U.S. Stocks Rise as Corporate Profits Overshadow Economic Data
U.S. Stocks Advance as Profits Overshadow Economic Reports
Jin Lee/Bloomberg
Traders work on the floor of the New York Stock Exchange in New York.
Traders work on the floor of the New York Stock Exchange in New York. Photographer: Jin Lee/Bloomberg
May 26 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks gained a second day as higher-than-estimated corporate profits at companies including Tiffany & Co. overshadowed data showing the economy grew at a slower rate than forecast and jobless claims unexpectedly rose. Bloomberg's Pimm Fox also speaks. (Source: Bloomberg)
May 26 (Bloomberg) -- Bill Gross, manager of the world's biggest bond fund at Pacific Investment Management Co., talks about the U.S. bond market and investment strategy. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
May 26 (Bloomberg) -- Sandy Villere, co-manager of Villere & Co.'s Villere Balanced Fund, talks about his criteria for selecting stocks in the current environment and some of his equity picks including 3D Systems Corp. and NIC Inc. Villere speaks with Matt Miller, Carol Massar and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)
May 26 (Bloomberg) -- Barry Ritholtz, chief executive officer of FusionIQ, talks about the outlook for the U.S. stock market, economy and his investment strategy for shares of Dell Inc., Kraft Foods Inc. and Hershey Co. Ritholtz speaks with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
May 26 (Bloomberg) -- Mario Gabelli, chief executive officer of Gamco Investors Inc., talks about the firm's investment strategy and the outlook for the U.S. equity market. Gabelli, speaking with Betty Liu, Jon Erlichman and Dominic Chu on Bloomberg Television's "In the Loop," also discusses recent initial public offerings in the technology industry and corporate mergers and acquisitions. Nicholas Thompson, senior editor at New Yorker magazine and a Bloomberg Television contributing editor, also speaks. (Source: Bloomberg)
U.S. stocks gained a second day as higher-than-estimated corporate profits at companies including Tiffany & Co. (TIF) overshadowed data showing the economy grew at a slower rate than forecast and jobless claims unexpectedly rose.
Tiffany, the second-largest luxury jewelry retailer, advanced 8.6 percent after raising its full-year earnings forecast as profit beat estimates. NetApp Inc. (NTAP) rallied 6.9 percent as the data-management company forecast earnings that topped projections. Microsoft Corp. (MSFT) rose 2 percent as Greenlight Capital Inc. President David Einhorn called for the company’s board to replace Chief Executive Officer Steve Ballmer, saying the company suffers from “Charlie Brown management.”
The Standard & Poor’s 500 Index advanced 0.4 percent to 1,325.69 at 4 p.m. in New York. The Dow Jones Industrial Average increased 8.10 points, or 0.1 percent, to 12,402.76. Both benchmark gauges yesterday snapped a three-day decline.
“The bright side is that there’s a clear dichotomy between the health of corporate America and the economy,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $53 billion. “We’ve softened somewhat. Still, profits remain good and there’s M&A activity. That tells me that we’re not going to see a huge move in stocks in either direction.”
The S&P 500 fell 2.8 percent from an almost three-year high on April 29 amid concern about Europe’s debt crisis and weaker- than-forecast economic data. Still, the benchmark gauge is up 5.4 percent from the end of 2010 amid government stimulus measures and higher-than-forecast corporate profits.
GDP Report
The U.S. economy grew at a 1.8 percent annual rate in the first quarter, less than forecast, reflecting a smaller gain in consumer spending than previously calculated. The revised rise in gross domestic product was the same as estimated last month and compared with a 3.1 percent gain in the prior quarter, Commerce Department figures showed. The median forecast of economists surveyed by Bloomberg News called for a 2.2 percent increase.
More Americans unexpectedly filed applications for unemployment benefits last week, a sign the labor market is struggling to gain momentum. Jobless claims increased by 10,000 to 424,000, Labor Department figures showed. The median estimate of economists was for a drop to 404,000.
Earlier today, stocks extended declines after Luxembourg’s Jean-Claude Juncker, who leads the group of euro-area finance ministers, said the International Monetary Fund may not release its portion of a 12 billion-euro ($17 billion) aid payment to Greece next month.
‘Troika’
“There are specific IMF rules and one of those rules says that IMF can only take action when the refinancing guarantee is given over 12 months,” Juncker said today at a conference in Luxembourg. “I don’t think that the troika will come to the conclusion that this is given,” he said, using the term to describe a team of inspectors from the European Union, the IMF and European Central Bank.
Tiffany increased 8.6 percent to $76.04. The jeweler raised its full-year forecast as sales did better in Japan than expected after the earthquake.
NetApp rose 6.9 percent to $55.31. The data-management company forecast adjusted earnings of as much as 57 cents a share for the first quarter, compared with the average estimate of analysts surveyed by Bloomberg of 50 cents a share.
Microsoft Rallies
Microsoft rose the most in the Dow, adding 2 percent to $24.67. Shares of the world’s biggest software maker are “statistically” cheap, Mario Gabelli, chairman of Gamco Investors Inc., said in an interview on Bloomberg TV.
Walgreen Co. (WAG) retreated 1 to $43.70 after Goldman Sachs Group Inc. cut the largest U.S. drugstore chain from its “conviction buy” list.
Big Lots Inc. (BIG) declined 2.8 percent to $31.44. The discount retailer forecast second-quarter earnings of 38 cents to 48 cents a share, falling short of the average analyst estimate of 52 cents, according to Bloomberg data.
Goldman Sachs Group Inc. lowered its year-end forecast for the S&P 500 to 1,450 from 1,500 and reduced its 2012 earnings projection, citing weakening economic estimates. S&P 500 companies will post combined profit of $104 a share next year, compared with Goldman Sachs’s prior estimate of $106, according to David Kostin, the New York-based equity strategist. He maintained his 2011 earnings forecast for the S&P 500 of $96 a share.
‘Lowered GDP Growth’
“Our adjustments reflect a combination of developments including recently lowered GDP growth estimates by our economists in the U.S. and Asia and a significant increase in our Brent oil price forecast,” Kostin wrote today in a note to clients.
Companies in the S&P 500 that raised dividends for at least 25 years are beating the benchmark gauge, reversing a trend started in August when the Federal Reserve signaled additional economic stimulus.
The S&P 500 Dividend Aristocrats Index is again beating the S&P 500 after an almost six-month period of underperformance. Since the middle of February, the index of dividend payers rose 3.1 percent through yesterday and the S&P 500 fell 0.9 percent. The ratio between the two gauges rebounded to 0.41 from a one- year low of 0.39 on Feb. 14. It had fallen from a record of 0.42 on Aug. 26 through mid-February. During that period, the “aristocrats” surged 18 percent as a group, trailing a 27 percent gain for the S&P 500.
“Once the Fed signaled QE2, we had a resumption of the risk rally,” said Russ Koesterich, the San Francisco-based global chief investment strategist for the IShares unit of BlackRock Inc., which oversees $3.65 trillion as the world’s largest asset manager. “Now that we’re coming to an end of QE2 and there’s concern about a slower pace of economic growth, investors are turning more defensive. These more stable, higher- dividend paying companies are the beneficiaries of that.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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