Nasdaq Composite Gains as Google, Amazon.com Rally on Earnings

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Breaking Down the Nasdaq’s Record High

The Nasdaq Composite Index extended a record and the Standard & Poor’s 500 Index closed at an all-time high as Google Inc., Microsoft Corp. and Amazon.com Inc. rallied after posting quarterly results.

Google jumped 3.3 percent after saying first-quarter advertising volume jumped. Amazon climbed 14 percent as sales climbed more than analysts projected. Microsoft gained 10 percent, the most since April 2009, after quarterly profit beat estimates.

The Nasdaq Composite climbed 0.7 percent to 5,092.09 at the close in New York. The gauge closed at a record yesterday, sailing past its dot-com era peak as EBay Inc. and Microsoft rose. The Standard & Poor’s 500 Index added 0.2 percent to 2,117.69, its highest ever. The Dow Jones Industrial Average climbed 21.45 points, or 0.1 percent, to 18,080.14.

“It’s very positive that this time you actually have good tech earnings to support the Nasdaq record,” said Manish Singh, who helps oversee $2 billion as head of investments at Crossbridge Capital in London. “We’re not seeing the same euphoria we saw 15 years ago. The rally in the tech stocks looks sustainable because these companies have been in the market for many years. The U.S. earnings season overall is turning out to not be so bad after all.”

The S&P 500 climbed 1.8 percent for the week, beating its closing record set on March 2. The Dow is still 1.1 percent below its all-time high reached the same day.

Technology Earnings

The Nasdaq Composite has almost quadrupled since global equity markets bottomed in March 2009, paced by gains in tech giants from Apple Inc. to Google. Results from International Business Machines Corp. and Intel Corp. this season helped extend a five-year expansion that have lifted tech profits to a record.

The Chicago Board Options Exchange Volatility Index fell 1.5 percent to 12.29, the lowest since Dec. 5. The gauge, known as the VIX, slid for a fifth day, its longest downward streak in four months. About 6.2 billion shares changed hands on U.S. exchanges, 6 percent below the three-month average.

Information technology firms earned $194 billion from continuing operations in 2014, about 19 percent of the S&P 500 as a whole, compared with $67 billion in 2000, or 13 percent, data compiled by S&P Dow Jones Indices show.

Results from Apple and Pfizer Inc. are due next week. Of those that have reported this season, 77 percent beat profit projections and 49 percent exceeded sales estimates.

While analysts predict an earnings decline through September for S&P 500 companies, they have tempered how steep that will be. They forecast first-quarter profit will drop 2.9 percent, an improvement on April 10 estimates for a 5.6 percent decline.

Equities fluctuated during the past month amid concerns that a stronger dollar and lower oil prices would hurt corporate earnings as the Fed considers raising rates. The Bloomberg Dollar Spot Index has soared 4.4 percent this year.

Dollar Headwind

“It’s all about earnings,” said Hank Smith, who oversees $8 billion as chief investment officer at Radnor, Pennsylvania-based Haverford Trust Co. “What the market is also expressing is that this dollar headwind is in the market. It’s not unexpected. If it was unexpected, I don’t think you would see the S&P near an all-time high.”

Four out of 10 major groups in the S&P 500 advanced. Technology companies added 1 percent, while Amazon.com led consumer-discretionary stocks to a 1.3 percent gain.

Amazon rose 14 percent to a record after releasing first quarter sales that exceeded analysts’ predictions. The company’s investments in speedy delivery services, data centers, and original video programming brought in more customers as sales jumped 15 percent.

Software Makers

Software companies rose 2 percent as a group as Microsoft gained 10 percent. The world’s largest software maker announced profits yesterday that exceeded analysts’ estimates as growth in cloud software sales and more expensive versions of server programs made up for slowing demand for personal-computer products.

Google jumped 2.9 percent, the most in almost three months, despite releasing profit and sales just short of estimates. The company’s costs were kept well under control, boosting investor confidence.

Starbucks Corp. jumped to a record, rising 4.9 percent after posting sales that beat estimates, fueled by an expanded menu and new mobile-phone application. Juniper Networks Inc. rallied 8.9 percent amid better-than-forecast quarterly revenue.

Time Warner Cable Inc. gained 4.4 percent after Comcast Corp. dropped its $45.2 billion deal to buy the company, officially pulling the plug after concluding the merger would be rejected by regulators. Comcast added 0.7 percent.

Mylan, Biogen

In other deal news, Mylan NV went forward with a hostile $31.2 billion bid for fellow drugmaker Perrigo Co., opting to take its offer directly to shareholders rather than accept a separate takeover proposal from Teva Pharmaceutical Industries Ltd. Mylan added 3.2 percent, while Perrigo slipped 4.3 percent, the most in almost a year.

Biogen Inc. dropped 6.6 percent, the most in a month, after releasing first-quarter earnings and sales below analysts’ estimates.

Xerox Corp. lost 8.8 percent, the most since October 2013, after cutting its full-year profit forecast.

Economic data today showed orders for business equipment unexpectedly fell in March for a seventh consecutive month, a sign business investment will remain sluggish.

Bookings for non-military capital goods excluding aircraft, a proxy for future corporate spending on new equipment, dropped 0.5 percent. Demand for all durable goods -- items meant to last at least three years -- rose 4 percent on aircraft and autos.

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