U.S. Stocks Climb After Dow Tops 15,000 Amid Earnings
U.S. stocks rose, after the Dow Jones Industrial Average (INDU) climbed above 15,000 for the first time yesterday, as earnings forecasts from Whole Foods Market Inc. (WFM) and Electronic Arts Inc. beat analyst estimates.
Whole Foods Market and Electronic Arts gained more than 10 percent. J.C. Penney Co. added 7.4 percent as quarterly sales declined less than in the year-earlier period. Symantec Corp. lost 2.4 percent after it said sales and revenue will miss analyst estimates.
The Standard & Poor’s 500 Index rose 0.4 percent to 1,632.69 at 4 p.m. in New York. The Dow added 48.92 points, or 0.3 percent, to 15,105.12. More than 6.2 billion shares traded hands on U.S. exchanges today, about in line with the three-month average.
“We’ve recovered from the nervousness that we saw in the market in April and we’ve built a nice base here,” Peter Jankovskis, who helps oversee $3.5 billion as co-chief investment officer of Lisle, Illinois-based Oakbrook Investments LLC, said by phone. “We’ve gotten through the earnings season and we’re turning to the phase in the quarter where economic reports will determine if the market can hold up.”
The Dow closed above 15,000 for the first time yesterday on optimism over global central bank stimulus and better-than-estimated corporate earnings. The S&P 500 posted its fifth straight record today. The gauge has climbed 3.2 percent in that time, the largest five-day rally since Jan. 7. U.S. stocks are in the fifth year of a bull market amid three rounds of bond purchases by the Federal Reserve.
About 86 percent of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. That’s the highest level since Feb. 13, while below the two-year high of 93 percent in January.
News Corp. and Monster Beverage Corp. were among five S&P 500 companies reporting earnings today. About 72 percent of companies that have released results since the start of the earnings season have exceeded profit projections, while 52 percent have missed sales estimates, data compiled’ by Bloomberg show.
The S&P 500 will extend its record rally as the U.S. central bank continues using economic stimulus as a way to reduce unemployment, according to Scott Black, president of Boston-based Delphi Management Inc.
“There’s room to go on the upside, especially since you’re getting nothing on the fixed-income side,” Black said in an interview on Bloomberg Radio today. “There’s every indication that Ben Bernanke is going to remain accommodative because we’re not even near the threshold where he wants to get unemployment back under 6.5 percent.”
Fed Chairman Ben S. Bernanke has kept overnight interest rates near zero since December 2008 and embarked on a bond buying program that has expanded the central bank’s balance sheet to more than $3 trillion. The Fed has pledged to maintain this policy as long as U.S. unemployment remains above 6.5 percent and the outlook for inflation doesn’t exceed 2.5 percent.
Economic data from China and Germany today came in better than estimated. Chinese export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell. German industrial production also rose more than forecast, increasing for a second month in March in a further sign that Europe’s largest economy is returning to growth.
Investors bought shares of stocks most tied to economic growth, sending 25 out of 30 members of the Morgan Stanley Cyclical Index higher. The gauge has rallied 5.7 percent in the past five days. Raw-material, technology and phone shares had the biggest advances among 10 groups in the S&P 500, climbing at least 0.7 percent.
UnitedHealth Group Inc. added 3.3 percent to $62.51, Hewlett-Packard Co. increased 2.8 percent to $21.07 and Alcoa Inc. gained 2.7 percent to $8.87 for the biggest gains in the Dow (INDU). JPMorgan Chase & Co. increased 1.3 percent to $49.76.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.3 percent to 12.66. The equity volatility gauge is down 30 percent for the year.
Whole Foods gained 10 percent to $102.19. Net income rose to about $142 million, or 76 cents a share, from $118 million, or 64 cents, a year earlier, the Austin, Texas-based company said yesterday. Analysts had projected profit of 73 cents a share, the average of 24 estimates compiled by Bloomberg.
The company also said that profit excluding certain items will be as much as $2.89 a share in fiscal 2013, up from a previous estimate of as much as $2.87. Analysts estimate $2.87 a share, on average.
Electronic Arts increased 17 percent to $21.56, the highest since December 2011. The company, which makes the “FIFA” and “SimCity” video games, forecast adjusted earnings of $1.20 a share in the year ending in March, exceeding the $1.10 average estimate compiled by Bloomberg.
J.C. Penney added 7.4 percent to $17.61. The department-store chain that replaced its chief executive officer last month said preliminary fiscal first-quarter sales fell 16 percent, a smaller drop than a year earlier. CEO Myron Ullman is working to improve sales after revenue last year tumbled 25 percent to $13 billion amid Ron Johnson’s failed attempt to remake the retailer.
Sotheby’s rose 3.8 percent to $36.25. The auction house sold a Paul Cezanne painting for $41.6 million in its Impressionist and modern art sale yesterday.
News Corp. climbed 3.3 percent in extended trading following the close of exchanges after reporting profit that beat estimates amid higher licensing fees for television shows such as “American Idol.” Monster Beverage lost 16 percent at 5:50 p.m. as profit was cut by $8.3 million from payments to terminate distributor agreements.
Symantec declined 2.4 percent to $24.49. Revenue in the current period, which ends in June, will be $1.61 billion to $1.65 billion, the biggest maker of security software said yesterday. Profit excluding some costs will be 35 cents to 36 cents a share. Analysts on average had projected sales of $1.7 billion and profit of 44 cents.
C.H. Robinson Worldwide Inc. lost 7 percent to $57.26 for the biggest retreat in the S&P 500. The transportation logistics firm posted quarterly profit lower than analysts estimated.
Williams Cos. lost 3.7 percent to $35.60. The third-largest U.S. pipeline company posted its full-year earnings forecasts through to 2015, trailing current analyst estimates for all three years.
Manchester United Plc lost 1.8 percent to $18.44. Alex Ferguson will retire as British soccer’s most successful manager, having led the club to 38 trophies in 26 years.
The S&P 500 may trigger a longer-term buy signal for global equity markets, even as the benchmark gauge for U.S stocks nears a resistance level, according to Roelof-Jan van den Akker, a technical analyst at ING Groep NV.
The measure is nearing its short-term resistance of 1,635, signaling a possible 1.6 percent decline from yesterday’s finish to 1,600 within the next two weeks. Still, a monthly close above the longer-term resistance level of 1,600 would send a buy signal for the next year, triggering a greater increase in the S&P 500 that will lead global stock markets higher, van den Akker said.
“Prices are slowly breaking the upward rising resistance line around 1,600,” he said via phone from Amsterdam. “Even though we may see a short-term pullback that we will consider normal, the S&P 500’s uptrend is intact and likely to continue. Prices are still in a steep upward move in the next few weeks.”
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.
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