S&P 500 Erases Loss for Week on Earnings, Spending Data

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A trader works on the floor of the New York Stock Exchange on the morning of January 30, 2014 in New York City. Close

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Photographer: Andrew Burton/Getty Images

A trader works on the floor of the New York Stock Exchange on the morning of January 30, 2014 in New York City.

U.S. stocks rebounded, erasing this week’s loss for the Standard & Poor’s 500 Index, as earnings beat estimates at companies from Facebook Inc. (FB) to PulteGroup Inc. and consumer spending picked up.

Facebook jumped 14 percent as the world’s largest social network said more than half its advertising revenue came from mobile devices in its last quarter. Blackstone Group LP and Under Armour Inc. also rallied after reporting earnings that beat estimates. All 10 main S&P 500 industry groups rose as the government reported the economy grew 3.2 percent and spending climbed the most in three years. Amazon.com Inc. tumbled 7.7 percent after the market close as profit trailed forecasts.

The S&P 500 gained 1.1 percent to 1,794.19 at 4 p.m. in New York, for the largest advance since Dec. 18. The equity benchmark lost 1 percent yesterday as the Federal Reserve decided to reduce its monthly bond purchases by $10 billion. The S&P 500 is down 2.9 percent for the month. The Dow Jones Industrial Average rose 109.82 points, or 0.7 percent, to 15,848.61 today. About 6.9 billion shares changed hands in the U.S., 11 percent above the three-month average.

“Given this momentum and recent sharp declines in the unemployment rate, the Federal Reserve looks justified in its decision to continue to taper bond purchases yesterday,” David Kelly, the chief global strategist at JPMorgan Funds in New York, said in a note. His firm oversees about $400 billion in mutual funds. “Assuming that the current volatility in emerging markets subsides, this report should bolster the case for both higher interest rates and higher stock prices.”

Economic Reports

U.S. benchmark indexes are poised for their first monthly declines since August amid turmoil in emerging markets. Investors are pulling money from exchange-traded funds that track emerging markets at the fastest rate on record, as China’s slowing growth and cuts to central-bank stimulus sink currencies from Turkey to Brazil.

The 3.2 percent annualized gain in gross domestic product in the fourth quarter matched the median forecast in a survey of economists and followed a 4.1 percent advance in the prior three months, Commerce Department figures showed today. Growth in the second half of the year was the strongest since the six months ended in March 2012. Consumer spending, which accounts for almost 70 percent of the economy, climbed 3.3 percent, less than estimated.

Jobless claims climbed by 19,000 to 348,000 in the period ended Jan. 25, which included the Martin Luther King holiday, Labor Department data showed. The reading was the highest since mid-December. The median forecast of 55 economists was 330,000.

Home Sales

Stocks briefly pared gains today as a report showed contracts to purchase existing homes in the U.S. fell more than forecast in December as higher borrowing costs and bad weather held back sales. The gauge of pending home sales slumped 8.7 percent, the biggest decline since May 2010, after a revised 0.3 percent drop in November that was initially reported as a gain, the National Association of Realtors said.

“The fact we can print a quarter in which GDP growth was more than 3 percent, even though government spending contracted as much as it did, is unquestionably a positive,” Dan Greenhaus, chief global strategist at BTIG LLC in New York, said by phone. “The concerns over emerging markets are the dominant topic. To the extent this remains contained, the sell-off is likely to be limited.”

The Chicago Board Options Exchange Volatility Index (VIX) slid 0.4 percent today to 17.29. The gauge of S&P 500 options known as the VIX has gained 26 percent this year.

Facebook Climbs

Facebook rose 14 percent to $61.08. The social network reported that revenue jumped 63 percent to $2.59 billion in the fourth quarter, beating the average analyst estimate of $2.35 billion. Profit of 31 cents a share exceeded the 27-cent average projection of analysts surveyed by Bloomberg.

PulteGroup Inc. added 1.8 percent to $19.77. Net income increased to $220.1 million, or 57 cents a share, from $58.7 million, or 15 cents, a year earlier. That compares with a 46-cent average estimate of 19 analysts. The homebuilder has focused on increasing house prices and managing spending as rising mortgage rates cut into homebuyer demand by making purchases more expensive. The builder’s average selling price gained 13 percent in the fourth quarter.

