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U.S. stocks rose for a fourth straight day as improving consumer confidence and earnings overshadowed lower-than-forecast economic growth and a downgrade of Spain’s credit rating. The dollar weakened versus 14 of 16 major peers while Treasuries were little changed.
The Standard & Poor’s 500 Index added 0.2 percent to 1,403.36 at 4 p.m. in New York and the Stoxx Europe 600 Index (SXXP) closed up 0.8 percent. Ten-year Treasury yields were little changed at 1.93 percent after earlier dipping to a 12-week low. The euro strengthened 0.2 percent to $1.3242 as it gained for a fourth day. Spain’s bonds fell as the nation lost its A rating at S&P, while Italian bonds erased earlier losses.
Amazon.com Inc. posted earnings-per-share that quadrupled (AMZN) the average analyst estimate, joining about three quarters of S&P 500 companies to exceed forecasts so far in the reporting season and leading a gauge of retailers in the index to a record. The Commerce Department said the U.S. economy grew at a 2.2 percent annual rate, below the 3 percent pace at the end of last year and the 2.5 percent median forecast of economists. The report showed a smaller contribution from inventories overshadowed higher consumer spending.
“The economy is not gangbusters, but the chance of a recession is dimming,” Michael Mullaney, who helps manage $9.5 billion as chief investment officer at Fiduciary Trust in Boston, said in a telephone interview. “We’re encouraged by the earnings surprises. We’re not happy with today’s GDP data, but it shows domestic spending being on track.”
The Thomson Reuters/University of Michigan’s final index of sentiment increased to 76.4 from 76.2 last month. The gauge was projected to hold at the 75.7 level initially reported earlier this month, according to the median forecast of economists.
Amazon.com (AMZN) surged 16 percent, the most since 2009. Expedia Inc. surged 24 percent for the best gain in the S&P 500 after the online travel agency reported adjusted earnings-per-share that almost doubled the average analyst estimate. Starbucks Corp. (SBUX) fell 5.3 percent as the biggest coffee-shop chain reported same-store sales that trailed (SBUX) projections. Procter & Gamble Co. slid 3.6 percent as the largest consumer-products company cut its profit estimate.
The S&P 500 rallied almost 1.8 percent this week after Apple Inc. (AAPL) posted earnings that almost doubled (AAPL), sending the index to its biggest gain of the week on April 25. The index is down about 0.4 percent in April, threatening to snap a four- month streak of gains, its longest since 2009.
Investors are “getting spooked by uncertainty” surrounding the U.S. budget deficit and reemergence of Europe’s debt crisis, mirroring concerns at this time of year in 2011 and 2010, according to Thomas Lee, chief U.S. equity strategist at JPMorgan Chase & Co. in New York. The S&P 500 tumbled 19 percent from its 2011 high in April to its low in October. In 2010, it slid 16 percent from an April peak to its July low. This year, it has slipped about 1 percent from an almost four-year high on April 2.
While the parallels of 2012 to 2011 “are striking, the downside risks, in our view, are lower,” Lee wrote in a note to clients, saying that the U.S. budget standoff and Japan’s tsunami and nuclear disaster aggravated concerns last year. “In a nutshell, same frequency, different amplitude,” he wrote.
The Stoxx 600 erased an earlier decline of as much as 0.9 percent as construction, financial-services and bank shares led gains. Sales at Vinci SA, Europe’s largest builder, topped analyst estimates, while Sandvik AB, the world’s biggest maker of metal-cutting tools, reported first-quarter profit that beat projections. Earnings have slipped 1.7 percent on average for the 128 companies in the Stoxx 600 that released results since April 10, while still beating analyst estimates by 6.9 percent.
“For the past few days, the market has been focusing on earnings and this is an element of support,” said Guillaume Duchesne, an equity strategist at BGL BNP Paribas SA in Luxembourg. “The debut of earnings season has been impressive. There are signs of hope in the U.S. economy.”
Italy sold 4.92 billion euros ($6.5 billion) of 2017 and 2022 bonds, close to the maximum target, even as its borrowing costs rose.
The two-year Italian note yield erased earlier gains to trade little changed at 3.25 percent as the government also sold debt maturing in 2016 and 2019. The Spanish 10-year yield climbed five basis points to 5.88 percent and was above 6 percent earlier, as S&P cut the nation’s sovereign rating two steps yesterday, to BBB+ from A, on concern the country will have to provide further fiscal support to the banking sector. A report today showed unemployment surged to 24.4 percent, the highest in 18 years.
Oil rose 0.3 percent to $104.88 a barrel in New York, reversing losses in the last hour of floor trading. Gold futures advanced 0.3 percent to $1,664.80 an ounce on the Comex in New York. Copper rallied 1.5 percent to $3.8295 a pound for a fourth straight advance.
Emerging-market stocks rose, erasing an earlier decline. The MSCI Emerging Markets Index (MXEF) advanced 0.4 percent. The gauge is still poised for a sixth weekly retreat, the longest losing streak since October 2008. Russia’s Micex Index gained 1.6 percent, and Poland’s WIG20 Index climbed 1.2 percent.
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