U.S. Stocks Advance as Dow Rallies to Highest Level Since 2008
April 20 (Bloomberg) -- Bloomberg's Cali Carlin reports on the performance of the U.S. equity market today. U.S. stocks rallied, sending the Dow Jones Industrial Average to its highest level since June 2008, as sales at companies from Intel Corp. to Yahoo! Inc. exceeded estimates and commodity producers gained. (Source: Bloomberg)
U.S. stocks rallied, sending the Dow Jones Industrial Average to its highest level since June 2008, as sales at companies from Intel Corp. (INTC) to Yahoo! Inc. exceeded estimates and commodity producers gained.
Intel climbed 7.8 percent, the most since March 2009, after the world's largest chipmaker also forecast revenue that may top projections. Yahoo! Inc., the most-visited U.S. Web portal, jumped 4.7 percent. United Technologies Corp. (UTX), the maker of Pratt & Whitney jet engines and Carrier air conditioners, rose 4.3 percent after lifting the lower end of its sales forecast. Alcoa Inc. (AA) and Chevron Corp. (CVX) added at least 1.2 percent as commodity prices advanced amid a weaker U.S. dollar.
The Standard & Poor’s 500 Index climbed 1.4 percent, the most in a month, to 1,330.36 at 4 p.m. in New York. The Dow average surged 186.79 points, or 1.5 percent, to 12,453.54. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against losses in the S&P 500, slid 4.8 percent to 15.07, the lowest since 2007.
“We’ve had enough good earnings,” said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, which manages $1.5 billion. “For lots of companies across different industries, this was a wait-and-see quarter, where people wondered -- was the economy slowing down? A lot of the companies have come through that with good numbers and a pretty positive outlook. That’s a bullish indication.”
Earnings Scorecard
Earnings-per-share beat analysts’ estimates at 76 percent of the 59 companies in the S&P 500 that reported results since April 11, data compiled by Bloomberg show. Companies in the index have topped estimates for eight straight quarters, the longest streak since at least 2006, helping propel the gauge up as much as 99 percent from the market bottom on March 9, 2009, Bloomberg data show.
The benchmark gauge this month rose to near the highest closing level for the rally, according to data compiled by Bloomberg. The S&P 500 advanced to 1,335.54 on April 6, or 7.47 points below the high on Feb. 18.
Stocks extended gains today after sales of previously owned U.S. homes increased 3.7 percent to a 5.1 million annual rate in March, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, data from the National Association of Realtors showed. The median price fell from a year earlier, and 40 percent of sales were distressed properties.
Companies most-tied to economic growth, including technology, energy and consumer discretionary shares, led the gains in the S&P 500 within 10 groups. The Morgan Stanley Cyclical Index rallied 1.8 percent as 29 of its 30 stocks advanced.
Chipmakers Surge
A gauge of chipmakers in the S&P 500 surged 5.3 percent, leading the gains among 24 industries.
Intel jumped 7.8 percent to $21.41 for the biggest gain in the Dow as the company’s forecast added to evidence of booming demand for machines that deliver computing over the Internet. Second-quarter revenue will be $12.8 billion, plus or minus $500 million, Intel said. That compares with $11.9 billion, the average of analysts’ projections.
First-quarter net income rose 29 percent to $3.16 billion, or 56 cents a share, from $2.44 billion, or 43 cents, a year earlier. Analysts on average had estimated profit of 46 cents. Sales increased 25 percent to $12.8 billion, compared with an average prediction of $11.6 billion.
Yahoo climbed 4.7 percent to $16.87. The most-visited U.S. Web portal reported first-quarter sales that topped estimates as companies stepped up their use of Internet advertising. Excluding sales passed on to partner sites, revenue was $1.06 billion. Analysts had estimated $1.05 billion on average.
All Five Divisions
United Technologies increased 4.3 percent to $85.90 after raising the lower end of its sales forecast for the year as the Carrier air-conditioning unit led revenue gains in all five divisions. Sales in 2011 may be $57 billion, up from a previous forecast of at least $56 billion. Chief Executive Officer Louis Chenevert raised the full-year profit forecast by a nickel to as much as $5.40.
Wynn Resorts Ltd. (WYNN) added 6.5 percent to $147.92. The owner of the Wynn and Encore casinos reported first-quarter profit rose sixfold, beating analysts’ estimates, lifted by a second Macau resort and improved results in Las Vegas.
“The risk-on trade is in full-blown mode,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “The surprise factor was sort of being lost in the market. The good corporate earnings across the board reinforce the idea that the global recovery is in place. As a consequence, equities and commodities are feeling the benefits of that.”
Commodity Rally
Commodity producers rallied as a weaker dollar and concern about debt and faster inflation spurred demand for an alternative investment. The Dollar Index, a gauge of the currency against six major peers, slid 0.9 percent to 74.33, its lowest level since 2009. A U.S. bond market gauge of trader inflation expectations approached the highest level since 2008. Gold futures rose to a record above $1,500 an ounce.
Alcoa, the largest U.S. aluminum producer, rallied 1.2 percent to $16.64. Chevron, the second-biggest U.S. energy company, increased 2.3 percent to $107.81.
Freeport-McMoRan Copper & Gold Inc. (FCX) gained 3.1 percent to $53.30. The largest publicly traded copper producer said it will pay a one-time 50-cent-a-share dividend and raised its 2011 sales forecast as the industrial metal traded close to a record.
Special Dividend
Freeport, which operates mines in the U.S., Africa and Indonesia, forecast full-year copper sales of 3.9 billion pounds and gold sales of 1.6 million ounces, up from predictions in January. The supplemental dividend of 50 cents, which was declared in addition to Freeport’s regular 25-cent quarterly payout, will be paid June 1, the company said.
International Business Machines Corp. (IBM) fell 0.4 percent to $164.75. The world’s largest computer-services provider said first-quarter services signings fell 14 percent from a year earlier. Still, IBM said operating earnings will be at least $13.15 a share this year, higher than a previous projection of at least $13 and the $13.08 average estimate of analysts.
Banks had the only decline in the S&P 500 within 24 industries, slumping 2.3 percent as a group.
Wells Fargo & Co. (WFC) tumbled 4.1 percent to $28.83. The largest U.S. home lender said first-quarter revenue fell 5.2 percent to $20.3 billion as fees from mortgage banking declined and average loans outstanding decreased.
Banks Trail S&P 500
Bank stocks are underperforming the S&P 500, even after Federal Reserve stress tests showed some financial institutions have regained enough strength to boost dividends and buy back their shares. A lack of loan growth and increased costs from new regulations plague the industry, according to Paul Miller, a former examiner for the Fed Bank of Philadelphia and a bank analyst at FBR Capital Markets in Arlington, Virginia.
“I don’t think we’ll get enough economic growth to spur strong loan demand, which is the primary revenue-driver,” he said. “Some investors are concerned the economy will just slug around for the next three or four more years.”
Union Pacific Corp. (UNP) slumped 1.3 percent to $96.07. The biggest U.S. railroad by sales posted profit that trailed analysts’ estimates after fuel prices climbed and winter snowstorms curbed first-quarter growth. Net income advanced to $639 million, or $1.29 a share, from $516 million, or $1.01, a year earlier. Earnings were projected to be $1.31, the average of 28 estimates compiled by Bloomberg.
To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net
To contact the editor responsible for this story: Michael Regan at mregan12@bloomberg.net
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