Among other companies rallying on better-than-estimated earnings, Blackstone jumped 4.2 percent to $32.23 after the biggest manager of alternative assets posted a record fourth-quarter profit. Under Armour climbed 23 percent to a record $104.76 after earnings per share beat estimates by 11 percent.

Pitney Bowes Inc. climbed 19 percent to $25.85. The 94-year-old postage-meter supplier trying to transform into an e-commerce company forecast its first revenue growth in six years. Harman International Industries Inc. jumped 17 percent to $102.34 after raising its earnings projection.

Earnings Season

Companies in the S&P 500 probably increased their earnings per share by 6.6 percent in the fourth quarter of 2013 and their revenue by 2.6 percent, analysts’ estimates compiled by Bloomberg show.

Google Inc. gained 2.6 percent to $1,135.39 after Lenovo Group Ltd. agreed to buy the Motorola Mobility mobile-phone business from the owner of the world’s largest search engine for $2.91 billion. The Chinese PC maker will pay $1.4 billion in cash and its own shares and $1.5 billion in a three-year promissory note, Google said in a statement late yesterday.

After the market close, Google reported fourth-quarter profit that fell short of estimates as a drop in advertising prices dragged results. The shares were little changed in late trading.

Amazon.com tumbled 7.7 percent to $371.85 as of 4:46 p.m. in New York. The world’s largest Web retailer reported fourth-quarter profit after the market close that trailed analysts’ estimates following a surge in costs to ship gifts over the holidays.

Visa, Exxon

Alexion Pharmaceuticals Inc. rallied 21 percent to $162 in regular trading for the biggest gain in the S&P 500. The drug company forecast 2014 profit above analysts’ estimates as fourth-quarter sales of Soliris, which treats a rare blood disease, rose 38 percent.

Visa Inc. (V) rose 1.7 percent to $220.88 as the debit- and credit-card network posted profit for the first quarter of its financial year that beat analysts’ estimates. The company generated net income of $2.20 a share, more than the $2.16 average projection in a survey.

Exxon Mobil Corp. lost 1.2 percent to $93.99. The world’s largest oil producer by market value said fourth-quarter profit dropped as it pumped less crude and natural gas from wells, and prices stagnated.

Symantec, 3M

Symantec Corp. fell 7.3 percent to $22.38. The data security firm slid the most since October after the company forecast revenue that fell short of some analysts’ estimates, as declines in the personal-computer market and the emergence of advanced hacking threats hurt demand for traditional antivirus software.

Citrix Systems Inc. slid 7.5 percent to $53.29 after forecasting full-year profit below analysts’ estimates.

3M Co. fell 1.7 percent to $128.05. The maker of goods ranging from auto insulation to bandages reported fourth-quarter sales below analysts’ estimates as demand in Asia and Latin America slows. The company is a barometer for the global economy with sales of consumer, health-care, industrial, electronics and safety products in all regions of the world.

J.C. Penney Co. slid 8.3 percent to $5.77, the lowest since 1981. The shares have tumbled 37 percent this year.

ETF Flows

More than $7 billion flowed from ETFs investing in developing-nation assets in January, the most since the securities were created, data compiled by Bloomberg show. The iShares MSCI Emerging Markets ETF (EEM) has seen its assets shrink by 11 percent, while the Vanguard FTSE Emerging Markets ETF is poised for the biggest monthly redemption since the fund was started in 2005. The WisdomTree Emerging Markets Local Debt Fund (ELD) is on track for an eighth straight month of withdrawals.

Investors accelerated redemptions after data showed Chinese manufacturing contracted and Argentina’s unexpected devaluation of its peso dented confidence in Latin America. Surprise rate increases by central banks in Turkey and South Africa failed to boost their currencies, while the U.S. Federal Reserve opted to press on with reductions to its monetary stimulus.

To contact the reporter on this story: Nick Taborek in New York at ntaborek@bloomberg.net

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

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