Stocks Advance on Earnings Optimism; Treasuries Retreat

U.S. Stocks Fall as Weak Factory Reports Trump Profit Growth
A trader talks on a phone while working on the floor of the New York Stock Exchange. Photographer: Jin Lee/Bloomberg

U.S. stocks advanced, while Treasuries retreated, as optimism about corporate earnings overshadowed a slump in homebuilder confidence. European equities fell for a fourth day.

The Standard & Poor’s 500 Index gained 0.6 percent to 1,071.25 at the 4 p.m. close in New York. The Stoxx Europe 600 Index fell 0.8 percent. The yield on the 10-year Treasury note climbed 0.05 percentage point to 2.97 percent, rising for the first time in four days. Oil snapped a three-day slump and the euro rose on speculation stress tests will show strength in the region’s banks. Gold declined to an eight-week low.

Microsoft Corp. rallied 1.4 percent to help lead technology stocks higher after UBS AG increased earnings estimates, while Halliburton Co. surged on profit and sales that topped analysts’ projections. Stocks fell earlier, and the two-year Treasury yield matched a record low of 0.5765 percent, as a gauge of homebuilder sentiment slid to the lowest in more than a year.

“These numbers that have been coming out for the second quarter have been pretty good overall,” said Hayes Miller, the Boston-based head of asset allocation in North America at Baring Asset Management, which manages $43.8 billion. “For now, for the most part, our expectation would be the second half of the year would be pretty good.”

The S&P 500 today recovered only about one-fifth of its 2.9 percent plunge on July 16, the biggest decline this month, which came after revenue at Bank of America Corp., Citigroup Inc. and General Electric Co. missed analysts’ estimates and a gauge of consumer confidence slid to the lowest level in a year.

Halliburton Earnings

Halliburton rose 6 percent, the most since June 10. International Business Machines Corp., which releases results after markets close today, increased 1.4 percent. All but three of the 25 companies in the S&P 500 that have released second-quarter results posted better-than-estimated earnings, according to data compiled by Bloomberg.

“Earnings season look pretty good so far this quarter and will probably buoy stocks,” said Jeff Saut, the chief investment strategist at Raymond James & Associates, which manages $230 billion in St. Petersburg, Florida. “It’s a mistake to get too bearish now.”

All but one of 19 industry groups in the Stoxx 600 retreated as the regional benchmark extended its retreat since July 13 to 3.8 percent.

BP Slumps

BP Plc slid 4.7 percent after the oil company’s talks to sell half its stake in Alaska’s Prudhoe Bay oilfield to Apache Corp. stalled over the weekend, said a person with knowledge of the matter.

Electrolux AB slid 7.8 percent in Stockholm, the most in five months, after the world’s second-biggest appliance maker said that demand weakened “substantially” in southern Europe.

The euro strengthened against 12 of 16 major counterparts, rising 0.1 percent to $1.2942. European regulators are examining the strength of 91 banks to determine whether they can survive potential losses on sovereign-debt holdings. Stress-test results will be released July 23.

Investors have been adding to their euro positions, according to Bank of New York Mellon Corp.’s iFlow data. Cumulative inflows from the euro totaled about two times the average amount compared with the previous year.

Canadian Dollar, Forint

The Canadian dollar gained against 15 of 16 major currencies with the central bank forecast to increase interest rates tomorrow for the second time in less than two months. The Hungarian forint fell to the weakest level in almost 15 months against the euro after the International Monetary Fund and European Union ended talks with the government without endorsing Prime Minister Viktor Orban’s plans to control the budget deficit.

The Irish 10-year yield climbed five basis points to 5.48 percent after the nation’s credit rating was cut one level at Moody’s Investors Service, which cited a “significant loss of financial strength” and the cost of bank bailouts.

The MSCI Emerging Markets Index declined for a third day, losing 0.4 percent. Asian stocks fell, dragging down the benchmark MSCI Inc. index by 0.8 percent, on concern global economic growth is faltering.

Crude oil for August delivery rose or 0.7 percent to $76.54 a barrel on the New York Mercantile Exchange. The August contract expires tomorrow. More-active September futures increased 52 cents, or 0.7 percent, to $76.90 a barrel.

Gold Slips

Gold prices fell to an eight-week low on reduced investment demand. Hedge-fund managers and other large speculators trimmed their net-long positions, or bets on a rally in Comex gold futures, by 2 percent to 204,921 contracts in the week ended July 13, according to government data. That marked the lowest level since April 6. Gold futures for August delivery fell 0.5 percent to $1,181.90 an ounce on the Comex in New York. The metal has dropped 6.7 percent from a record on June 21.

Corn prices tumbled 3.3 percent, the most in seven weeks, to $3.94 a bushel in Chicago and soybeans fell after weekend rains revived crops in the southern U.S. and widespread precipitation in the next five days in the Midwest may replenish soil moisture.

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