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U.S. Stocks Rise to Highest Level Since 2007 on Earnings

Feb. 8 (Bloomberg) -- In today's "Single Best Chart," Bloomberg's Scarlet Fu displays how much U.S. companies depend on overseas sales. She speaks on Bloomberg Television's "Bloomberg Surveillance."

U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level since November 2007, as corporate earnings topped estimates and European leaders reached a budget agreement.

Eight out of 10 groups in the S&P 500 rose as Apple Inc. and Hewlett-Packard Co. advanced at least 1.4 percent, pacing gains in technology stocks. LinkedIn Corp. surged 21 percent after the online professional-networking service provider posted earnings that beat estimates. US Airways Group dropped 2.4 percent as the boards of American Airlines parent AMR Corp. and US Air were said to be prepared to vote on a merger Monday.

The S&P 500 rose 0.6 percent to 1,517.93. The benchmark gauge rallied for a sixth straight week, its longest rally since August. The Dow Jones Industrial Average added 48.92 points, or 0.4 percent, to 13,992.97 today.

“Confidence is emerging here,” James Paulsen, chief investment strategist at Minneapolis, Minnesota-based Wells Capital Management said in a television interview on “Bloomberg Surveillance” with Tom Keene. His firm oversees $332 billion in assets. “People are finally deciding that this looks more like a sustainable recovery.”

The S&P 500 has rallied 6.4 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The benchmark equity gauge is about 3 percent below its record high reached in October 2007. The index erased a weekly decline today after being lower earlier on renewed concerns about the euro-area debt crisis and as European Central Bank President Mario Draghi said the euro’s advance could hamper a recovery.

Northeast Storm

Nearly 5.6 billion shares changed hands on U.S. exchanges today, or 9.5 percent below the three-month average, as the U.S. Northeast prepared for a storm forecast to drop snow by the foot. Exchanges in New York, which shut for two days in October when superstorm Sandy battered the city, remained open all day said they were ready to use backup systems if needed.

“It’s business as usual,” NYSE Euronext spokesman Richard Adamonis said by phone. “We do also have our contingency plans in place.”

About 75 percent of the 341 S&P 500 companies that released results so far in the reporting season have exceeded profit projections, and 67 percent have beaten sales estimates, according to data compiled by Bloomberg.

European Union leaders agreed to a seven-year budget that cuts spending for the first time, bowing to U.K. Prime Minister David Cameron’s insistence on thrift. The deal was struck after 25 1/2 hours of talks in Brussels, according to a post on Twitter by EU President Herman Van Rompuy today.

Trade Deficit

Data in the U.S. showed the trade deficit narrowed more than forecast in December, led by record exports of petroleum that gave the world’s largest economy a boost at the end of 2012. Inventories at U.S. wholesalers unexpectedly fell in December for the first time in six months.

“The trend’s been up all year and I don’t see anything changing that,” John Fox, a Cobleskill, New York-based fund manager at Fenimore Asset Management, which manages about $1.5 billion, said by phone. “Earnings results continue to be good, and stock prices are ultimately driven by corporate profits and interest rates.”

Technology stocks rose the most out of 10 S&P 500 groups, climbing 1 percent. Apple, the world’s most valuable company, added $6.76 to $474.98, climbing for a second day after saying yesterday its board and management are in active discussions to return more cash to shareholders. Hewlett-Packard jumped 43 cents to $16.87 and led gains in the Dow.

Microchip Technology

Microchip Technology Inc. surged 7.2 percent to $36.39 for the biggest gain in the S&P 500. The Chandler, Arizona-based company posted third-quarter earnings and revenue that exceeded analysts’ estimates.

LinkedIn climbed $26.39 to $150.48 after the company reported an 81 percent jump in revenue to $303.6 million, topping the average analyst estimate of $279.7 million. Profit excluding some items was 35 cents a share, beating the average 19-cent projection.

US Airways dropped 36 cents to $14.75. Its board, along with AMR Corp.’s, is prepared to vote on a merger on Feb. 11 as executives and advisers work on final terms this weekend, people familiar with the matter said.

Boeing Co. fell 1.1 percent to $76.56, the worst decline in the Dow, after telling airlines expecting to receive new 787 Dreamliners in coming months that deliveries may be late as regulators investigate overheating batteries that prompted the model’s grounding worldwide.

McDonald’s Corp. added 0.3 percent to $94.87. The world’s largest restaurant chain said sales in the U.S. increased 0.9 percent in January. Analysts projected a drop of 0.3 percent, the average estimate compiled by Consensus Metrix. Sales in Asia Pacific, the Middle East and Africa plunged 9.5 percent while analysts anticipated a decline of 5.8 percent.

Activision Blizzard Inc. jumped 11 percent to $13.41. The largest U.S. video-game maker more than tripled fourth-quarter net income.

AOL Jumps

AOL Inc. rose 7.4 percent to $33.72. The publisher of the Huffington Post and TechCrunch websites reported fourth-quarter earnings and sales that exceeded analysts’ estimates on improved advertising performance.

Primerica Inc. climbed 3.3 percent to $33.63. The life insurer previously owned by Citigroup Inc. said fourth-quarter profit climbed on a boost in policy sales.

Moody’s Corp. erased 7.7 percent to $43.37 even after reporting fourth-quarter profit increased 66 percent. The owner of the second-largest credit ratings firm has tumbled 22 percent this week, the most since 2008, after the Justice Department filed a lawsuit against its competitor S&P that claimed it deliberately understated the risk of bonds comprised of mortgages made to the least creditworthy borrowers.

Nuance Communications Inc. slumped 19 percent to $20.00. The maker of speech-recognition software reported first-quarter adjusted earnings of 35 cents a share, missing the average analyst estimate by 1 cent. The Burlington, Massachusetts-based company was cut to hold from buy at Craig-Hallum Capital Group LP and Needham & Co.

The U.S. stock-market rally to an almost-record high has left the S&P 500 trading at the most expensive level in 18 months. The price-earnings ratio for the U.S. equity benchmark has increased 25 percent to almost 15 since October 2011, according to data compiled by Bloomberg. That’s still about 10 percent cheaper than the average multiple of 16.6 from the past decade.

“Stocks are fairly valued,” Donald Selkin, who helps manage about $3 billion as chief market strategist at National Securities Corp. in New York, said in a phone interview yesterday. “As long as interest rates stay low, I don’t think we’re going to get much multiple expansion.”

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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