U.S. Stocks Advance as Housing Data, Earnings Exceed Forecasts
April 19, 2011, 4:41 PM EDTBy Rita Nazareth
April 19 (Bloomberg) -- U.S. stocks rose, as benchmark indexes rebounded from the worst declines in a month, after housing starts increased and earnings beat estimates at companies from Johnson & Johnson to Steel Dynamics Inc.
A gauge of homebuilders in S&P indexes gained 2.2 percent as all of its 12 stocks advanced. Johnson & Johnson, the second- biggest seller of health products, rallied 3.7 percent, the most in the Dow Jones Industrial Average. Steel Dynamics added 5.7 percent as its profit also beat projections. Freeport-McMoRan Copper & Gold Inc. rose 2.2 percent, pacing gains in raw- material producers, as gold touched a record $1,500.50 an ounce.
The Standard & Poor’s 500 Index added 0.6 percent to 1,312.62 at 4 p.m. in New York. Yesterday, the benchmark gauge slid 1.1 percent as S&P Ratings Service cut the long-term U.S. credit outlook. The Dow average advanced 65.16 points, or 0.5 percent, to 12,266.75 today.
“Buy the dips, sell the rips,” said Burt White, who helps oversee $284 billion as chief investment officer at LPL Financial Corp. in Boston. “This market has been very resilient. Things are better than people think as far as the economy goes. Today’s housing numbers were pretty good. You’ve got a bellwether such as Johnson & Johnson coming out with good news. The market is excited to see that.”
Corporate Profits
The S&P 500 has risen 4.4 percent in 2011, extending last year’s 13 percent rally, amid government stimulus measures and corporate earnings that beat analysts’ estimates. Earnings-per- share beat analysts’ estimates at about 76 percent of the 33 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg.
About 6.6 billion shares changed hands on U.S. exchanges, compared with the average over the past 50 days of 7.6 billion, as trading slowed for the Passover holiday.
Stock futures extended gains before the open of regular trading as Commerce Department figures showed that work began on 549,000 houses at an annual pace, up 7.2 percent from the prior month and exceeding the 520,000 median forecast of economists surveyed by Bloomberg News. Starts fell 19 percent in February to the lowest level in almost two years.
Homebuilders rallied. PulteGroup Inc., the largest U.S. homebuilder by revenue, gained 5.1 percent to $8.24. Lennar Corp. added 2.5 percent to $18.79.
“The economy is in a sustainable recovery,” said Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, who helps manage $275 billion. “The market is trading on fundamentals. Earnings are going to continue to surprise on the plus side.”
Record Streak
Investors counting on a record streak of higher-than- forecast profits to keep driving share prices may get clues from 79 companies reporting this week with the best history of earnings surprises.
Apple Inc., maker of the iPhone, and General Electric Co., the world’s biggest builder of jet engines, are among companies that have topped analysts’ projections in the last four quarters and had estimates boosted since February, according to data compiled by Bloomberg. S&P 500 companies will probably report average net income growth of 10 percent in the period, data compiled by Bloomberg show.
“You can call it momentum, progress or improvement, but there’s always interest in companies that can do better and better each quarter, come up with something new, pull a rabbit out of the hat,” said John Carey, a Boston-based money manager at Pioneer Investments, which oversees about $250 billion. “At the same time, there were some unusual, striking events in the first quarter that upset and distracted investors.”
Earnings
Companies in the S&P 500 have beaten analyst earnings estimates for eight straight quarters, the most since at least 2006, helping propel the index as much as 99 percent from the market bottom on March 9, 2009, data compiled by Bloomberg show.
Johnson & Johnson rallied 3.7 percent to $62.69. Earnings excluding one-time items of $1.35 topped the $1.26 average estimate of 16 analysts surveyed by Bloomberg. J&J forecast full-year earnings of $4.90 to $5 a share, more than an outlook for $4.80 to $4.90 in January as results were boosted by new drugs and a weaker dollar. Twenty-one analysts surveyed by Bloomberg estimated an average of $4.85.
A gauge of raw-material producers had the biggest gain in the S&P 500 within 10 industries, rallying 1.8 percent. Gold futures for June delivery rose $2.20, or 0.1 percent, to settle at $1,495.10 an ounce in New York after topping $1,500 during the day.
Debt Concerns
U.S. debt concerns weighed on the dollar, boosting demand for the precious metal as an alternative investment. The greenback dropped against the euro on speculation that the European Central Bank will continue to raise borrowing costs even as some nations struggle to contain sovereign debt.
Steel Dynamics climbed 5.7 percent to $18.46. The producer of the metal posted a first-quarter profit of 46 cents a share, exceeding the average analyst estimate by 5 cents.
Zions Bancorporation rose 3.9 percent to $23.85. The Salt Lake City-based bank reported first-quarter profit of 9 cents a share, excluding certain items. Analysts had estimated a loss of 15 cents a share on average.
Harley-Davidson Inc. declined 5.3 percent to $37.61. The biggest U.S. motorcycle maker reported first-quarter earnings from continuing operations were 51 cents a share, missing the 55-cent average estimate by analysts.
Goldman Sachs Group Inc. fell 1.3 percent to $151.86. The fifth-biggest U.S. bank was cut to “neutral” from “buy” at Rochdale Securities LLC.
Goldman posted a 21 percent drop in first-quarter profit, a smaller decline than analysts estimated, as fixed-income trading revenue more than doubled from a weak fourth quarter. Net income fell to $2.74 billion from $3.46 billion a year earlier, Goldman Sachs said in a statement. Earnings per share, which includes the cost of preferred dividend payments to Warren Buffett’s Berkshire Hathaway Inc., dropped to $1.56 from $5.59. The average estimate of analysts was for 81 cents.
--With assistance from Clyde Eltzroth in New York. Editors: Joanna Ossinger, Michael Regan
To contact the reporter on this story: Rita Nazareth in Sao Paulo at rnazareth@bloomberg.net
To contact the editor responsible for this story: Michael Regan at mregan12@bloomberg.net
