S&P 500 Erases Loss in Final Minutes of Trading on Bank Rally
January 20, 2012, 5:08 PM ESTBy Rita Nazareth
Jan. 20 (Bloomberg) -- Most U.S. stocks rose, erasing a loss for the Standard & Poor’s 500 Index in the final minutes of trading, as banks gained and results from International Business Machines Corp. to Intel Corp. boosted technology shares.
JPMorgan Chase & Co. and Bank of America Corp. added at least 1.1 percent. IBM, Intel and Microsoft Corp. rose more than 2.9 percent as results beat projections. General Electric Co. closed unchanged, rebounding from a 2.5 percent slump, as profit topped estimates while sales were curbed by Europe. Google Inc. tumbled 8.4 percent as earnings missed projections. American Express Co. slid 1.8 percent on lower-than-forecast sales.
Seven stocks gained for every five falling on U.S. exchanges at 4 p.m. New York time. The S&P 500 rose 0.1 percent to 1,315.38, extending its gain since Jan. 13 to 2 percent. The index rose for a third week, capping the longest streak since October. The Dow Jones Industrial Average climbed 96.50 points, or 0.8 percent, to 12,720.48. IBM, which comprises 11 percent of the share-price weighted Dow, added 60.55 points to the index.
“It’s a mixed bag of earnings,” Bruce Bittles, chief investment strategist at Milwaukee-based Robert W. Baird & Co., which oversees $85 billion, said in a telephone interview. “Earnings growth is going to decline, but that’s already built into the market to a certain extent. If earnings don’t collapse, it won’t be a problem.”
S&P 500 companies, which beat profit estimates in the previous 11 quarters, will report a 3.4 percent increase in per- share earnings during the September-December period, analysts’ forecasts compiled by Bloomberg show. Of the 51 companies in the S&P 500 that reported results since Jan. 9, 33 posted per-share earnings that beat projections, Bloomberg data show.
Economic Data
Sales of previously owned U.S. homes rose for a third month in December to the highest level since January 2011, a sign the housing market ended last year with momentum. Greek officials and private creditors entered a third day of negotiations on a debt swap deal that’s crucial to lowering the country’s borrowings and freeing up a second round of international aid.
Financial shares had the biggest gain among 10 S&P 500 groups, adding 0.7 percent. JPMorgan rose 1.2 percent to $37.36. Bank of America advanced 1.6 percent to $7.07.
“The upturn is around the corner,” Chris Hyzy, the New York-based chief investment officer at U.S. Trust Co., which oversees about $325 billion, said in a telephone interview. The rebound in banks “is a good sign. The financials have become a more stable sector. That’s the first sign that within six to nine months you could start to see the turnabout in the financial sector.”
IBM gained 4.4 percent to $188.52 after forecasting 2012 earnings that beat analysts’ estimates as fourth-quarter profit rose 4.4 percent because of rising software demand.
Intel, Microsoft
Intel increased 2.9 percent to $26.38. The chipmaker predicted first-quarter revenue that may top analysts’ estimates, signaling that the shortage of disk drives that throttled personal computer production may be ending.
Microsoft added 5.7 percent to $29.71. The company’s Xbox business got a boost from Christmas shoppers, who snapped up its video-game consoles and Kinect sensor controllers, and signed up for the Xbox Live online service.
GE closed unchanged at $19.15. Profit topped estimates after the company’s industrial order backlog rose to a record $200 billion even as weaker demand in Europe hindered sales in health care.
Google tumbled 8.4 percent to $585.99. Chief Executive Officer Larry Page is moving into new markets to ignite growth outside Google’s traditional search-based business. That effort contributed to an 8 percent drop in the average price Google gets when users click an ad, because it charges less for ads on mobile devices and in emerging markets, said Herman Leung, an analyst at Susquehanna Financial Group.
American Express
American Express lost 1.8 percent to $50.04. The company reported fourth-quarter revenue of $7.74 billion, missing the average analyst projection of $7.9 billion, data compiled by Bloomberg show. Profit excluding some items beat analysts’ estimates as card spending reached a record.
Capital One Financial Corp. slumped 5.6 percent to $46.03. The credit-card issuer seeking approval to purchase ING Groep NV’s U.S. online bank said fourth-quarter profit fell 42 percent as expenses rose.
Fifth Third Bancorp sank 2.9 percent to $13.17. Ohio’s largest lender reported fourth-quarter sales of $1.46 billion, missing the average analyst estimate of $1.52 billion, data compiled by Bloomberg show.
U.S. stocks are caught in “a vicious circle” of slower trading and bigger swings in prices, according to Pierre Lapointe, Brockhouse & Cooper Inc.’s global macro strategist.
Slowest Since 2008
Trading for the 50 days ended yesterday was the slowest since at least 2008, when Bloomberg started compiling the data, at 6.67 billion shares a day.
Similar averages for companies in the S&P 500 and the Dow declined this week to the lowest levels since 1999 and 2000, respectively, according to Bloomberg’s figures. They reflect trading totals for each stock on the New York Stock Exchange or Nasdaq Stock Market, depending on where it’s listed.
“Getting in or out of a stock causes more price variation” because fewer shares are trading, Lapointe and Alex Bellefleur, a financial economist, wrote yesterday in a report from their Montreal-based firm. “This increases volatility.”
The Chicago Board Options Exchange Volatility Index, or the VIX, closed above 20 for almost six months before dropping below the threshold yesterday. The time period was the longest for the benchmark gauge of U.S. stock options since 2009.
--With assistance from David Wilson in New York. Editors: Jeff Sutherland, Nick Baker
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
