U.S. stocks rose as investors speculated first-quarter earnings would help equities rebound from their biggest weekly decline of the year.
Alcoa Inc. rose 1.8 percent in regular trading, before reporting first-quarter results that disappointed investors after the market close. Advanced Micro Devices Inc. rose the most in the S&P 500 after Microsoft Corp. was said to use AMD chips in its next Xbox game console. BioCryst Pharmaceuticals Inc. surged 13 percent as China expedited the approval of its anti-influenza drug Peramivir. Lufkin Industries Inc. jumped 38 percent as General Electric Co. agreed to buy the company.
The S&P 500 rose 0.6 percent to 1,563.07 at 4 p.m. in New York, after falling as much as 0.3 percent earlier. The index erased its April 5 loss sparked by the government’s monthly jobs report. The Dow Jones Industrial Average added 48.23 points, or 0.3 percent, to 14,613.48. About 5.1 billion shares changed hands on U.S. exchanges, 19 percent below the three-month average.
“Earnings clearly are going to be the driver for a lot of volatility in the next couple of weeks,” Omar Aguilar, the San Francisco-based chief investment officer of equities at Charles Schwab Investment Management said in a telephone interview. The firm had $219.3 billion in assets under management as of Dec. 31. “The consensus is that we’re going to have a pretty diverse and poor earnings season. I think we’ll probably see a lot of surprises on the positive side, which is good.”
JPMorgan Chase & Co., Wells Fargo & Co. and Bed Bath & Beyond Inc. are among nine S&P 500 companies scheduled to report earnings this week. Analysts project profits at S&P 500 companies fell 1.8 percent in the latest quarter, the first year-over-year drop since 2009, estimates compiled by Bloomberg show. Analysts had predicted a 1.2 percent increase when surveyed in January.
The S&P 500 fell 1 percent last week as U.S. payrolls had the smallest gain in nine months in March while other reports showed manufacturing and services industries expanded less than forecast. The index climbed to an all-time high of 1,570.25 on April 2. The S&P 500 has more than doubled from its 12-year low in March 2009, helped by the Federal Reserve’s unprecedented bond purchases and three straight years of profit growth.
The benchmark gauge has alternated between gains and losses for the past 13 days, the longest period ever without a winning or losing streak, according to LPL Financial Holdings Inc.
Today’s reversal “continued a pattern, which has shown for quite some time now, which is any weakness is met with buying at some point of the day,” James Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.5 billion in assets, said in a telephone interview. “There are people who are afraid of missing out on further rallies.”
Nine of the 10 S&P 500 industry groups rose today as consumer stocks gained the most, adding at least 1.1 percent. Phone stocks retreated 0.5 percent.
Alcoa, the first Dow member to publish results each quarter, jumped 1.8 percent to $8.39 in regular trading. After the market close, the largest U.S. aluminum producer reported first-quarter earnings that exceeded analysts’ estimates as demand from U.S. automakers increased. Sales declined to $5.83 billion from $6.01 billion, missing the $5.88 billion average of 11 estimates. Alcoa shares slid 1.4 percent to $8.27 as of 7:08 p.m. in New York.
AMD surged 13 percent, the most since July 2011, to $2.59. Microsoft will use an AMD processor in its next Xbox game console as it seeks to cut the cost of building machines and get developers to create more titles, people with knowledge of the matter said.
The shift means Microsoft will drop the Power PC technology designed by International Business Machines Corp., and game discs made for the current Xbox 360 won’t be compatible. IBM slid less than 0.1 percent to $209.32 and Microsoft declined 0.4 percent to $28.59.
BioCryst surged 13 percent to $1.92, adding to a 29 percent gain on April 5 to close at the highest level since November. China’s Food and Drug Administration said it expedited the approval of Peramivir as authorities reported three more infections of the deadly H7N9 virus that has killed six people in the country since March.
Lufkin soared 38 percent, its biggest gain ever, to $87.96. GE, the world’s largest provider of power-generation equipment and services, said it will acquire Lufkin for about $3.3 billion, or $88.50 a share. GE rose 0.8 percent to $23.12.
Johnson & Johnson fell 1.1 percent to $81.11. The world’s largest seller of health-care products may cut its earnings forecast for 2013 because of a devaluation of the Venezuelan bolivar, JPMorgan said in a note. The firm reduced the stock’s rating to neutral from overweight.
CA Inc., a maker of software for managing information technology, slipped 1.2 percent to $24.30. Abhey Lamba, an analyst with Mizuho Securities USA Inc., cut the stock’s rating to neutral from buy.
Netflix Inc. fell 1 percent to $163.06, extending its decline to eight consecutive days. The stock has lost 14 percent during the losing streak, its longest such stretch since October 2008. Competition among pay-TV vendors is increasing as Intel Corp. plans to start an online service this year, while Time Warner Inc.’s Warner Bros. has recently introduced its own subscription streaming service.
Wagers that U.S. stock volatility will increase have reached a three-year high on concern American companies are getting ready to report the first slump in profit since 2009.
There were 6.54 million calls on the Chicago Board Options Exchange Volatility Index and 2.34 million puts on April 4, according to data compiled by Bloomberg. The ratio jumped to 2.93-to-1 last month, the highest since March 2010. The VIX, tracking S&P 500 option prices, has climbed 17 percent from its six-year low in March and lost 5.2 percent to 13.19 today.
“The weaker data and earnings would encourage higher volatility after an unchallenged rally throughout the first quarter,” Andrew Greeley, a senior managing director at Stamford, Connecticut-based Acorn Derivatives Management Corp., which manages more than $450 million in volatility assets, said on April 5.
Even bulls are taking steps to protect profits after gains in U.S. stocks added $10 trillion to equity values.
Russ Koesterich of BlackRock Inc. and Valentijn Van Nieuwenhuijzen at ING Investment Management, who bought equities in 2012, say risks are rising during a period in which stocks have lost an average 5.2 percent since 2010, data compiled by Bloomberg show. Concern the U.S. economy isn’t expanding fast enough prompted Koesterich to sell smaller companies. Van Nieuwenhuijzen is holding off on new share purchases.
Investors managing more than $5 trillion say they’re looking for ways to limit losses after the S&P 500 reached a record. That got harder in the first quarter, when rallies in drugmakers and utilities pushed valuations for so-called defensive industries to the highest since 2008.
“You have an increased risk of a correction now,” Koesterich, the chief investment strategist at New York-based BlackRock, the world’s largest money manager with $3.8 trillion in assets, said in an April 4 phone interview. “The parts of the market that have done the best, the defensives, have gotten very expensive,” he said. “This is a very different rally than what people are used to.”