March 24 (Bloomberg) -- U.S. stocks advanced, sending the Standard & Poor’s 500 Index higher for a second day, after corporate profit topped analysts’ estimates and a government report showed a decline in jobless claims.
Micron Technology Inc., the biggest U.S. producer of computer-memory chips, rose 8.4 percent and Linux-software maker Red Hat Inc. surged 18 percent after earnings beat analysts’ estimates. GameStop Corp. jumped 2.9 percent as the largest video-game retailer forecast profit above analyst’s projections. Amazon.com Inc. gained 3.5 percent after William Blair & Co. raised its rating for the world’s biggest online retailer.
The S&P 500 advanced 0.9 percent to 1,309.66 at 4 p.m. in New York, the highest level in two weeks. The Dow Jones Industrial Average advanced 84.54 points, or 0.7 percent, to 12,170.56. The benchmark measure of U.S. stock options completed its biggest six-day drop since November 2008.
“There’s no shortage of cheap stocks,” Leon Cooperman, chairman of hedge fund Omega Advisors Inc. said in an interview today with Bloomberg Television at the Strategas Global Macro Conference in New York. “You have good profits and good economic growth. You have good valuations and conservative posture.”
The S&P 500 has advanced 4.1 percent in 2011, extending last year’s 13 percent rally, amid government stimulus measures and as companies reported earnings that topped analysts’ estimates for the eighth straight quarter. The benchmark index is trading at 15.4 times reported earnings, compared with the average ratio of 19.7 at bull-market peaks.
Jobless Claims Drop
Fewer Americans filed applications for unemployment benefits last week, signaling the labor market is mending. Jobless claims declined by 5,000 to 382,000, Labor Department figures showed, in line with the median forecast of economists surveyed by Bloomberg News. The total number of people receiving benefits dropped to the lowest level in almost three years.
“The economy is improving and this is a good environment for corporate profits,” said David Kelly, who helps oversee $450 billion as chief market strategist at JPMorgan Funds in New York. “The latest numbers suggest an advance in the U.S. economy. Investors are buying the idea that even though there are many headwinds, if you believe the economy will grow, then stocks are cheap.”
Global stocks rose for a sixth day, the longest rally for the MSCI World Index since September, amid speculation the need for European Union bailouts may end with Portugal. European leaders meet in Brussels today after Portugal’s parliament rejected budget-cutting measures, pushing the country closer to needing an EU rescue.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 6.1 percent to 18, extending its drop since March 16 to 39 percent. That’s the biggest drop over the same number of days in 28 months. The VIX needed to fall below 17.53 to beat the six-day record set two months after Lehman Brothers Holdings Inc.’s September 2008 bankruptcy sent stocks plunging.
Micron Technology jumped 8.4 percent to $11.50. Second-quarter sales and profit beat analysts’ estimates on increasing demand for chips used to store data on mobile phones and tablets. Revenue climbed 15 percent to $2.26 billion in the period that ended March 3. That compared with $2.1 billion, the average of predictions compiled by Bloomberg.
Red Hat gained 18 percent, the most in the S&P 500, to $47.26. The largest seller of the Linux operating system posted a profit of 26 cents a share excluding some items, beating the 22 cent average of 22 estimates in a Bloomberg survey, as customers updating data centers to take advantage of cloud computing boosted billings.
GameStop rose 2.9 percent to $21.73. The world’s largest video-game retailer forecast first-quarter profit excluding some items of at least 53 cents a share, beating the average analyst estimate of 52 cents in a Bloomberg survey.
Amazon.com added 3.5 percent to $171.10 after being raised to “outperform” from “market perform” at William Blair by equity analyst Mark Miller.
Bank of America Corp. sank 1.3 percent to $13.48. The biggest U.S. lender was cut to “market perform” from “outperform” at FBR Capital Markets. The bank may not have the earnings power to be in compliance with the new capital requirements, analyst Paul Miller said in a note.
Trading in U.S. stocks, which fell to the slowest pace this year, is poised to contract because Citigroup Inc.’s reverse stock split may take out about one-tenth of the volume, according to Birinyi Associates Inc. New York Stock Exchange volume declined to 3.75 billion shares on March 22 and 3.97 billion shares yesterday, the second and the sixth-slowest trading days this year, respectively, Bloomberg data show.
“We won’t be surprised when we read in a few weeks that volume is declining and how this is a negative signal for equities,” Jeffrey Yale Rubin, Birinyi’s director of research, wrote in a note yesterday. “Just be aware that it’s because of a structural change and not a ‘real’ decline in volume.”
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