U.S. Stocks Gain on Internet Rally Amid Earnings Reports

Photographer: Angel Navarette/Bloomberg

A Galaxy Gear 2 wearable device sits on a display table while media inspect the latest Samsung Electronics Co. hardware during a news conference on the opening day of the Mobile World Congress in Barcelona. Samsung kicked off Asian earnings, posting profit that topped estimates. Close

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Photographer: Angel Navarette/Bloomberg

A Galaxy Gear 2 wearable device sits on a display table while media inspect the latest Samsung Electronics Co. hardware during a news conference on the opening day of the Mobile World Congress in Barcelona. Samsung kicked off Asian earnings, posting profit that topped estimates.

U.S. stocks climbed, with Internet shares halting a four-day slide, as results from Merck & Co. to Sprint Corp. beat estimates while the Federal Reserve met on policy. Corn gained a third day to lead a gauge of commodities higher.

The Standard & Poor’s 500 Index rose 0.5 percent, while Twitter Inc. slid after market on slowing user growth. The Nasdaq Composite Index added 0.7 percent. The Stoxx Europe 600 Index climbed 1.2 percent, while emerging-market equities added 0.7 percent. Treasury 10-year yields slipped one basis point to 2.69 percent after earlier rising three basis points. The S&P GSCI (SPGSCI) index of 24 commodities added 0.6 percent as corn headed for its longest stretch of monthly gains since 2010.

Merck cut spending on promotions and research to help boost profit, while Sprint reported sales that topped forecasts. Yahoo! Inc. and Cornerstone OnDemand Inc. jumped at least 5.4 percent as the Dow Jones Internet Index rallied 2.2 percent. The Fed is forecast by economists to scale back monthly bond buying after its two-day meeting, amid signs the U.S. economy withstood the effects of harsh winter weather. The U.S. and the European Union stepped up sanctions against Russia yesterday.

“Earnings have been strong and for the most part, companies have been upbeat with their full-year earnings outlooks,” Steven Rees, head of U.S. equities at JPMorgan Private Bank, which oversees $992 billion in assets, said in a phone interview. “Data on earnings and today’s data on consumer confidence means you won’t hear much change from the Fed. The next catalyst in the market will be Friday’s jobs report.”

April Gains

Merck, the second-biggest U.S. drugmaker by sales, gained 3.6 percent for the largest advance in the Dow Jones Industrial Average, which rose 0.5 percent. Sprint jumped 11 percent. Of the 287 companies in the S&P 500 that have posted results this season, 75 percent posted earnings that exceeded analysts’ estimates and 53 percent topped sales projections, data compiled by Bloomberg show.

The S&P 500’s advance today left it 0.3 percent higher for the month. It remains 0.7 percent below an all-time high reached April 2. The Nasdaq Composite has fallen 2.3 percent as Internet stocks have sold off amid concern valuations have outpaced estimates for earnings growth. Nasdaq companies trade at 35 times reported earnings, about double the valuation for S&P 500 members. The Dow Jones Internet index is down 7.3 percent in April.

‘Buying Opportunity’

Other technology stocks that have been the focus of selling advanced today. Facebook Inc. climbed 3.6 percent, ending an 11 percent drop over four days. Google Inc. Class C shares gained 2 percent, snapping a 4.1 percent drop over the same period.

“It is healthy to see some profit-taking and rotation into other parts of the market,” Rees said. “We’re starting to see some bottoming in higher quality growth stocks. It’s a selective buying opportunity.”

Twitter Inc. (TWTR) slid more than 9 percent in extended trading, falling below $39 to the lowest level since its initial public offering. The microblog company said user growth in the first quarter slowed to 25 percent from 30 percent in the previous period, while revenue more than doubled to $250.5 million. Shares rose 4.6 percent to $42.62 in normal hours, snapping a five-day retreat.

EBay Inc. dropped 3.4 percent in after hours trading. The world’s biggest online marketplace issued a sales target for the current period that may fall short of some analysts’ forecasts. The stock added 1.7 percent in the regular session.

Fed Survey

The Fed will probably cut stimulatory bond buying to $45 billion at the two-day meeting that started today, according to the median of 43 economists’ estimates compiled by Bloomberg. Policy makers will keep their target interest rate for overnight bank lending in a range of zero to 0.25 percent, a Bloomberg survey shows.

Data today showed the Conference Board’s index of U.S. consumer confidence decreased to 82.3 in April from 83.9 a month earlier. Reports later this week on gross domestic product and hiring in April will give investors more clues to how the economy withstood severe winter weather.

