U.S. Stocks Rise as GE Earnings Outweigh Technology Slump
U.S. stocks rose, giving the Standard & Poor’s 500 Index a fourth straight week of gains, as better-than-forecast results from General Electric Co. (GE) offset disappointing earnings from Google Inc. and Microsoft Corp. (MSFT)
GE surged 4.6 percent to the highest in almost five years, pacing gains among industrial shares. Pfizer Inc. advanced 2.1 percent to boost health-care stocks. Technology shares sank 2 percent. Microsoft, the world’s largest software maker, plunged 11 percent and Google, owner of the most popular Internet search engine, lost 1.6 percent. Advanced Micro Devices Inc. (AMD) retreated 13 percent after saying its gross margin would narrow in the current quarter.
The S&P 500 rose 0.2 percent to a record 1,692.09 at 4 p.m. in New York, erasing an earlier decline of as much as 0.3 percent. The Dow Jones Industrial Average lost 4.8 points, or less than 0.1 percent, to 15,543.74. The Nasdaq 100 Index slid 1.1 percent to 3,044.93, the biggest drop in a month. About 5.9 billion shares traded hands on U.S. exchanges today, or 7.3 percent below the three-month average.
“Earnings have held up reasonably well,” said Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Plc’s wealth unit in London. “We’ve seen some winners and some losers coming through. There has been disappointment around technology, but we don’t necessarily think that is going to be a long-term trend.”
U.S. stocks rallied yesterday, sending the S&P 500 and the Dow average to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless-benefit claims declined to a two-month low. The S&P 500 climbed 0.7 percent in the past five days and is up 19 percent this year.
About 84 percent of stocks in the index traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. While that’s below a 19-month high of 93 percent reached in May, it’s up from its 2013 bottom of 12.8 percent in June. Some 108 stocks in the index closed at a 52-week high yesterday; none finished at a 52-week low.
Equities futures got a brief boost today after the People’s Bank of China said it will remove the floor on lending rates offered by financial institutions starting tomorrow. The announcement builds on pledges by Premier Li Keqiang to expand an overhaul of interest rates, a development the World Bank says must be a priority in reform of the financial system.
Federal Reserve stimulus and better-than-forecast corporate earnings have helped fuel a surge in stocks worldwide, with the S&P 500 jumping 150 percent from its March 2009 low. Yesterday’s rally pushed the gauge’s valuation to 15.3 times estimated profit, the highest since April 2010, data compiled by Bloomberg show.
Investors have increasingly turned to stocks this month, as U.S. equity exchange-traded funds are getting money at the fastest rate since September 2008. About $27.9 billion was sent to American share ETFs in the last 13 days, about four times the amount deposited last month and the most in almost five years, according to data compiled by Bloomberg from about 1,500 funds.
Mutual funds that invest in U.S. shares had $4.55 billion of inflows during the week through July 10, ending seven consecutive weeks of withdrawals, according to data from the Washington-based Investment Company Institute released yesterday.
The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, (SPX) dropped 8.8 percent to 12.56, its lowest level since May 17. The measure has fallen 11 out of the past 12 trading sessions.
Of the companies on the S&P 500 that have reported earnings so far, about 72 percent have topped analysts’ estimates, according to data compiled by Bloomberg. About 53 percent have beaten revenue projections.
Earnings among financial companies in the S&P 500 have outperformed the index average, with 80 percent of the firms surpassing estimates. The group’s results have exceeded forecasts by an average of 8.7 percent.
Banks and insurers are predicted to report earnings growth of 26 percent this quarter, data compiled by Bloomberg show. Excluding financial stocks, analysts forecast S&P 500 companies will report a 2 percent drop in profit, the data show.
Capital One Financial Corp. (COF) climbed 3.1 percent to $69.14, the highest since October 2007. The lender that gets more than half its revenue from credit cards posted a second-quarter profit that beat analysts’ estimates by 8.3 percent as a boost in U.S. consumer confidence helped fuel spending.
Seven of 10 groups in the S&P 500 advanced. Health-care stocks rallied 1.4 percent as Pfizer gained 2.1 percent to $29.09.
Industrial shares added 1.2 percent. GE surged 4.6 percent to $24.72, the highest since September 2008. Demand for jet engines and drilling equipment drove the company’s order backlog to a record. Adjusted profit from continuing operations fell 8 percent to $3.7 billion, or 36 cents a share. That exceeded the 35-cent average analyst estimate.
Whirlpool Corp. rallied 8 percent to $128.91 for the biggest gain in the S&P 500. The maker of home appliances raised its 2013 earnings target as it anticipates to benefit from U.S. energy tax credits.
Schlumberger Ltd. rose 5.4 percent to $82.74, a two-year high, helping energy shares rally 1.4 percent. The world’s largest oilfield-services provider announced a $10 billion share buyback plan as quarterly profit rose and it forecast “double-digit” customer spending increases on crude exploration.
Chipotle Mexican Grill Inc. (CMG) jumped 8.6 percent to $408.97, the highest in a year. The burrito chain that recently started selling tofu posted second-quarter profit that topped the average analyst estimate, as an increase in traffic boosted sales at its established restaurants.
Technology stocks led declines today, slumping 2 percent for a second day of losses. Earnings from the group have disappointed the most among 10 industries in the benchmark gauge. The 17 companies that have reported have missed estimates by an average 3.6 percent. The average result for all companies has come in 2.7 percent above forecasts, the data show.
Analysts predict the technology group will report a 8 percent decline in profit, compared with a 2.4 percent increase estimated for the S&P 500 as a whole.
“It is a bit of a lukewarm earnings overall with a couple of high-profile misses,” said James Dunigan, who helps oversee $118 billion as chief investment officer in Philadelphia at PNC Wealth Management. “We will start to see more of a micro view than a macro view of the market, looking at individual stocks and individual sectors across the board.”
Microsoft sank 11 percent to $31.40, the biggest drop since January 2009, after reaching a five-year high on July 16. The software company said fourth-quarter profit missed analysts’ projections by the biggest margin in at least a decade amid weaker demand for personal computers running Windows.
Google fell 1.6 percent to $896.60 after second-quarter sales and profit fell short of estimates as mobile advertising crimped average prices. The stock slid as much as 3.9 percent earlier in the session.
AMD sank 13 percent to $4.03 for the biggest drop in the S&P 500. The second-largest maker of personal-computer processors forecast a drop in third-quarter gross margin, even as it predicted higher sales.
Intel Corp. slipped 0.9 percent for a third day of losses, and EBay Inc. slid 2.5 percent. Both reported on July 17 sales forecasts that fell short of estimates.
Intuitive Surgical Inc. plunged 6.8 percent to $392.67, the lowest since October 2011. The robot surgery company cut its revenue forecast and earnings missed targets. Intuitive has lost about $6 billion in value over five months after disclosures about adverse events with its products, a recent recall and,now, a regulatory warning it hasn’t adequately reported on issues concerning the devices.
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