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U.S. Stocks Rise on Home Sales Increase; Treasuries Gain

Stocks Gain on Earnings, Pound Weakens; Cattle Futures Rebound
Traders work at the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

U.S. stocks rose for a third day as pending home sales increased more than forecast and technology companies rallied on better-than-estimated earnings. Metals led commodities higher, while 10-year Treasury yields approached a two-month low.

The Standard & Poor’s 500 Index closed up 0.7 percent to 1,399.98, capping its best three-day rally since February. Futures on the benchmark index slid 0.4 percent at 5:32 p.m. in New York after S&P cut Spain’s sovereign credit rating. The Stoxx Europe 600 Index rose 0.1 percent, reversing a drop of 0.7 percent. Ten-year note yields lost four basis points to 1.94 percent, gold futures increased 1.1 percent and the dollar weakened versus 11 of 16 major peers amid bets the Federal Reserve won’t hesitate in providing more stimulus if the economy weakens. Oil closed at a three-week high.

The S&P 500 reversed early losses as the National Association of Realtors reported that pending home purchases rose 4.1 percent to the highest level since April 2010, tempering concern about the economy after an earlier government report showed jobless claims topped estimates last week. Citrix Systems Inc. and Xilinx Inc. led technology shares higher after posting earnings that topped estimates by at least 16 percent.

“We’re more confident,” Andrew Milligan, who helps oversee about $240.7 billion as the Edinburgh-based head of global strategy at Standard Life Investments Ltd., said in a telephone interview. “The market got into this earnings season a little too pessimistic. The economy has surprised a little more positively. The underlying concept of an economy moving forward is pretty much accepted by people.”

Early Losses Reversed

Benchmark indexes started the session lower after Labor Department data showed 388,000 Americans filed jobless claims last week, 13,000 more than the median economist estimate. Earlier losses in stocks also came as euro-region economic confidence declined and Italy’s borrowing costs rose at a sale of six-month bills.

Stock futures declined after the regular market close as Spain’s sovereign credit rating was cut to BBB+ from A by S&P on concern the nation will have to provide further fiscal support to the banking sector as the economy contracts. Spain’s short-term rating was lowered to A-2 from A-1, while the outlook on the long-term rating is negative, S&P said.

The S&P 500 rallied about 2.4 percent in three days, led by yesterday’s 1.4 percent advance as Apple Inc.’s earnings almost doubled and Fed Chairman Ben S. Bernanke said he’s prepared to do more to stimulate growth if needed. Today’s gain extended this year’s advance in the S&P 500 to 11 percent and trimmed its monthly decline to 0.6 percent. If the S&P 500 erases its April drop, it will cap the fifth straight month of gains, the longest streak since 2009.

Earnings Season

Earnings have beaten analysts’ estimates at about 75 percent of the 239 companies in the S&P 500 that released results since April 10, according to data compiled by Bloomberg. Per-share profits grew 8.1 percent for the group, led by a 22 percent increase in technology company earnings. Earnings were forecast to rise 0.8 percent before the start of the reporting season, according to a survey of analysts on April 5.

“The most recent concern of the bears was that earnings this quarter were going to disappoint and take the market lower,” Birinyi Associates Inc., the Westport, Connecticut-based firm founded by Laszlo Birinyi, said in a note to clients. “That this was a concern last quarter, as well, was conveniently forgotten.” The S&P 500 rose 12 percent in the first quarter, its best start to a year since 1998, as per-share earnings topped estimates by 3.4 percent during the reporting season.

PulteGroup Rallies

PulteGroup Inc. rallied 10 percent, the most this year, following the housing report and after the homebuilder’s loss narrowed as it reduced costs and sold houses at higher prices. Xilinx surged 6.8 percent, the most in three years, after its sales forecast also beat estimates as the company sells more chips to makers of mobile-phone equipment amid a surge in data demand from smartphone users. Citrix rallied 12 percent after the software company’s full-year earnings forecast also topped estimates.

Exxon Mobil Corp. slipped 0.9 percent and United Parcel Service Inc. retreated 1.8 percent after earnings missed estimates.

Treasuries gained for the first time in three days, with 30-year yields losing three basis points to 3.12 percent, as the Fed’s pledge to keep borrowing rates low through 2014 pushed the yield to a record low of 1.347 percent at today’s auction of $29 billion in seven-year notes.

Monetary Stimulus

Pacific Investment Management Co.’s Bill Gross said that while more monetary stimulus isn’t likely at the moment, additional quantitative easing remains an option for the Fed if employment growth is sluggish. The current U.S. jobless rate is 8.2 percent.

“There’s little doubt in my mind that a target for unemployment of at least 7 percent, perhaps lower, is what they’re shooting for,” Gross, who runs the world’s biggest bond fund, said in an interview on Bloomberg Television’s “Street Smart” with Trish Regan. “Maybe not on June 30th, but it will require additional quantitative easing.”

Automobile and oil companies led European stocks higher, while banks tumbled as Deutsche Bank AG, Germany’s biggest lender, and Banco Santander SA, the largest in Spain, posted worse declines in profits than analysts estimated. AstraZeneca Plc dropped 6.1 percent, the most since 2010, after the U.K. drugmaker cut its earnings forecast.

Alcatel, Mobistar

Alcatel-Lucent SA, France’s largest telecommunications equipment supplier, plunged 17 percent after reporting a first-quarter loss. Mobistar SA sank 14 percent to the lowest in almost nine years as Belgium’s second-biggest mobile-phone company reported profit that missed analysts’ estimates.

The yield on Spanish 10-year government bonds increased three basis points to 5.83 percent. The Italian yield was little changed at 5.64 percent after climbing as much as seven basis points earlier. Italy sold 8.5 billion euros ($11.3 billion) of six-month bills at a rate of 1.772 percent, up from 1.119 percent at the previous auction on March 28.

An index of executive and consumer sentiment in the euro area fell to 92.8 this month from a revised 94.5 in March, the European Commission said.

‘Continue to Be Difficult’

“Economic statistics will continue to be difficult considering countries’ deficits and the fact that they aren’t attacking the problem,” said Matthieu Giuliani, who helps manage $4 billion at Paris-based Banque Palatine SA. “Growth in the macroeconomy won’t be found soon.”

The S&P GSCI index of 24 commodities climbed for a third day as nickel, zinc, lead and copper rallied at least 1.4 percent. Oil climbed to a three-week high, rising 0.4 percent to $104.55 a barrel, after the home-sales report and as a weakening dollar lifted prices of commodities. The Dollar Index, a gauge of the currency against six major peers, slipped 0.1 percent.

The MSCI Emerging Markets Index of stocks advanced 0.7 percent as the Hang Seng gauge in Hong Kong jumped 0.8 percent and Kospi in South Korea added 0.1 percent. Brazil’s Bovespa added 0.7 percent.

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