Stocks Rise on Corporate Earnings Ahead of Fed MeetingOliver Renick
U.S. stocks rose, bringing the Standard & Poor’s 500 Index within 1.5 percent of its last record, as investors dissected earnings and economic data before a Federal Reserve policy announcement tomorrow.
Amgen Inc. climbed 6.1 percent after raising its full-year forecast. T-Mobile US Inc. added 3.1 percent after boosting its estimate for subscriber acquisitions. Madison Square Garden Co. jumped 11 percent after Bloomberg News reported it’s considering splitting the company in two. Twitter Inc. sank 9.8 percent as its loss widened and user growth slowed.
The Standard & Poor’s 500 Index climbed 1.2 percent to 1,985.05 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 187.81 points, or 1.1 percent, to 17,005.75. The Russell 2000 Index of small-cap stocks surged 2.9 percent, the most since 2012.
“People in the market who were cautious are kicking themselves for missing the bottom,” Scott Wren, the senior equity strategist who helps oversee $1.4 trillion at Wells Fargo Advisors LLC in St. Louis, said by phone. “Earnings are confirming that yes, we’re in a modest growth, modest inflation environment that’s not going to change anytime soon, and the stock market can do OK with that.”
Policy makers began their two-day policy meeting today after six weeks of volatility in global financial markets. Chair Janet Yellen and her colleagues will focus instead on a robust U.S. outlook and end their bond-buying program as planned, according to 62 of 64 economists surveyed by Bloomberg News.
By smaller margins, most also expect the officials to reiterate rates will stay low for a “considerable time” and that there’s a “significant underutilization of labor resources.”
Minutes from the last meeting, when policy makers pledged to keep U.S. borrowing costs low for a considerable time, showed officials expressed concern that U.S. growth may be at risk from a global slowdown.
“Expectations are for the U.S. to be on a reasonably good growth path and right now the U.S. globally is the bright spot,” Geoffrey Pazzanese, a New York-based fund manager at Federated Investors Inc., said by phone. Federated has $352 billion under management. “Employment is improving, jobs are improving in the private sector, and there’s a Fed that, despite tapering, is still at very low rates.”
The S&P 500 has rebounded 6.6 percent from a six-month low on Oct. 15 amid better-than-expected earnings and signs of a strengthening economy even as the Fed prepares to end its bond purchases.
Almost 79 percent of S&P 500 companies that have reported so far have beaten earnings estimates, while 62 percent have surpassed revenue projections, according to data compiled by Bloomberg. Profit for S&P 500 companies rose 6.3 percent in the third quarter and sales increased 4.1 percent, analysts predicted.
“The corporate sector seems to be alive and kicking,” said Christian Gattiker, head of research at Julius Baer Group Ltd. in Zurich. “This is good news especially after the breakdown of confidence we had earlier this month. The question is whether the market has to rely on central bank policy alone to drive asset prices higher. Certainly the earnings season so far shows there is some support from the corporate sector too.”
Data today indicated orders for durable goods unexpectedly dropped in September for a second month as demand for machinery and computers slumped. Bookings for goods meant to last at least three years decreased 1.3 percent after falling 18.3 percent in August. The median forecast of 83 economists surveyed by Bloomberg called for a 0.5 percent gain.
Consumer confidence advanced in October as Americans enjoyed further price drops at the gas pump and the job market continued to improve. The Conference Board’s index climbed to 94.5 this month, the highest since October 2007, from a September reading of 89 that was stronger than initially estimated.
“The consumer confidence index was really big as everybody’s been concerned about what the pullback in the stock market means for holiday spending,” John De Clue, the Minneapolis-based chief investment officer for the Private Client Reserve of US Bank, said in a phone interview. “When you approach this time of year you’re looking at a wall of money to be spent or not spent, and it looks like now the fall in gasoline prices is going to offset that.”
All 10 of the main groups in the S&P 500 advanced, with energy stocks rising 2.3 percent to lead gains. Transocean Ltd. and Newfield Exploration Co. added at least 4.3 percent.
Madison Square Garden jumped 11 percent, the most in four years, to $72.99 after Bloomberg reported it is exploring splitting into two publicly traded companies to unlock value in the New York Knicks and New York Rangers sports franchises. The company also announced its first ever buyback, of as much as $500 million in Class A shares.
Amgen added 6.1 percent to $157.19 Full-year earnings excluding one-time items are projected to be at least $8.45 a share and revenue will reach at least $19.8 billion. The company had previously said profit would probably not exceed $8.40 per share.
T-Mobile rose 3.1 percent to $28.85. The fourth-largest U.S. wireless carrier will probably add 4.3 million to 4.7 million new monthly customers this year.
Regal Entertainment Group jumped 3.8 percent to $21.28. The largest U.S. cinema chain, controlled by billionaire Philip Anschutz, retained Morgan Stanley to advise on a review of options including a sale, according to a statement.
Yahoo! Inc. added 2.6 percent to $45.87, extending a nine-day winning streak to 21 percent, the longest run since 2006. The company announced third-quarter earnings last week that beat analysts’ estimates.
Twitter slumped 9.8 percent to $43.78. Active users on the social network rose 23 percent to 284 million in the third quarter, down from the prior period’s 24 percent growth. The company said its net loss widened to $175.5 million from $64.6 million.
Kohl’s Corp. dropped 6.6 percent to $54.66 for the biggest loss in the S&P 500. The retailer said full-year earnings per share will now be at the lower end of a $4.05 to $4.45 range. Analysts projected $4.29.