S&P 500 Gains on GE Earnings as Gold Rises, Dollar Slips

The Standard & Poor’s 500 Index rose to a record close, erasing earlier losses, as better-than-estimated results from General Electric Co. overshadowed disappointing earnings from Google Inc. and Microsoft Corp. Gold advanced and the dollar slumped.

The S&P 500 rose 0.2 percent to 1,692.09 at 4 p.m. in New York, after reversing an intraday decline of 0.3 percent. The Stoxx Europe 600 Index increased less than 0.1 percent. Treasuries advanced for a second straight week. The dollar slid against most major currencies and gold advanced 0.7 percent. Oil settled higher after swinging between gains and losses during the trading session.

GE shares rallies while Microsoft, the world’s largest software maker, and Google, owner of the most popular Internet search engine, tumbled as earnings missed estimates. The People’s Bank of China said it will abolish the floor on lending rates beginning tomorrow. Finance ministers and central bankers from the Group of 20 nations meet this weekend in Moscow.

“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.”

Per-share earnings topped analysts’ estimates at about 73 percent of S&P 500 members that have reported for the quarter, Bloomberg data show. About 53 percent have beaten revenue projections.

Technology Earnings

General Electric advanced 4.6 percent to the highest level since 2008 after saying its order backlog reached a record amid demand for jet engines and drilling equipment.

Google dropped 1.6 percent as mobile advertising crimped average prices. Microsoft plunged 11 percent, the most since 2009, after missing projections by the biggest margin in at least a decade as demand weakens for personal computers running Windows. Advanced Micro Devices Inc. tumbled 13 percent after forecasting a drop in third-quarter gross margin, even as it predicted higher sales. The technology results followed disappointing reports yesterday from Intel Corp.

Earnings from technology companies have disappointed the most among 10 groups in the S&P 500. The 17 companies that have reported have missed estimates by an average 3.6 percent. Analysts predict the group will report an 8 percent decline in profit, compared with a 2.4 percent increase estimated for the S&P 500 as a whole.

Weekly Gain

U.S. stocks rallied to record highs yesterday 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 has climbed 0.7 percent in the past five days, for a fourth straight weekly gain. The benchmark gauge for U.S. equities has surged 150 percent from a 12-year low in 2009, driven by profit growth and three rounds of central bank monetary stimulus.

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, dropped 8.9 percent to 12.54. The VIX is at its lowest level since May 17, before Federal Reserve Chairman Ben S. Bernanke signaled the central bank could start scaling back monetary stimulus.

ETF Flows

U.S. equity exchange-traded funds are getting money at the fastest rate since September 2008 as stock investors shrug off concern that the Fed is poised to slow stimulus.

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. Securities tracking everything from shares to bonds and commodities have received $32.4 billion in July, the most since September.

The ETF flows show that Americans are gaining confidence in the economic recovery and beginning to favor shares. That would reverse the trend since 2008, when investors looked for safety after the financial crisis and housing collapse and poured the most money into bonds.

“If you are looking for the source waters of the recent melt-up in U.S. stock markets, look no further than U.S.-listed exchange-traded funds,” Nicholas Colas, chief market strategist at ConvergEx Group in New York, wrote in a note to clients today. “Investors have fallen very much in love with U.S.-based securities of late.”

Quelling Concerns

Yields on 10-year Treasuries fell four basis point to 2.49 percent. Treasuries capped a second weekly gain after Bernanke quelled concern that a reduction of U.S. stimulus was imminent. The Fed chief said yesterday it was “way too early to make any judgment” about starting tapering in September. The previous day, Bernanke said the Fed’s quantitative easing is “by no means on a preset course.” Policy makers are scheduled to meet next on July 30-31.

Moody’s Investors Service revised the U.S.’s Aaa credit rating outlook to stable from negative yesterday. It cited the falling budget deficit.

In Europe, the Stoxx 600 rose less than 0.1 percent, after dropping as much as 0.5 percent earlier. SAP AG, the world’s biggest maker of applications for businesses, lost 2.3 percent. ARM Holdings Plc retreated 2.6 percent. The company designs chips for phones running Google’s Android operating system.

Royal Vopak NV slumped 5 percent for the largest drop on the Stoxx 600 after forecasting lower earnings before interest, taxes, depreciation and amortization for 2013 than analysts had estimated. The world’s biggest chemical- and oil-storage company also said it will raise as much as 350 million euros ($460 million) by selling preferred shares.

Emerging Markets

The MSCI Emerging Markets Index fell 0.7 percent, led by technology shares and paring its second consecutive weekly gain. Taiwan Semiconductor Manufacturing Co. dropped the most in more than four years after it forecast sales that trailed estimates. Taiwan’s Taiex slid 1.6 percent, the most in five weeks. The Shanghai Composite Index retreated 1.5 percent and Russia’s Micex Index added 0.3 percent.

The dollar weakened against most major peers, falling most against the Swedish krona and South African rand. The U.S. currency slipped 0.2 percent to $1.3138 per euro. JPMorgan Chase & Co.’s Global FX Volatility Index, a measure of currency fluctuations, slid to a seven-week low.

China Lending

New Zealand’s dollar advanced 0.4 percent against the U.S. currency after the People’s Bank of China said it would remove limits on lending rates. 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.

The yen fell against 14 of its 16 major peers before upper-house elections in Japan. Prime Minister Shinzo Abe’s Liberal Democratic Party and its coalition partner New Komeito are on track to win more than 65 of the 121 upper house seats being contested, according to a poll published in the Nikkei newspaper on July 17. Victory will strengthen the prime minister’s ability to carry out a plan of monetary easing, fiscal stimulus and deregulation known as Abenomics.

Indonesia’s rupiah posted its longest losing streak on record as the central bank manages a gradual depreciation of the onshore exchange rate toward offshore levels.

The S&P GSCI, a gauge of commodities, slipped 0.1 percent after declining as much as 0.6 percent and rising 0.5 percent during the day. Gold rose for a second day to $1,294 an ounce. Wheat jumped for the first time in six sessions, climbing 0.6 percent, after China, the world’s biggest consumer, increased purchases of the grain from the U.S.

Crude rose 1 cent to $108.05 a barrel, after rallying as much as 1.2 percent earlier in the session. Oil capped a fourth weekly gain, reaching the highest level since March 2012.

West Texas Intermediate crude became more expensive than Brent for the first time in almost three years as pipeline and rail shipments helped clear a bottleneck that reduced the price of the U.S. benchmark.

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