S&P 500 Index Advances on Inflation Data Amid Earnings

July 22 (Bloomberg) -- Tina Fordham, senior global political analyst at Citigroup, and Maya MacGuineas, president at Committee for a Responsible Federal Budget, examine the ongoing conflicts for Russia and Israel and how nations prepare for geopolitical risk. They speak on “Bloomberg Surveillance.”

U.S. stocks rose, with the Standard & Poor’s 500 Index closing two points from a record, as data showed inflation has failed to gain a toehold and earnings from Comcast Corp. to Chipotle Mexican Grill Inc. topped estimates.

Herbalife Ltd. shares surged the most since trading began in 2004 as hedge-fund manager Bill Ackman struggled to convince investors the seller of weight-loss shakes is guilty of fraud. Chipotle jumped 12 percent after reporting earnings and sales that beat projections. Comcast added 1.5 percent after profit topped estimates on higher revenue from Internet customers. Travelers Cos. dropped 3.8 percent as earnings slid 26 percent.

The S&P 500 rose 0.5 percent to 1,983.53 at 4 p.m. in New York. The index climbed as high as 1,986.24, topping its previous intraday record. The Dow Jones Industrial Average increased 61.81 points, or 0.4 percent, to 17,113.54. About 5.3 billion shares changed hands on U.S. exchanges today, 8 percent above the three-month average.

“The equity market seems destined to trend higher,” Terry Sandven, chief equity strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $120 billion, said by phone. “We think there is still some modest upside if you continue to see earnings rise. The inflation numbers are supportive of higher stock prices. It reflects U.S. economic growth that is neither too slow nor too fast.”

The S&P 500 has advanced 7.3 percent this year through yesterday amid better-than-estimated corporate earnings and central bank stimulus, as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter.

Data today showed the consumer price index increased 0.3 percent in June, paced by a jump in gasoline that is now reversing, bolstering Federal Reserve Chair Janet Yellen’s view that recent increases were temporary.

Inflation Data

Investors have been scrutinizing inflation data to determine when the Fed will begin raising its benchmark interest rate. Last week Yellen told lawmakers the central bank plans to press on with record easing to combat persistent weakness in the job market.

Inflation has failed to get a toehold as slowing global demand has prevented companies from exercising pricing power. If prices remain in check, Fed policy makers can keep interest rates low well into 2015.

A separate report showed sales of previously owned U.S. homes climbed in June to an eight-month high, a sign the housing market is making more headway.

The S&P 500 fell 0.2 percent yesterday on concern that the crisis in Ukraine could lead to deeper sanctions against Russia. European Union governments labored to identify more Russian businesspeople and companies to sanction and pressed President Vladimir Putin to speed a probe into the downing of Malaysian Air flight MH17 or face isolation.

Day-By-Day

“It’s a day-by-day encounter for markets, with every speech and communication from politicians giving us the direction for the day,” Lorne Baring, who helps oversee about $500 million as managing director at B Capital SA in Geneva, said by telephone, referring to Russia.

The S&P 500 closed at a record 1,985.44 on July 3 and trades at 18.3 times reported earnings, near the highest level in four years. The index has not had a drop of more than 10 percent since 2011.

Earnings at the gauge’s members probably rose 6.2 percent in the second quarter, while sales gained 3.3 percent, according to analyst estimates compiled by Bloomberg.

Some 36 companies listed on the S&P 500 report earnings today, including Coca-Cola Co., McDonald’s Corp., Microsoft Inc. and Apple Inc. About 76 percent of S&P 500 companies that have posted results this season have beaten analysts’ estimates for profit, while 67 percent exceeded sales projections, according to data compiled by Bloomberg.

Corporate Results

Eight of the 10 main S&P 500 groups advanced today, as health-care and technology stocks rose at least 0.8 percent to lead gains. Producers of consumer staples had the only decline.

ARM Holdings Plc jumped 7 percent. The chip designer whose products power Apple’s iPhone and iPad, said royalty growth will accelerate in the second half as the smartphone market recovers.

Intel Corp., the world’s biggest maker of semiconductors, rallied 2.1 percent for the biggest gain in the Dow, while Apple added 0.8 percent.

Chipotle jumped 12 percent to an all-time high. The restaurant chain said second-quarter net income rose 25 percent and revenue jumped to $1.05 billion, buoyed by an increase in traffic at existing outlets and by sales in new stores.

Comcast rose 1.5 percent. The largest cable company in the U.S. said second-quarter revenue increased 3.5 percent to 16.8 billion, while analysts estimated almost $17 billion. The company is in the process of buying Time Warner Cable Inc.

Dow Earnings

Apache Corp. gained 4.6 percent, its biggest advance in a year, after hedge fund Jana Partners LLC disclosed a $1 billion stake in the oil and natural gas company.

DuPont Co. slipped 0.9 percent. The U.S. chemicals producer posted lower-than-estimated revenue after some farmers switched to genetically modified soybeans from corn.

Travelers declined 3.8 percent for its steepest slide in nearly three years. The only property-casualty insurer in the Dow average said second-quarter profit missed estimates on catastrophe costs.

Coca-Cola dropped 2.9 percent, the most since February. The world’s largest beverage company, reported second-quarter sales that missed analysts’ estimates amid sluggish demand for drinks such as juice and Diet Coke in North America.

Burgers, Bikes

McDonald’s fell 1.3 percent. The largest restaurant chain by sales posted second-quarter profit that trailed analysts’ estimates after a U.S. slump lingered. The company’s business faces a crowded field and last year it added many new items, slowing down its kitchens.

Harley-Davidson Inc. dropped 5.4 percent, its biggest slump in two years, after lowering its forecast for new motorcycle shipments in 2014 to no more than 275,000, after previously predicting at least 279,000.

Kimberly-Clark Corp. slid 3.1 percent, the biggest decline since February, after the manufacturer of consumer hygiene products reported second-quarter earnings that missed some analysts’ estimates.

Netflix Inc. declined 4.6 percent to the lowest in a month. The online movie and TV-streaming service forecast third-quarter profit below analysts’ estimates.

Herbalife surged 25 percent, rebounding from an 11 percent slide yesterday after Ackman compared the company to Enron Corp. in television appearances. Speaking today during what he billed as the most important presentation of his career, Ackman said he estimates that the company’s nutrition clubs lose $12,000 per year, on average.

To contact the reporter on this story: Oliver Renick in New York at orenick2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeremy Herron, Michael P. Regan

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