U.S. Stocks Rise for 2nd Week Amid Earnings, China Data

U.S. stocks rose for a second week, as the Standard & Poor’s 500 Index climbed to the highest level in five years, amid optimism about fourth-quarter corporate earnings and better-than-estimated data on Chinese exports.

American Express Co. rallied 2.7 percent for the week after the credit-card issuer said it will eliminate 5,400 jobs this year. Seagate Technology Plc and Celgene Corp. increased at least 5.8 percent after their forecasts exceeded analysts’ projections. Bank of America Corp. slid 4 percent for the biggest drop in the Dow Jones Industrial Average. Boeing Co. lost 3.3 percent after a 787 Dreamliner operated by Japan Airlines Co. caught fire on the ground in Boston.

The S&P 500 advanced 0.4 percent to 1,472.05 for the week. The benchmark equity gauge closed at 1,472.12 on Jan. 10, the highest level since December 2007. The Dow added 53.22 points, or 0.4 percent, to 13,488.43. The Chicago Board Options Exchange Volatility Index, known as the VIX, fell 3.4 percent to 13.36, the lowest level since June 2007.

“This week was a bit of an inhale as earnings season gets started,” Tim Leach, who manages $111 billion as the San Francisco-based chief investment officer of U.S. Bank Wealth Management, said by telephone. “From a global point of view, there’s a building thesis that the significant slowdown in China is at the end and that China is going to be rebuilding some momentum from here.”

Alcoa Inc. unofficially started the earnings season on Jan. 8 as the first company in the Dow to report results. Of the 27 S&P 500 companies that have posted earnings, 81 percent exceeded analysts’ estimates and 67 percent reported a profit increase, according to data compiled by Bloomberg. Fourth-quarter earnings at S&P 500 companies grew 2.5 percent, according to analysts’ estimates. That would be the second-slowest quarterly growth since 2009, the data show.

China Exports

Equities also advanced for the week as a report showed China’s overseas sales rose 14.1 percent in December from a year earlier, almost triple the 5 percent gain predicted. A separate report on the final day showed China’s inflation accelerated more than forecast to a seven-month high, a pickup that may limit room for easing to support an economic recovery.

The S&P 500 posted the biggest gain in more than a year during the previous week as lawmakers passed a bill averting most of the more than $600 billion in spending cuts and tax increases, known as the fiscal cliff, and Labor Department figures showed payrolls rose last month. The benchmark index has rallied 8.8 percent from its November low as the Federal Reserve expanded its bond purchase program to boost the economy and optimism grew that Congress would reach a budget agreement.

Biggest Gains

Hewlett-Packard Co., the largest maker of personal-computers and printers, surged 6.7 percent to $16.16 for the biggest gain in the Dow this week. Merck & Co. climbed 3 percent to $43.23 as health-care companies advanced the most out of 10 S&P 500 groups.

American Express rallied 2.7 percent to $61.24. The biggest U.S. credit-card issuer by purchases said it will eliminate jobs, mostly in travel services, as consumers and businesses rely more on digital technology for bookings.

New York-based AmEx also reported preliminary results ahead of its formal earnings announcement scheduled for Jan. 17. It posted a 47 percent drop in fourth-quarter profit and recorded charges totaling $594 million, including costs tied to severance and changes in how the firm estimates future redemptions of credit-card rewards.

Seagate, Celgene

Seagate Technology increased 5.9 percent to $33.29. Sales rose to at least $3.6 billion in the fiscal second quarter, exceeding an earlier forecast for $3.5 billion as the Dublin-based company maintained share in the computer hard-drive market.

Celgene rallied 17 percent to $96.30, a record high. The world’s fourth-largest biotechnology company forecast adjusted earnings this year will be as much as $5.60 a share, beating the average analyst estimate by 2 cents.

Analysts at Royal Bank of Canada and Piper Jaffray Cos. lifted their rating on Celgene to outperform and overweight, respectively. Lazard Capital Markets LLC raised its price target to $123 a share from $90.

Best Buy Co. climbed 17 percent, the most since March 2009, to $14.21. Sales stabilized in the U.S. during the holiday season after three quarters of declines, bolstering founder Richard Schulze’s bid to take over the consumer-electronics retailer.

Supermarket Chains

Supervalu Inc. jumped 20 percent to $3.53. A Cerberus Capital Management LP-led investor group agreed to buy five of its chains in a deal valued at about $3.3 billion. Cerberus also will lead a group to conduct a tender offer to buy as much as 30 percent of Supervalu’s common stock for $4 a share in cash.

Herbalife Ltd. added 8.2 percent to $40.02. Daniel Loeb’s Third Point LLC took an 8.2 percent stake in Herbalife, becoming the latest firm to bet against hedge fund manager Bill Ackman, who has accused the direct seller of nutrition shakes of being a pyramid scheme. Chief Executive Officer Michael Johnson said Ackman’s statements were “gross mischaracterizations” of the company’s model as executives mounted a point-by-point defense for investors.

Alcoa slumped 3.5 percent to $8.94 even as the largest U.S. aluminum producer reported fourth-quarter sales that exceeded analysts’ estimates after the company sold the commodity at a higher-than-expected average price.

Bank Earnings

Wells Fargo & Co. fell 0.9 percent to $35.10 on the final day of the week, paring its weekly gain to 0.5 percent, as fourth-quarter results showed margins narrowed and mortgage applications waned. The narrower margins have come as the bank takes a bigger share of mortgage and commercial markets while betting on an economic turnaround.

Goldman Sachs Group Inc., JPMorgan Chase & Co., Bank of America, Citigroup Inc. and Morgan Stanley are among the largest U.S. banks scheduled to report earnings next week. Earnings for financial companies in the S&P 500 grew 16 percent in the fourth-quarter, the second-biggest increase only behind telephone companies’ profits, according to data compiled by Bloomberg.

Bank of America lost 4 percent to $11.63 for the week. The lender was downgraded to neutral from outperform at Credit Suisse on valuation. The stock “appears to be discounting significantly faster improvements in efficiency than we would be expecting,” analyst Moshe Orenbuch wrote in a note. The shares surged 109 percent last year.

Boeing declined 3.3 percent to $75.16. U.S. regulators said they will perform a far-reaching review of the design, manufacturing and assembly of the 787 Dreamliner after the Jan. 7 fire and several incidents last year.

(Corrects name of firm in 13th paragraph to Lazard Capital Markets LLC in story published Jan. 12)
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