Stocks Gain on Intel, JPMorgan Earnings Strength
April 14 (Bloomberg) -- Jason Tyler, senior vice president at Ariel Investment LLC, talks with Bloomberg's Betty Liu about JPMorgan Chase & Co.'s first-quarter profit reported today. The second-biggest U.S. bank by assets said net income rose 55 percent to $3.33 billion, or 74 cents a share, beating analysts' estimates, on record fixed-income trading revenue and a reduction in provisions for credit losses. (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 rallied, sending the Standard & Poor’s 500 Index to its biggest gain in almost six weeks, on better-than-estimated results at Intel Corp., JPMorgan Chase & Co. and CSX Corp. and an increase in retail sales.
Intel rallied 3.3 percent after the world’s largest chipmaker forecast rising sales this quarter and record profit margins for the year, fueling optimism that a rebound in technology spending is strengthening. JPMorgan advanced 4.1 percent, the most since October, after reporting record fixed- income trading revenue. CSX rose 4.1 percent to an 18-month high. Equities extended gains as the Federal Reserve said the economy expanded across most of the nation in March.
The S&P 500 climbed 1.1 percent to 1,210.65 at 4 p.m. in New York, its biggest advance since March 5 and the first day the index exceeded 1,200 since September 2008. The Dow Jones Industrial Average climbed 103.69 points, or 0.9 percent, to 11,123.11 as 23 of its 30 stocks advanced.
“It’s just a couple of earnings reports so far, but these are pretty important companies and the numbers look phenomenal,” said Brian Barish, president of Cambiar Investors LCC in Denver, which manages about $5.6 billion. “Not only is the bear case not unfolding, it seems to be just categorically false.”
Combined operating profit for S&P 500 companies increased 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg, which would mark the first back-to-back quarterly gains since 2007. The S&P 500 has surged 79 percent from a 12-year low in March 2009 as the economy and corporate earnings returned to growth and the Fed left interest rates at a record low to foster the recovery.
Intel, JPMorgan
Intel jumped 3.3 percent to $23.52, its highest closing price since August 2008. Second-quarter revenue will climb as high as $10.6 billion, exceeding analysts’ predictions, and 2010 gross margins will widen to a record, the chipmaker said late yesterday. Net income surged almost fourfold in the three months through March.
Texas Instruments, the second-biggest U.S. chipmaker, rose 4 percent to $26.90 for its biggest advance since October. Teradyne Inc., which makes chip-testing equipment, rallied 7.6 percent for the biggest gain in the S&P 500.
JPMorgan surged 4.1 percent to $47.73 for the top gain in the Dow. The bank said a “broad-based” economic recovery boosted first-quarter earnings 55 percent. Chief Executive Officer Jamie Dimon cited stabilizing U.S. home prices and other signals that the economy may be poised for a “strong recovery.” Chief Financial Officer Mike Cavanagh said delinquencies for credit cards and mortgages in which the borrower is behind by just one payment also improved.
Mayo’s Upgrade
Credit Agricole Securities USA Inc. analyst Mike Mayo raised his recommendation on three U.S. banks, lifting Goldman Sachs Group Inc. and Bank of America Corp. to “buy” from “outperform” and boosting JPMorgan to “outperform” from “underperform.” Mayo also raised his share-price estimate for Citigroup Inc. to $4 from $3.
“The worst of credit trends seems to be over for the big banks,” Mayo and colleague Chris Spahr wrote in a note to clients. “We previously thought that loan losses would approach the level of the Great Depression,” they wrote, “but now feel more confident that this is about the worst it will be.”
Bank of America rallied 3.9 percent for the second-biggest gain in the Dow, while Citigroup jumped 6.7 percent. American Express Co., Visa Inc. and MasterCard Inc. climbed at least 1.5 percent.
Railroad Rally
CSX jumped 4.1 percent to $55.46 after first-quarter profit benefited from increased shipping volumes and higher revenue from each carload. CSX led off quarterly earnings reports for an industry in which analysts project a rebound in profit after the recession damped freight demand. Union Pacific Corp., the biggest U.S. railroad, releases results on April 22. Increases in earnings would add to evidence that the U.S. economy is strengthening.
Indexes of financial and information-technology companies gained the most of 10 industry groups in the S&P 500, rising 2.6 percent and 1.7 percent respectively.
Credit Suisse Group AG raised its year-end estimate for the S&P 500 by 13 percent to 1,270 today, saying “equities still offer value relative to other asset classes.”
‘Hoarding Cash’
“Because there’s been so much talk of double-dip recession, corporations have been hoarding cash,” said Marc Pado, the San Francisco-based U.S. market strategist at Cantor Fitzgerald LP. “They’re sitting on a trillion dollars of cash and cash equivalents. And for corporations, that’s a lot. I think companies are going to be looking more closely at the potential for acquisitions and corporate buybacks.”
The S&P 500 Retailing Index advanced 1.7 percent, with Amazon.com Inc. and AutoNation Inc. pacing gains. Retail sales in the U.S. climbed 1.6 percent, the biggest increase in four months, and gains for February and January were revised up, Commerce Department figures showed. Economists surveyed by Bloomberg had forecast a median gain of 1.2 percent.
A report from the Labor Department showed the cost of living increased 0.1 percent in March after no change the previous month, in line with the survey median. Another Commerce Department report showed business inventories rose 0.5 percent in February, above the 0.4 percent median economist estimate, as companies built up stocks to meet improving demand.
The Fed’s report on regional economic activity, known as the Beige Book, said the economic activity increased “somewhat” in all of the central bank’s districts except St. Louis. Fed Chairman Ben S. Bernanke said the U.S. expansion will remain moderate as the economy contends with weak construction spending and high unemployment.
‘Moderate’ Recovery
“On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters,” Bernanke said in testimony to Congress today. “Significant restraints on the pace of the recovery remain, including weakness in both residential and nonresidential construction and the poor fiscal condition of many state and local governments.”
Tomorrow will bring reports on manufacturing from the New York and Philadelphia Fed regions as well as data on U.S. industrial production and jobless claims.
The manufacturing reports “will tell us if the retail- sales gains were in new production or inventory liquidations,” said Larry Peruzzi, senior equity trader at Boston-based broker dealer Cabrera Capital Markets. “If the former, it would set up well for an allocation trade out of cash and into equities.”
Crude Halts Slump
Crude oil ended a five-day decline, rising 2.1 percent to $85.84 a barrel on the New York Mercantile Exchange after the U.S. Energy Department reported an unexpected drop in inventories. Schlumberger Ltd. and ConocoPhillips gained more than 2 percent.
Apple Inc. rose 1.3 percent to $245.69, the highest closing price since the company went public in 1980. The maker of Macintosh computers and iPods said demand for its new iPad tablet computer was “far higher” than predicted and the company will delay the device’s international introduction by a month.
Mosaic Co. fell 2.4 percent to $55.40. North America’s second-largest crop-nutrient producer was downgraded to “neutral” from “buy” at Goldman Sachs Group Inc. U.S. shares of Canada’s Potash Corp. of Saskatchewan, also downgraded to “neutral” from “buy,” dropped 2.3 percent to $109.64.
Philip Morris International Inc. declined 2.2 percent to $51.30. The tobacco producer may miss earnings-per-share estimates, Citigroup Inc. analyst Adam Spielman wrote in a note today. The New York-based company is scheduled to post quarterly earnings on April 22.
To contact the reporter on this story: Joanna Ossinger in New York at jossinger@bloomberg.net.
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