U.S. Stocks Advance as Investors Weigh Data, Earnings

U.S. stocks rose, halting two days of losses for the Standard & Poor’s 500 Index, as investors weighed corporate earnings and economic reports for clues on when the Federal Reserve may reduce stimulus measures.

Facebook (FB) Inc. rallied 30 percent after the world’s most popular social-networking service posted second-quarter revenue and profit that beat analysts’ estimates. Visa Inc. advanced 4.2 percent to a record as profit topped forecasts. Homebuilders sank 4.8 percent as a group after PulteGroup Inc. and D.R. Horton Inc. reported lower-than-expected orders.

The S&P 500 rose 0.3 percent to 1,690.25 at 4 p.m. in New York, after earlier falling as much as 0.4 percent. The Dow Jones Industrial Average added 13.37 points, or 0.1 percent, to 15,555.61. More than 6.4 billion shares traded hands on U.S. exchanges today, in line with the three-month average.

“It seems like market participants on a day-to-day basis want to trade more on the prospect of what that means for the Fed’s tapering plan,” Jeff Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri, said in a phone interview. His firm has $2.3 billion under management. “I’d much rather see the market supported by positive underlying economic trend and real activity, rather than supported by the hope that the Fed will continue to artificially suppress the rate.”

The S&P 500 (SPX) completed its first two-day drop in a month yesterday, after climbing to within 3 points of 1,700 for a third straight day, as housing and manufacturing data fueled speculation the Fed may reduce its asset-buying this year. Support from central banks and better-than-estimated corporate earnings have driven the S&P 500 up as much as 151 percent from its March 2009 low.

Session Highs

The benchmark gauge rose to session highs today after a Wall Street Journal article suggested the Fed will reassure investors it won’t be quick to raise interest rates at its next policy-making meeting on July 30-31. Fed Chairman Ben S. Bernanke said last week it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September.

The central bank has said economic data will determine the timing and pace of any reduction in its $85 billion in monthly bond-buying, known as quantitative easing. The Fed will start trimming purchases in September, according to a Bloomberg survey of economists.

Separate reports showed today that orders for durable goods rose more than forecast in June while more Americans filed for unemployment benefits last week as annual auto-plant shutdowns continued to affect data.

‘Middle Ground’

“We are kind of stuck in that middle ground where data is not bad enough to be encouraging about more quantitative easing, but it’s not good enough to convince people that there is enough there fundamentally to justify sharply higher prices,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in an interview.

Equity valuations have climbed 16 percent this year, with the S&P 500 trading at 16.3 times reported earnings, close to the highest level since May 2010, according to data compiled by Bloomberg. The index closed at record on July 22.

Of the 237 S&P 500 companies that have posted quarterly results, 74 percent have exceeded analysts’ profit estimates and 57 percent have beaten sales projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, dropped 1.6 percent today to 12.97, halting two days of gains. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, is down 28 percent this year.

Facebook Rally

Nine of the 10 S&P 500 main groups advanced, as utilities and commodity producers rose at least 0.5 percent.

Facebook surged 30 percent to $34.36, the highest level in 14 months. Revenue rose 53 percent to $1.81 billion in the latest quarter, beating the average analyst estimate of $1.62 billion. Profit excluding certain items of 19 cents a share also exceeded the 14-cent average projection of analysts.

Visa advanced 4.2 percent to a record $194.61 as the biggest bank-card network reported a fiscal third-quarter profit that beat analysts’ estimates.

TripAdvisor Inc. (TRIP) jumped 16 percent to $71.10 after posting second-quarter earnings per share of 52 cents. That exceeded the average analyst projection of 48 cents.

Boston Scientific Corp. rallied 13 percent to $10.83. The second-biggest maker of heart-rhythm devices reported profit that beat analysts’ estimates and raised its forecast amid signs that demand for defibrillators is starting to stabilize.

Best Performance

Better-than-expected results from International Paper Co. and Dow Chemical Co. boosted raw-materials producers to the best performance in the S&P 500. International Paper, the world’s largest maker of office paper, jumped 6.3 percent to $50.19. Dow Chemical rose 1.8 percent to $34.99 as stronger transportation and packaging demand helped its plastics unit.

Qualcomm Inc. added 3.3 percent to $63.42. The largest seller of semiconductors for mobile phones forecast fiscal fourth-quarter sales that may exceed analysts’ estimates, buoyed by smartphone demand in emerging markets.

Oneok Inc. (OKE) surged 26 percent to a record $53.77 for the biggest gain in the S&P 500. The company plans to spin off its distribution business, forming one of the largest natural gas utilities in the U.S. with 2 million customers in at least three states.

E*Trade Financial Corp. climbed 7.9 percent to $14.69. The online brokerage with six chief executive officers since 2007 said it plans to sell a market-making unit that handles orders for its customers and announced earnings that beat estimates.

Homebuilder Rout

The S&P Supercomposite Homebuilding Index slumped 4.8 percent to the lowest level since December as all its 11 members declined for a second day.

PulteGroup (PHM) fell 10 percent to $16.55 for the biggest retreat in the S&P 500. The largest U.S. housebuilder by market value said second-quarter earnings included 17 cents a share in charges that left the total below analyst estimates.

D.R. Horton slid 8.6 percent to $19.38, the lowest this year. The largest U.S. homebuilder by volume said orders increased 12 percent. That’s below analysts’ forecast of 28 percent growth, according to Adam Rudiger, an analyst at Wells Fargo & Co.

Home Depot Inc. the biggest U.S. home-improvement retailer, slipped 1.6 percent to $78.99.

Caterpillar Inc. declined 1.6 percent to $82.14. The largest manufacturer of mining and construction machinery was cut to market perform, an equivalent of neutral, from outperform at BMO Capital Markets by equity analyst Joel Tiss. The company yesterday issued a forecast that missed analyst estimates.

Western Digital Corp. (WDC) dropped 5.9 percent to $63.53. The maker of hard drives forecast first-quarter adjusted earnings per share of $1.95 to $2.05, less than the average analyst estimate of $2.06. Competitor Seagate Technology LLC slipped 4.7 percent to $42.12.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net; Katie Brennan in New York at kbrennan23@bloomberg.net

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

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