U.S. Stocks Gain as Caterpillar Rises, Commodities Rally

U.S. stocks rose, after the biggest weekly loss in five months for the Standard & Poor’s 500 Index, as Caterpillar Inc. jumped and a rally in commodity prices spurred energy and raw-material producers.

Caterpillar jumped 2.8 percent after saying it sees increased sales of building equipment and plans more production in China. Halliburton Co. gained 5.6 percent after reporting first-quarter profit that exceeded analysts’ estimates. Microsoft Corp. soared 3.6 percent after activist investor ValueAct Holdings LP amassed about a $1.9 billion stake. Newmont Mining Corp. added 1.3 percent and Exxon Mobil Corp. advanced 0.7 percent as gold and oil prices rose.

The S&P 500 increased 0.5 percent to 1,562.50 at 4 p.m. in New York. The gauge fell 2.1 percent last week, its biggest drop since November, as earnings from Bank of America Corp. and International Business Machines Corp. missed estimates. The Dow Jones Industrial Average added 19.66 points, or 0.1 percent, to 14,567.17 today. About 5.6 billion shares traded on U.S. exchanges, 12 percent below the three-month average.

“We’re in the middle of earnings season and that continues to be a key driver,” Richard Sichel, who oversees about $1.8 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “It’s important to us to hear what management teams are saying, how optimistic or pessimistic they sound about future growth.”

Eight S&P 500 companies including Netflix Inc. and Texas Instruments Inc. posted their quarterly earnings today. Of the 111 that have reported so far, 72 percent have exceeded analysts’ predictions for earnings, data compiled by Bloomberg show. Profit at S&P 500 companies dropped 1.1 percent in the first three months of the year, according to forecasts compiled by Bloomberg. That would mark the first year-over-year decrease since 2009.

Home Sales

Equities slumped earlier as figures from the National Association of Realtors showed purchases of previously owned houses, tabulated when a contract closes, fell 0.6 percent to a 4.92 million annual rate last month. The median forecast of 75 economists surveyed by Bloomberg projected sales would increase to a 5 million rate. Prices climbed, reflecting more demand for higher-priced houses.

“The home sales number was disappointing for the market but we still think the housing market is showing modest improvement,” Thomas Nyheim, a Wilmington, Delaware-based fund manager for Christiana Trust, which oversees about $17 billion, said in a phone interview.

Fed Stimulus

The S&P 500 has surged 131 percent from a 12-year low in 2009 as the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy.

New York Fed Bank President William C. Dudley said European economic weakness and U.S. budget woes mean “more needs to be done” to shore up the global economy and financial regulation.

“In the United States, the good news is that the economic outlook appears to be gradually improving,” Dudley said today at a conference in New York. “For Europe, the near-term macroeconomic outlook seems less bright.”

At a meeting in Washington late on April 19, the Group of 20 finance chiefs didn’t oppose the Bank of Japan’s plan to buy more than 7 trillion yen ($70 billion) of bonds a month. The central bank’s Governor Haruhiko Kuroda said he would proceed with his campaign to end 15 years of deflation. The Bank of Japan aims to increase inflation to 2 percent within two years.

‘More Confidence’

“Winning international understanding gives me more confidence to conduct monetary policy appropriately,” Kuroda told reporters after the meeting. “We will continue our qualitative and quantitative easing for the next two years.”

Caterpillar rose 2.8 percent to $82.71. The world’s largest maker of construction and mining equipment has seen “slightly increasing sales to users for a number of months” in construction, Doug Oberhelman, chairman and chief executive officer, said during a call with analysts. In China, Caterpillar will increase production this quarter after reducing output to let inventory levels fall.

The company also said it will start buying back stock in the second quarter and spend about $1 billion. Caterpillar fell earlier in the day after cutting its 2013 forecast and first-quarter earnings trailed analysts’ earnings estimates.

Microsoft Soars

Microsoft increased 3.6 percent to $30.83. Chief Executive Officer Steve Ballmer is working to deliver more software and services over the Internet to bolster sales amid a global PC slump that’s eroding demand for pre-installed programs. ValueAct, which has a history of investing in companies it believes are fundamentally undervalued, said that Microsoft can succeed in this effort, aided by the Azure cloud-computing platform.

Halliburton jumped 5.6 percent to $39.29. The world’s largest provider of hydraulic-fracturing services reported first-quarter profit that exceeded analysts’ estimates as the company reduced costs in North America. The company also benefited from lower prices on guar, an ingredient used in hydraulic fracturing to get oil and natural gas from dense rock formations.

Energy and raw-material companies rose the most among 10 S&P industries today, climbing more than 1 percent, while industrial and utility shares had the biggest declines. The S&P GSCI gauge of 24 commodities added 0.3 percent after falling 7.3 percent the past three weeks.

Newmont Mining increased 1.3 percent to $33.40. The price of gold has rebounded after reaching a more than two-year low on April 15. The metal entered a bear market this month amid decreased demand for a hedge against deflation and concern struggling European nations will sell gold to raise cash.

Exxon, Chevron

Exxon Mobil Corp. gained 0.7 percent to $88.09 and Chevron Corp. advanced 0.6 percent to $116.57 as West Texas Intermediate crude rose to a one-week high.

International Paper Co. climbed 3.2 percent to $47.15. The world’s largest maker of office paper is in talks about combining its xpedx unit with Unisource Worldwide Inc. to form the biggest distributor of office and copier paper. A deal may be in the form of a so-called Reverse Morris Trust in which International Paper would contribute xpedx’s assets, the Memphis, Tennessee-based company said today in a statement.

Power-One Inc. surged 57 percent to $6.33 after ABB Ltd., the world’s biggest builder of electricity networks, said it will buy the maker of solar-power inverters for about $1 billion, or about $6.35 a share. The price is 7.7 times Power-One’s earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg.

Volatility Gauge

U.S. equity volatility rose the most in almost four months last week after unexpectedly slow growth in China and a selloff in commodities triggered the biggest stock-market drop since November.

The Chicago Board Options Exchange Volatility Index climbed 24 percent to 14.97 on April 19, the most since December. The index known as the VIX surged 46 percent in four days, briefly erasing its year-to-date decline, before sliding 15 percent on the last day of the week. The VIX fell 3.9 percent to 14.39 today.

“Volatility is getting more sticky, it rushes up without going straight back down which we haven’t seen before this year,” Michael Purves, Greenwich, Connecticut-based Weeden & Co.’s head of derivatives research, said in a phone interview on April 19. “The markets are starting to process that the economic news has been getting softer and that we’re due for a correction. We obviously also had the extraordinary move in gold which has been enhancing volatility across asset classes.”

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