U.S. Stocks Rise on Higher Earnings After Two Weeks of Declines
April 23, 2011, 6:48 AM EDTBy Whitney Kisling
April 23 (Bloomberg) -- U.S. stocks climbed, halting a two- week drop for the Standard & Poor’s 500 Index, as companies from Intel Corp. to Johnson & Johnson posted earnings that exceeded estimates and housing starts increased.
Intel, Johnson & Johnson and Wynn Resorts Ltd. added at least 5.8 percent after their quarterly adjusted earnings beat analysts’ projections by at least 7.3 percent this past week. D.R. Horton Inc. advanced 4 percent for the week as housing starts exceeded estimates. Halliburton Co. rallied 7.8 percent after Moody’s Investors Services said the company is less likely to face fines from the Gulf of Mexico oil spill.
The S&P 500 advanced 1.3 percent to 1,337.38 in the week. The index is up 0.9 percent in April. The Dow Jones Industrial Average rose 164.16 points, or 1.3 percent, to 12,505.99 in the week after it slipped 0.3 percent the previous week. The gain sent the Dow to the highest level since June 5, 2008 on April 21. U.S. markets were closed April 22 for the Good Friday holiday.
“It’s going to be another strong quarter of earnings,” said Jeffrey Lindsey, a portfolio manager at BlackRock Inc., which oversees $3.65 trillion as the world’s largest asset manager. The market is cheap, he said. “It could be that people are surprised with the strength of the stock market, despite clearly important macro concerns just because the starting point is still inexpensive.”
The S&P 500 has risen 6.3 percent in 2011, and is up 6.4 percent since reaching 1,256.88, the low for the year, on March 16. Corporate earnings are exceeding projections by 9.8 percent so far this season, while economic reports from housing to manufacturing are boosting investor confidence this month. The index is trading at 13.7 times the estimated operating earnings of its companies, compared with an average of 18.1 times reported profit over the last decade.
Technology Leads
Technology shares added 3 percent over the past four sessions as Intel, the biggest chipmaker, Apple Inc. and International Business Machines Corp. all posted results that exceeded estimates. S&P 500 financial companies are posting the best results so far in the first-quarter reporting season, exceeding estimates by 14 percent, according to data compiled by Bloomberg.
SLM Corp. had the third-biggest increase in the S&P 500 this past week, adding 10 percent to $16.31. The student lender known as Sallie Mae declared its first dividend since 2007 and reported first-quarter earnings that exceeded analyst estimates.
Intel Corp., the world’s biggest chipmaker, helped lead technology stocks higher after forecasting second-quarter sales that may top analysts estimates, evidence of booming demand for machines that deliver computing over the Internet. First-quarter earnings and sales both surpassed estimates and the Santa Clara, California-based company rose 8.7 percent in the week, the biggest weekly advance since July 2009.
Apple, Yahoo
Apple Inc. climbed 7.1 percent in the week, while Yahoo! Inc. advanced 1.4 percent, after they reported better-than- forecast results.
Johnson & Johnson, the world’s second-biggest seller of health products, increased its annual earnings forecast after quarterly profit beat estimates on drug sales and a weak dollar. The shares rose the most since 2008 the day they reported and advanced 5.8 percent for the week.
Wynn Resorts rallied 6.7 percent and Wynn Macau Ltd., a unit of the casino operator founded by billionaire Steven Wynn, rose 2.9 percent in the week.
“We are seeing excellent results thus far,” said David Kostin, Goldman Sachs Group Inc.’s chief U.S. equity strategist. “You have an expanding economy, strong earnings growth and you have positive flows” of money into the market.
Housing Starts, AAA Rating
Commerce Department figures showed this past week 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.
Stocks fell one day this past week -- on April 18, when the S&P 500 lost 1.1 percent, the biggest daily slide since March 16. Standard & Poor’s Ratings Service put a “negative” outlook on the nation’s AAA credit rating, assigning a one-in-three chance of a ratings cut in the next two years, because of rising budget deficits and debt.
Under President Barack Obama’s fiscal year 2012 budget, released in February, the total amount subject to the debt ceiling would be $20.8 trillion in 2016. The plan House Republicans approved April 15, written by Budget Committee Chairman Paul Ryan of Wisconsin, would need a debt ceiling of at least $19.5 trillion, according to data compiled by Bloomberg Government.
‘Material Risk’
“We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium-and long-term budgetary challenges by 2013,” New York-based S&P said in its report. “If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.”
Biogen Idec Inc., the world’s largest maker of multiple sclerosis medicines, surged the most in the S&P 500 this past week, advancing 20 percent to $99.70. Data from the third and final stage of studies showed the company’s multiple sclerosis pill reduced the proportion of patients whose disease flared up by 49 percent over two years compared with a placebo.
Halliburton and Cameron International Corp., which provided cement work and equipment involved in last year’s Gulf of Mexico oil spill, are less likely to face fines than other companies, Moody’s Investors Service said. Halliburton rose 7.8 percent to $50.48 in the week, while Cameron International advanced 2.2 percent to $54.53.
--With assistance from Carol Massar in New York and Alexis Xydias in London. Editors: Joanna Ossinger, Dick Schumacher.
To contact the reporter on this story: Whitney Kisling in New York at wkisling@bloomberg.net.
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
