Norfolk Southern, the second-largest U.S. eastern railroad, climbed 4.8 percent after posting a fourth-quarter profit that exceeded analysts’ estimates. BlackBerry Ltd. rose 8.6 percent as the smartphone maker said it plans to sell most of its Canadian real estate to raise cash for its turnaround plan. Coach, the largest U.S. luxury handbag maker, slumped 6 percent after sales missed analysts’ estimates. IBM slid 3.3 percent as revenue declined for a seventh consecutive quarter amid weaker demand for servers.
Three stocks rose for every two that declined in the Standard & Poor’s 500 Index. (SPX) The U.S. equity benchmark added less than 0.1 percent to 1,844.86 at 4 p.m. in New York. The Dow Jones Industrial Average lost 41.10 points, or 0.3 percent, to 16,373.34 for a second day of declines. About 6.3 billion shares changed hands on U.S. exchanges, 3 percent above the three-month average, according to data compiled by Bloomberg.
“Earnings are all that matters,” Dan Morris, who helps oversee about $564 billion as global investment strategist at TIAA-CREF Asset Management in New York, said in a phone interview. “To see the justification for meaningful higher prices, we just need to wait for earnings to catch up and accelerate a bit and that may take a quarter or two.”
Twenty-five companies in the S&P 500 including Northern Trust Corp., Netflix Inc. and EBay Inc. report earnings today. Of the 86 index members that have posted results so far this season, 70 percent have beaten estimates for profit and 65 percent have exceeded sales projections, according to data compiled by Bloomberg.
Per-share profit for companies in the benchmark probably climbed 6 percent in the fourth quarter, while sales increased 2.2 percent, according to analysts surveyed by Bloomberg.
A five-year rally that lifted the S&P 500 up more than 170 percent from a bear-market low has boosted equity valuations to near the highest level since 2009. The index trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
The Dow is diverging from the S&P 500 by the most in more than two years amid weaker results from companies such as Johnson & Johnson and IBM. The average difference between their performance in the past three days has been 0.5 percentage point, the most since October 2011.
“Earnings have been mixed,” David Chalupnik, head of equities at Nuveen Asset Management in Minneapolis, said in a phone interview. His firm manages about $120 billion. “If we as a country, we as a world, stay in the muted economic growth we’ve experienced in the past two years, the market probably can’t support the valuations here. We need better economic numbers and we need earnings to follow that.”
Traders are buying record amounts of options that pay off if the calm that is blanketing markets proves temporary. Outstanding call options on the Chicago Board Options Exchange Volatility Index (VIX) has reached a record 8.4 million, exceeding the previous high of 7.7 million in March, according to data compiled by Bloomberg.
The contracts, which expire today, are used by investors as insurance against losses because the VIX usually climbs when equities fall. Investors are positioning for stock swings with more than 180 companies in the S&P 500 getting ready to release quarterly results by the end of next week. The VIX slid 0.2 percent today to 12.84, bringing its decline for 2014 to 6.4 percent.
Energy, consumer-discretionary and industrial stocks rose the most among 10 main industries in the S&P 500, climbing more than 0.2 percent. Telephone and raw-materials companies dropped at least 0.7 percent for the worst performance.
Norfolk Southern jumped 4.8 percent to $92.94. The company’s profit exceeded analysts’ forecast amid higher shipments of chemicals, automotive and agricultural products.
BlackBerry rose 8.6 percent to $10.78. The company said in a statement that it will work with CBRE Group Inc. to sell vacant properties as well as occupied space it will then lease back from the new owners.
Textron (TXT) Inc. advanced 5.3 percent to $38. The manufacturer of Cessna aircraft said it earned 60 cents a share in the fourth quarter. That beat the average analyst estimate by 1 cent.
Nuance Communications Inc. jumped 7.8 percent to $16.05. The provider of voice applications to corporate customers said first-quarter preliminary adjusted earnings per share probably amounted to 23 cents to 24 cents, more than the 20-cent average estimate of analysts. The company predicted profit of 18 cents to 21 cents a share in November.
Coach slid 6 percent to $49.38. Revenue for the quarter through Dec. 28 amounted to $1.42 billion, missing the average analyst estimate of $1.48 billion. The maker of luxury accessories posted earnings per share of $1.06, falling short of the $1.11 that analysts had projected.
IBM (IBM) dropped 3.3 percent to $182.25 for the biggest retreat in the Dow. The world’s biggest computer-services provider said revenue declined to $27.7 billion in the three months through December. Profit dropped at the company’s hardware unit partly because of its x86 server business, according to Chief Financial Officer Martin Schroeter.
Advanced Micro Devices Inc. (AMD) slumped 12 percent to $3.67 for the biggest drop since October. The maker of processors for personal computers predicted that revenue will be from $1.29 billion to $1.38 billion in the first quarter. The average analyst projection had called for sales of $1.37 billion, according to a Bloomberg survey.
Motorola Solutions Inc. fell 3.9 percent to $64.51. The mobile communications company forecast first-quarter profit below analyst estimates and said it expects sales to decline between 4 percent and 6 percent. Analysts were predicting a 2 percent revenue gain.
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