U.S. Stocks Rise as Banks Rally Amid Corporate Earnings Optimism

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Conditions Are Ripe for Some Volatility: Bitsberger

U.S. stocks rose, after the biggest gain in more than a month for the Standard & Poor’s 500 Index, as banks rallied amid optimism over corporate earnings season.

Comcast Corp. advanced after increasing its stock buyback. Berkshire Hathaway Inc. climbed 2 percent as lower fuel prices helped boost its railroad profits. JPMorgan Chase & Co. hit a 15-year high. Cognizant Technology Solutions Corp. rallied 6.2 percent after raising its revenue outlook. Merck & Co. Inc. reached a three-month high, while McDonald’s Corp. slipped as the fast-food giant unveiled its turnaround plan.

The S&P 500 climbed 0.3 percent to 2,114.49 at 4 p.m. in New York, after Friday posting a 0.4 percent weekly decline. The Dow Jones Industrial Average rose 46.34 points, or 0.3 percent, to 18,070.40. The Russell 2000 Index gained 0.4 percent, and the Nasdaq Composite Index increased 0.2 percent. About 5.7 billion shares traded hands on U.S. exchanges, 12 percent below the three-month average.

“With nothing negative coming from overseas, you’re seeing a continuation of the positive price action from Friday afternoon,” said Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc. “We still have a pretty heavy slate of earnings this entire week, with a number of high-profile companies reporting, that’ll probably be the focus for the next several days.”

Of the S&P 500 members that have already released results this season, 73 percent beat profit projections and 49 percent topped sales estimates. Analysts have tempered their predictions for a corporate profit slump, now projecting a first-quarter drop of 0.4 percent, compared with April 17 calls for a 4.3 percent decline.

Economic Data

Factory orders jumped 2.1 percent in March, the biggest gain since July. Investors are watching the data for clues as to when the Federal Reserve will start raising interest rates.

The central bank left open the possibility of an increase this year even amid weak growth data. A private employment report is due on Wednesday, before the monthly jobs release on Friday.

Economists forecast a 225,000 increase in April non-farm payrolls, and a one-tenth decline in the unemployment rate to 5.4 percent. If payroll growth returns to trend, forecasters and monetary policy makers will more firmly embrace the view that first-quarter weakness was transitory.

Stocks pared a weekly loss on Friday, as Gilead Sciences Inc. and Expedia Inc. rallied after Thursday’s selloff in biotechnology and small-cap shares. The Chicago Board Options Exchange Volatility Index gained 1.2 percent Monday to 12.85. The gauge, known as the VIX, advanced 3.3 percent last week.

Stock Performance

Seven of the S&P 500’s 10 main groups climbed today. Utility companies jumped 0.7 percent, and financial shares gained 1 percent, with banks in the index rallying to their highest level in four months as Treasury yields reach an eight-week high.

Hudson City Bancorp Inc. and merger partner M&T Bank Corp. rose more than 2 percent. Bank of America Corp. and JPMorgan added more than 1.7 percent. Berkshire Hathaway’s 2 percent gain, its biggest in three months, helped lead the advance in financial shares.

Health-care rallied a second day for the biggest two-session gain in seven weeks. Henry Schein Inc. added 2.3 percent after reporting first-quarter earnings that exceeded consensus analyst estimates. Merck & Co. Inc. and Amgen Inc. advanced at least 1 percent. The Nasdaq Biotechnology Index increased 0.4 percent after rising 2.9 percent Friday.

Consumer discretionary stocks in the benchmark index climbed as Wynn Resorts Ltd. increased 4 percent. Comcast gained 0.6 percent, and earlier as much as 2.9 percent, after the cable provider’s first-quarter profit beat estimates, boosted by more Internet customers. Comcast also plans to increase its stock buyback by 59 percent to $6.75 billion this year.

Consumer Stocks

Consumer staples gained as Tyson Foods Inc. added 1.5 percent to a two-month high. The largest U.S. meat supplier, posted better-than-expected fiscal second-quarter profit after its prepared-foods business benefited from last year’s acquisition of Hillshire Brands Co. ConAgra Foods Inc. rose 1.5 percent.

Energy companies in the benchmark gauge slid as Transocean Ltd. and Ensco Plc dropped more than 2 percent. Valero Energy Corp. and Hess Corp. fell at least 1.3 percent.

Diamond Offshore Drilling Inc. slid 1.1 percent after an earlier 5.1 percent slide. The company said it’s expecting a downturn in demand for offshore drilling to last at least through next year as customers cut spending amid the crude crash and new rigs continue to enter an oversupplied market.

Pioneer, CSX

Pioneer Natural Resources Co. declined 1.9 percent after David Einhorn, who runs hedge fund Greenlight Capital, criticized the oil and gas explorer for spending too much money without returns.

CSX Corp. led a retreat among S&P 500 transportation companies, as the railroad fell 2.3 percent after Pershing Capital Management LP founder Bill Ackman said he was leaving CSX off his agenda for discussion at a hedge-fund conference. The reaction showed investors’ continued interest in whether the biggest eastern U.S. carrier may eventually be involved in an industry merger.

A Bloomberg gauge on U.S. airlines slipped 1 percent after jumping 3 percent Friday. Republic Airways Holdings Inc. lost 6.6 percent as preliminary first-quarter results missed estimates. Southwest Airlines Co. slumped 1.8 percent.

Raw-material companies declined 0.3 percent. Monsanto Co. fell 2.1 percent after people familiar with the matter said it approached Syngenta AG about a potential takeover. Newmont Mining Corp. and Freeport McMoRan Inc. dropped more than 1.1 percent.

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