FedEx Corp., General Motors Co. and McDonald’s Corp. have all blamed the weather for poor earnings performances as snow storms during the first three months of the year in the U.S. slowed shipments and kept shoppers indoors.

“The economy is in a sweet spot,” Patrick Spencer, who helps oversee more than $100 billion as London-based head of equity sales at Robert W. Baird & Co., said in a phone interview. “Growth isn’t so exuberant that the Fed needs to withdraw their support quickly, and not so anemic that they need to be concerned about further weakening.”

Asian Futures

Futures on the Nikkei 225 Stock Average in Japan, where markets were closed for a holiday today, added 0.3 percent to 14,435 on the Chicago Mercantile Exchange. Contracts on indexes in Australia and South Korea gained at least 0.3 percent, while futures on Hong Kong’s Hang Seng and Hang Seng China Enterprises Index dropped 0.1 percent in most recent trading.

The yen slipped 0.2 percent to 102.64 per dollar in a second declining day.

Apple Inc. is about to join the ranks of the biggest U.S. corporate borrowers as the company starts marketing bonds in what it says may rival last April’s then-record $17 billion offering. The iPhone maker is offering bonds in seven parts, according to a person with knowledge of the transaction. Apple shares lost 0.3 percent after three days of gains.

Credit Bubble

Apollo Global Management LLC co-founder Marc Rowan said he sees many signs of a bubble in the credit markets that could lead to a financial crisis.

“All the danger signs are there of a future crisis,” Rowan said today at the Milken Institute Global Conference in Beverly Hills, California. “We’re back to doing exactly the same things that were done in the credit markets during the crisis. Our job is to step wisely and try to avoid that.”

Rowan joins a growing chorus of regulators and investors, including Marathon Asset Management LP and DoubleLine Capital LP’s Jeffrey Gundlach, expressing concern about aggressive underwriting standards as the Federal Reserve’s zero-interest policy extends into a sixth year. Still, the debt is luring investors as defaults are near record lows and the U.S. economy strengthens.

Five shares advanced for every one that declined in the Stoxx 600, with trading volumes 13 percent below the 30-day average, according to data compiled by Bloomberg. All but one of the 19 industry groups rose, led by oil and bank stocks.

Banks Outlook

Deutsche Bank AG climbed 2.2 percent after profit fell less than estimated. Europe’s largest investment bank by revenue also said it plans to sell at least 1.5 billion euros ($2.1 billion) of bonds designed to incur losses in a crisis, helping the firm meet stricter limits on leverage.

After the close of the European market, S&P Ratings Services cut the outlook on 14 European banks, including Deutsche Bank, to negative from stable.

Statoil ASA (STL), Norway’s biggest energy company, gained 4.5 percent to a five-year high after profit exceeded projections.

ABB Ltd. lost 7 percent after the world’s largest maker of power transformers posted quarterly profit that missed estimates. Serco Group Plc (SRP) slumped 15 percent after the operator of London’s Docklands Light Railway said it may lower its forecast and sell shares.

A risk measure that uses options to forecast fluctuations in equities, currencies, commodities and bonds fell to its lowest level in almost seven years last week. Calm is pervading after the MSCI All-Country World Index more than doubled from March 2009 levels, 10-year Treasury yields climbed from an all-time low of 1.39 percent reached in 2012, and the euro traded in the narrowest range ever last week.

Ruble Climbs

The MSCI Emerging Markets Index rebounded from a one-month low as investors dismissed a new round of Russia sanctions and phone shares surged in China.

Russian stocks and bonds climbed for a second day and the ruble strengthened after a the sanctions bypassed the country’s major companies and banks.

The U.S. yesterday named seven individuals, including Igor Sechin, head of oil giant OAO Rosneft, and 17 companies linked to allies of President Vladimir Putin, such as InvestCapitalBank. The EU put Russian Deputy Premier Dmitry Kozak on its expanded sanctions list.

The S&P GSCI gauge of 24 commodities posted its first advance in three days. West Texas Intermediate crude oil rose 0.4 percent on speculation over U.S. oil supplies, settling at $101.28 a barrel.

Corn for July delivery climbed 1.5 percent a bushel on the Chicago Board of Trade, after the U.S. government reported planting in the nation, which is the world’s largest grower and exporter, trailed a five-year average.

Arabica-coffee futures for July delivery jumped 5.3 percent for the biggest advance in a week.

To contact the reporters on this story: Stephen Kirkland in London at skirkland@bloomberg.net; Jeremy Herron in New York at jherron8@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Emma O’Brien

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