U.S. Stocks Recover From Global Retreat on Earnings Optimism as Bonds Gain
April 13 (Bloomberg) -- Bloomberg's Michael McKee reports that Pacific Investment Management Co., the biggest holder of inflation-protected Treasuries, is “underweight” inflation-linked bonds in portfolios that focus on the debt. According to Pimco's Mihir Worha, developed economies face the risk of deflation as growth slows and central banks end programs to revive their financial systems. (Source: Bloomberg)
April 14 (Bloomberg) -- Stacy Smith, chief financial officer at Intel Corp., talks with Bloomberg's Susan Li about demand for personal computers. The world’s biggest chipmaker forecast second-quarter sales that topped analysts’ predictions, citing growing worldwide demand. Speaking from Santa Clara, California, Smith also discusses Apple's iPad, partnerships and China's currency policy. (Source: Bloomberg)
U.S. stocks rose, halting a global drop, as earnings optimism boosted technology, industrial and consumer shares. Treasury 10-year notes increased on speculation last week’s decline was unsustainable. Oil fell for a fifth day.
The Standard & Poor’s 500 Index rose 0.1 percent at 4 p.m. in New York and the Dow Jones Industrial Average closed above 11,000 for a second day. The MSCI World Index lost 0.3 percent as lower-than-estimated sales at Alcoa Inc. weighed on global commodity producers. The 10-year note yield fell 2 basis points to 3.82 percent amid speculation inflation will remain subdued. Oil slipped 0.3 percent to $84.05 a barrel on concern the market is oversupplied.
S&P 500 futures gained 0.2 percent at 5:06 p.m. in New York following the close of U.S. exchanges and Intel Corp. extended gains after the largest chipmaker’s first-quarter earnings and second-quarter sales forecast topped analyst estimates, easing concern that first-quarter profits will disappoint investors after Alcoa started the earnings season.
“The stock market is showing resilience,” said Alan Gayle, a money manager at RidgeWorth Investments in Richmond, Virginia, which oversees $63 billion. “Alcoa’s earnings report was a bit less than what the market was expecting, but that was not enough to derail enthusiasm. The economy is turning higher, corporate profits are going to continue to expand.”
Home Depot Rises
Fastenal Co. led a rally in U.S. industrial shares after profit topped analysts’ estimates at the nation’s largest seller of nuts and bolts, propelling Home Depot Inc., the biggest home- improvement retailer, to the top gain in the Dow. Both the Dow and S&P 50 closed at the highest levels since Sept. 26, 2008.
Gains were limited as Alcoa, the largest U.S. aluminum producer, slid 1.6 percent for the biggest loss in the Dow. Huntington Bancshares Inc. and Regions Financial Corp. had the second- and third-largest drops in the S&P 500 after UBS AG cut the shares to “sell” and said earnings at regional lenders will disappoint investors.
Combined earnings per share for S&P 500 companies increased 30 percent in the first quarter from a year earlier, the first back-to-back quarterly profit gains among U.S. companies since 2007, according to analyst estimates compiled by Bloomberg.
The S&P 500 has jumped 77 percent from a 12-year low in March 2009 as the economy returned to growth and the Federal Reserve kept its benchmark interest rate near zero to safeguard the recovery. The rally pushed the benchmark’s price-to-earnings ratio to about 22, the highest in almost two years, according to data compiled by Yale University Professor Robert Shiller.
Bigger Trade Deficit
Early losses in U.S. stocks were spurred in part by data showing the nation’s trade deficit widened in February by more than anticipated. The gap increased 7.4 percent to $39.7 billion from a revised $37 billion the prior month, the Commerce Department said. Imports climbed 1.7 percent as Americans bought more computers and televisions made abroad, while exports rose to the highest level since October 2008.
The gain in 10-year Treasuries came as Mihir Worah at Pacific Investment Management Co., the biggest holder of inflation-protected Treasuries, said developed economies face the risk of deflation as growth slows and central banks end programs to revive financial systems.
Yields on Fannie Mae and Freddie Mac mortgage securities that guide home-loan rates declined to the lowest in three weeks, pushing financing costs lower after a recent increase.
Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds fell about 0.01 percentage point to 4.44 percent as of 3:02 p.m. in New York, according to data compiled by Bloomberg. That’s down from an eight-month high of 4.67 percent on April 5.
Copper in Chile
The Stoxx Europe 600 Index lost 0.3 percent. Antofagasta Plc, which will mine about a 10th of Chile’s copper this year, fell 2.3 percent in London. Heineken NV slid 2.3 percent in Amsterdam after JPMorgan Chase & Co. recommended selling the shares. LVMH Moet Hennessy Louis Vuitton SA, the world’s largest maker of luxury goods, rose 1.5 percent in Paris after reporting first-quarter sales that beat analysts’ estimates.
Oil fell for a fifth day, its longest losing streak since Jan. 15, amid forecasts of an 11th consecutive weekly gain in U.S. crude supplies and as the International Energy Agency boosted its forecast for non-OPEC supply. Crude oil for May delivery dropped 34 cents $84.05 a barrel in New York.
The MSCI Emerging Markets Index dropped for a second day, falling 0.7 percent as shares of oil producers including Russia’s OAO Lukoil retreated. The South Korean won weakened 0.4 percent against the dollar on speculation the central bank sold the currency to boost export earnings.
The MSCI Asia Pacific Index fell 0.6 percent. Alumina Ltd., Alcoa’s venture partner, slumped 5.6 percent in Sydney. Powerchip Semiconductor Corp. slumped 6.9 percent in Taipei on share-sale plans.
To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net.
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