U.S. Stocks Rise on Increased Profit Forecasts
UPS jumped 7 percent as growing overseas demand and cost cutting efforts improved the earnings outlook at the world’s largest package-delivery company. Photographer: Norm Betts/Bloomberg
July 22 (Bloomberg) -- Bloomberg's Courtney Donohoe reports on the performance of the U.S. equity market today. U.S. stocks rose, with the Standard & Poor’s 500 Index gaining the most in two weeks, after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased profit forecasts. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
July 22 (Bloomberg) -- Cliff Remily, a portfolio manager at Thornburg Investment Management Inc., talks about his investment strategy for dividend-paying stocks. Remily talks with Pimm Fox on Bloomberg Television's "Street Smart." (Source: Bloomberg)
U.S. stocks rose, with the Standard & Poor’s 500 Index gaining the most in two weeks, after companies from United Parcel Service Inc. to AT&T Inc. and Qualcomm Inc. increased profit forecasts.
UPS jumped 5.2 percent as growing overseas demand and cost- cutting improved the earnings outlook at the world’s largest package-delivery company. AT&T rose 2.4 percent as quarterly profit beat analysts’ estimates on demand for Apple Inc.’s iPhone. Qualcomm, the biggest maker of chips that run mobile phones, jumped the most since November 2008 as it predicted higher selling prices for devices based on its technology.
The S&P 500 rose 2.3 percent to 1,093.67 as of 4 p.m. in New York. The Dow Jones Industrial Average climbed 201.77 points, or 2 percent, to 10,322.30. Both gauges gained the most since July 7.
“Investors look to UPS as an indicator for the global economy, so their strong numbers are a positive,” said Greg Woodard, portfolio strategist at Manning & Napier in Fairport, New York, which manages about $30 billion. “Some of the negative sentiment that had crept into the market is disappearing.”
The S&P 500 has climbed 7 percent since July 2 on optimism about corporate earnings. About 85 percent of S&P 500 companies that have reported results since July 12 beat analysts’ per- share earnings forecasts, Bloomberg data show, while 69 percent have topped revenue forecasts. Sales have risen 9.2 percent for S&P 500 companies that have reported earnings so far.
‘Good Shape’
“Corporate America is in very good shape,” said London- based Stephen Pope, chief global equity strategist at Cantor Fitzgerald. “We are seeing companies coming through with good top-line growth. I am happy with the tone and tenor of the U.S. equity market.”
UPS jumped 5.2 percent to $63.15 after raising its annual profit forecast and posting second-quarter earnings that beat analysts’ estimates. Net income was $845 million, or 84 cents a share, which exceeded the 75-cent average of 10 analysts’ estimates compiled by Bloomberg. Revenue rose 13 percent to $12.2 billion, UPS said.
The Dow Jones Transportation Average, an index of 20 stocks including UPS, jumped 3.9 percent, as Union Pacific Corp., the largest U.S. railroad by 2009 revenue, also rallied on better- than-estimated earnings.
AT&T, Qualcomm
AT&T increased 2.4 percent to $25.51. The largest U.S. phone company also reported second-quarter profit that beat analysts’ estimates. AT&T, which gets more than 40 percent of its sales from its wireless unit, activated 3.2 million iPhones in the period and gained a net 496,000 contract subscribers.
Qualcomm rallied 8.2 percent to $39.11 after the chipmaker said it expects higher profit and selling prices for devices based on its technology. The company raised its 2010 profit forecast and reported third-quarter sales that topped some analysts’ estimates, a sign that demand for phones is picking up.
U.S. regional banks surged on earnings that beat analysts’ estimates and lower loan-loss provisions. Fifth Third Bancorp jumped 10 percent to $12.45.
The KBW Bank Index gained 3.9 percent after Fifth Third posted its first profit in four quarters. SunTrust Banks Inc. increased 9.6 percent to $24.58 after reporting a profit of $12 million compared with a loss of $183 million a year earlier.
Homebuilders Advance
Homebuilders advanced after purchases of existing houses dropped a less-than-forecast 5.1 percent to a 5.37 million annual rate, figures from the National Association of Realtors showed today in Washington. The number of transactions will be “very low” in coming months, reflecting the end of the government incentive, the group’s chief economist said in a news conference.
Lennar Corp., the third-largest U.S. homebuilder by revenue, gained 3.1 percent to $14.76. Toll Brothers Inc., the biggest U.S. luxury-home builder, climbed 3.8 percent to $17.14. Home Depot Inc., the largest U.S. home-improvement retailer, advanced 2.7 percent to $28.22.
Amazon.com Inc. and Microsoft Corp. were among companies that reported quarterly results after the close of trading today.
Amazon.com Inc. tumbled 13 percent to $103.93 in after- market trading after rising 2.3 percent during the regular session. The largest Internet retailer reported second-quarter earnings of 45 cents a share. The average estimate of analysts surveyed by Bloomberg was for a profit of 54 cents a share.
Microsoft
Microsoft gained 2.9 percent to $25.84 at 4 p.m. The world’s largest software maker reported fourth-quarter profit that topped analysts’ estimates after customers purchased more personal computers running the Windows operating system. The stock slumped 0.8 percent to $25.64 in trading after the official close of markets.
The major indexes extended gains as the Conference Board said its index of leading indicators fell 0.2 percent in June from the prior month. Economists surveyed by Bloomberg had, on average, expected a 0.3 percent drop. The housing data and leading indicator reports overshadowed a jump in initial jobless claims of 37,000 to 464,000 in the week ended July 17, exceeding the highest estimate of economists surveyed by Bloomberg News, Labor Department figures showed. The survey median projected claims would climb to 445,000.
“Investors are giving the stimulative measures the benefit of the doubt over the debt imbalances that we still face,” said Jordan Irving, who helps manage about $136 billion at Delaware Investments in Philadelphia. “The general trend of the economic data points to a nice recovery, maybe with a slowdown in the second half of the year, but no double dip.”
Bernanke Effect
U.S. stocks snapped two days of gains yesterday as Federal Reserve Chairman Ben S. Bernanke said the economic outlook remains “unusually uncertain” without offering additional measures to stimulate growth. His semiannual testimony concluded today with a hearing before the House Financial Services Committee in Washington.
Xerox Corp. climbed 7.4 percent to $9.03. The largest maker of high-speed color printers posted second-quarter profit that topped analysts’ estimates and boosted its full-year forecast on increasing revenue and cost cuts. The company said 2010 earnings excluding some items would be at least 88 cents a share, compared with the 87-cent average estimate of analyst surveyed by Bloomberg.
AmeriCredit Corp. surged 21 percent to $23.91 after General Motors Co. said it’s buying the subprime lender for $24.50 a share.
3M Co., the maker of products from stethoscopes to sandpaper, advanced 3 percent to $84.75 after raising its full- year forecast and posting profit that beat analysts’ estimates as sales climbed at all divisions for the third straight quarter.
Boeing Co. rose the most in the Dow, advancing 5.4 percent to $66.60 after the Chicago-based planemaker and Airbus SAS won 237 jetliner orders worth $28 billion at this week’s Farnborough Air Show, more than three times the number announced in Paris a year ago, prompting some executives to declare the global slump over.
To contact the reporter on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
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