U.S. Stocks Advance as Merck, IBM Shares Gain Before Fed MeetingJennifer Kaplan
The Standard & Poor’s 500 Index rose as Merck & Co. boosted its outlook and IBM Corp. increased its dividend before Wednesday’s Federal Reserve decision. The Nasdaq 100 Index slid 0.2 percent as Apple Inc. slumped.
Merck added 5 percent after lifting its annual earnings forecast. International Business Machines Corp. climbed 1.9 percent. Twitter Inc. plunged 18 percent after an unexpected early release of its results showed revenue fell short of estimates. Apple slipped 1.6 percent amid concerns that rapid iPhone growth may not continue. Whirlpool Corp. dropped 7.1 percent after cutting its annual forecast.
The S&P 500 Index rose 0.3 percent to 2,114.76 at 4 p.m. in New York. The Dow Jones Industrial Average added 72.17 points, or 0.4 percent, to 18,110.14. The Nasdaq Composite Index fell 0.1 percent, while the Russell 2000 Index advanced 0.5 percent. About 6.7 billion shares changed hands on U.S. exchanges, about 1 percent above the three-month average.
“Earnings is driving most everything that’s going on right now,” said Tom Wirth, senior investment officer for Chemung Canal Trust Co., which manages $1.9 billion in Elmira, New York. “When I look at the stocks that are doing well and those that aren’t doing so well, it’s mostly earnings driven here.”
In the midst of the corporate earnings season, investors are also awaiting the outcome of the Fed’s meeting, which began today, for more clues on the timing of interest rate increases.
The Fed won’t hike rates until its September meeting, according to 73 percent of 59 economists in a Bloomberg News survey, up from 37 percent in the March survey, when the majority said the first increase would likely come in June or July.
Most Fed policy makers expect to raise the benchmark interest rate by the end of 2015. With economic data missing estimates this month by the most in more than six years, some officials have said they are wary of lifting rates too soon.
The Fed last month dropped an assurance that it will be “patient” in raising rates. Instead, officials said they want to see further labor-market gains and be “reasonably confident” inflation will move back up toward their 2 percent goal before tightening policy.
The Conference Board’s index of consumer confidence unexpectedly decreased to 95.2 in April from 101.4 a month earlier, the New York-based private research group said Tuesday. The median forecast in a Bloomberg survey of 77 economists called for the gauge to climb to 102.2 after a previously reported 101.3 a month earlier.
Data Wednesday may show U.S. economic growth slowed to a 1 percent pace in the first quarter, from 2.2 percent in the previous three months.
Selling in U.S. equities Tuesday briefly accelerated, sending the S&P 500 as much as 0.7 percent lower, after Al Arabiya reported that Iranian forces seized a U.S. cargo vessel. U.S. officials later said Iranian forces boarded a Marshall Islands-flagged cargo ship, denying the seized vessel was American.
Pfizer, Ford and Kraft Foods Group Inc. are among 40 S&P 500 companies that released results today. Of index members that have already reported this season, about three quarters beat profit projections and about half topped sales estimates.
U.S. stocks retreated from records yesterday, with biotechnology companies leading losses. The Nasdaq Composite Index topped its dot-com-era high last week and the S&P 500 closed at a record as Google Inc., Microsoft Corp. and Amazon.com Inc. rallied after posting financial results. U.S. shares have still lagged most developed-market indexes this year.
The Chicago Board Options Exchange Volatility Index fell 5.4 percent to 12.41, after rising almost 7 percent yesterday. The gauge, known as the VIX, fell nearly 12 percent last week to its lowest level in almost five months.
Nine of the S&P 500’s 10 main groups rose, led by phone companies as AT&T Inc. rallied 2.3 percent to its highest level in more than two months. Health-care shares rebounded, after a 1.8 percent drop Monday, paced by Merck’s biggest gain since January and Aetna Inc.’s 3.2 percent climb to an all-time high.
United Parcel Service Inc. gained 3.4 percent, its best rise in more than two years, after reporting profit that exceeded analysts’ estimates, buoyed by an increase in international deliveries and lower fuel costs.
Iron Mountain Inc. climbed 2.9 percent, the most since December, after reaching an agreement to buy Australian-U.S. competitor Recall Holdings Ltd. for about $2 billion. The U.S. data-storage company raised its bid following a rejection of an offer last year.
Technology shares rose as IBM and Microsoft Corp. added more than 1.8 percent. IBM reached a six-month high after raising its dividend by 18 percent. Microsoft hit a five-month high.
JetBlue Airways Corp. advanced 6.7 percent to an 11-year high after reporting earnings that matched analysts’ estimates.
Twitter plunged after revenue fell short of estimates in the first quarter, even after the company introduced new products and tweaked features to attract more people. The company was was slated to report results after the market close until Selerity Inc., a financial news service, disclosed Twitter’s profit and sales numbers.
Twitter shares initially lost 5.8 percent on the Selerity report before trading was halted. The stock re-opened lower by 20 percent. The Nasdaq Internet Index lost 1.4 percent, while the Dow Jones Internet Composite Index fell 1.2 percent.
Apple rose as much as 1.4 percent and lost as much as 2.3 percent before closing 1.6 percent lower amid concerns that the rapid iPhone growth can’t continue.
Consumer discretionary companies lagged amid lackluster earnings reports and an unexpected decline in consumer confidence to a four-month low. Whirlpool and Coach Inc. led the retreat, each down more than 6 percent. Under Armour Inc. and Nike Inc. slid at least 1 percent.
Coach fell 6.3 percent, the biggest drop since last June, after posting North American comparable sales that fell below analysts’ targets in the third quarter. Currency effects also took a toll last quarter, reducing the value of its overseas revenue.
Container Store Group Inc. slumped 14 percent, the most since January, after fourth-quarter profit and sales trailed analysts’ estimates.
Jacobs Engineering Group Inc. dropped 5.7 percent, its biggest slide in a year, and Parker-Hannifin Corp. declined 3.7 percent after the industrial companies cut their full-year profit views.