U.S. stocks advanced, snapping a two-day decline for the Standard & Poor’s 500 Index, amid investors’ optimism about fourth-quarter corporate earnings.
Alcoa Inc. (AA), which reported better-than-estimated sales, fell 0.2 percent after rallying as much as 2.5 percent earlier today. Seagate Technology Plc (STX) jumped 6.6 percent as revenue topped an earlier forecast. Herbalife Ltd. (HLF) added 4.2 percent after Daniel Loeb’s Third Point LLC took an 8.2 percent stake in the company. Bank of America Corp. (BAC) slid 4.6 percent after Credit Suisse Group AG cut its recommendation for the lender.
The S&P 500 rose 0.3 percent to 1,461.02 at 4 p.m. New York time. The Dow Jones Industrial Average added 61.66 points, or 0.5 percent, to 13,390.51. About 6.1 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“Alcoa’s report got us off to a good start,” said Peter Jankovskis, who helps oversee $3 billion of assets as co-chief investment officer at Lisle, Illinois-based Oakbrook Investments LLC. He spoke in a telephone interview. “Still, earnings growth is going to be a little bit harder to come by. If we see some good results from bellwether companies, that will definitely give a lift to the market.”
Fourth-quarter profits at S&P 500 companies probably increased 2.9 percent, according to analysts’ estimates compiled by Bloomberg. That would be the second-slowest quarterly growth since 2009, the data show.
Six out of 10 groups in the S&P 500 rose today as health-care and industrial shares had the biggest gains. Telephone and utility companies retreated the most. The Dow Jones Transportation Average climbed 1 percent to the highest level since July 2011. An S&P index of homebuilders advanced 0.9 percent to the highest since August 2007.
The Chicago Board Options Exchange Volatility Index rose 1.4 percent to 13.81. The index earlier touched 13.22, the lowest intraday level since 2007, and dropped 40 percent over the previous six days.
“People are just looking at these low levels as opportunity to buy portfolio protection,” Jonathan Krinsky, chief technical analyst at Miller Tabak & Co., said in an interview. “There were also a lot of eyes on it, and often times when that happens as an instrument breaks support levels, it reverses.”
Alcoa, the first company in the Dow to report results, fell 0.2 percent to $9.08, erasing earlier gains. Aluminum prices are rising as demand in China (AA) and the U.S. increases while record amounts are being shut away in warehouses as part of financing deals. Alcoa, which said yesterday that global aluminum demand growth will accelerate to 7 percent in 2013, is trying to avoid a downgrade to junk by Moody’s Investors Services. The ratings company said Dec. 18 it was reviewing its rating.
Seagate Technology Plc climbed 6.6 percent, the most in the S&P 500, to $33.48. Sales rose to at least $3.6 billion in the fiscal second quarter, exceeding an earlier forecast for $3.5 billion as the company maintained share in the computer hard-drive market. Western Digital Corp., another maker of disk drives, added 4.3 percent to $43.80.
Herbalife added 4.2 percent to $39.95. Third Point became the latest firm to bet against hedge fund manager Bill Ackman, who has accused the direct seller of nutrition shakes of being a pyramid scheme. Herbalife is preparing to lay out its rebuttal at an investor conference in New York tomorrow.
MasterCard Inc. (MA), the second-biggest U.S. payments network, increased 2.8 percent to a record $532.39 after Goldman Sachs Group Inc. boosted the stock to buy from neutral.
Mattel Inc. climbed 3.1 percent to $36.81. The world’s largest toymaker was raised to buy from neutral at MKM Partners.
Boeing Co. jumped 3.6 percent, the most in the Dow, to $76.76. Qatar Airways Ltd., one of the biggest customers for Boeing’ Dreamliner, said heightened scrutiny of the model after a plane caught fire at the Boston airport won’t damp the carrier’s purchase plans. Boeing shares tumbled 4.6 percent in the previous two days.
Clearwire Corp. (CLWR) surged 7.2 percent to $3.13. The wireless-network operator that agreed to be bought out by Sprint Nextel Corp. (S) last month for $2.97 a share received an unsolicited offer from Dish Network Corp. at a price that’s 11 percent higher. Sprint (S) fell 1.5 percent to $5.88 while Dish rose 2.5 percent to $36.85.
NuVasive Inc. jumped 11 percent to $17.46. The maker of devices to treat spinal problems forecast 2013 sales that would beat analyst estimates.
The KBW Bank Index of 24 financial companies slipped 0.7 percent. Bank of America tumbled 4.6 percent to $11.43. The lender was downgraded to neutral from outperform at Credit Suisse on valuation. The stock “appears to be discounting significantly faster improvements in efficiency than we would be expecting,” analyst Moshe Orenbuch wrote in a note. The shares surged 109 percent last year.
Apollo Group Inc., the biggest U.S. for-profit college, lost 7.8 percent to $19.32 as net income slid on a drop in new enrollment. Competition for students has increased as more traditional universities have begun offering online courses that were once dominated by for-profit colleges. Apollo and its for-profit college competitors have faced scrutiny the past few years from state attorneys general and the U.S. government over their recruiting practices.
Separately, Morgan Stanley downgraded the stock to equal weight, similar to a neutral rating, from overweight.
Bets that U.S. stocks will move in unison have fallen to the lowest level in more than two years on speculation earnings season will drive investors to companies with the best results.
The CBOE S&P 500 Implied Correlation Index has fallen 12 percent to 62.87 since reaching a four-month high in December. The gauge, which uses options to measure expectations about whether S&P 500 companies will move in lockstep, reached 59.76 on Jan. 2, its lowest level since November 2010 (JCJ).
Improvement in the world’s largest economy will reduce the market’s sensitivity to government reports, allowing investors to focus on individual companies, Anthony Benichou of Louis Capital Markets said. The S&P 500’s daily swings during the past month have been in line with the average from last year, according to data compiled by Bloomberg. More than 320 companies in the U.S. equity benchmark are due to release quarterly results in the next month.
“With earnings approaching, we are going to switch from macro to micro, trying to be more selective, and it is going to be a more stock-specific strategy,” Benichou, equity salesman at Louis Capital Markets in London, said in a phone interview yesterday. “It is less about country and sector but more about looking at fundamentals in detail.”
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