline prices drove much of the gain, and wholesale prices continue to improve over last year's levels.

Separately, homebuilder confidence rose to its best level in six months, with a July index reading of 53. The latest index, by being higher than 50, indicates homebuilders are more upbeat than downbeat on current housing conditions.

The Dow and the S&P 500 rose 0.4%, and the Nasdaq finished 0.2% higher.

Stocks on the Move
Bank of America's (BAC) second-quarter results were again marred by litigation expenses, as a $4 billion pretax charge reduced net income to $2.3 billion, or $0.19 per diluted share. With each massive settlement, B of A is closer to putting its troubled past behind it, but the environment remains tough for large banks, say Morningstar Analysts. One of the largest factors in the company's earnings remained out of management's control, as reported net interest income fell from $10.8 billion to $10.2 billion over the last 12 months. Separately, the bank met with the Justice Department Tuesday to discuss a potential settlement related to a mortgage-related charges, but the parties did not reach an agreement. Shares were down 1.9% at the closing bell.

Time Warner (TWX) and 21st Century Fox (FOX)(FOXA) disclosed Wednesday that the board of Time Warner rejected an unsolicited stock and cash bid from Fox. The bid was reportedly 1.531 FOXA shares and $32.42 in cash per Time Warner share, valuing Time Warner at $80 billion, or $85 per share, 19.7% above its closing price of $71.01 on Tuesday. News of the deal first leaked Wednesday. The deal was presented to Time Warner in June and was rejected this month. While Time Warner reportedly is not engaging, Fox founder Rupert Murdoch has generally gotten his target even after being rebuffed the first time. Time Warner shares soared 17.1%. FOX shares lost 4.6%, and FOXA shares fell 6.2%.

Tuesday after the market close, Apple (AAPL) and International Business Machines (IBM) announced an exclusive partnership to further promote and deliver iOS to the enterprise customer. The partnership plans to bring IBM's Big Data and analytics to iOS, develop over 100 industry-specific enterprise apps and solutions built solely for iOS devices, and allows Apple to leverage IBM's salesforce and enterprise customer relationships into additional iPhone and iPad device sales to corporations. For Apple, Morningstar analyst think the partnership can only strengthen Apple's narrow economic moat. Apple shares pared gains and fell 0.6%, but IBM shares rose 2.1%.

Also after Tuesday's closing bell, Intel (INTC) reported solid second-quarter results, driven by improved PC demand and robust growth in the firm's server chip business. Quarterly revenue was $13.8 billion, up 8% both sequentially and year over year. In the server processor business, sales were $3.5 billion, an increase of 14% quarter over quarter and 19% year over year. Shares surged by 9.3%.