U.S. stocks rose for the week as better-than-estimated economic data triggered a three-day rally, before gains were trimmed in the final two sessions amid worse- than-forecast results at Google Inc. and Microsoft Corp. (MSFT:US)
The Standard & Poor’s 500 Index ended the week with a two- day slump as Google and Microsoft sank at least 1.9 percent. Commodity and financial companies climbed the most among 10 S&P 500 (SPX) groups as Citigroup Inc. (C:US) posted a surprise profit and Murphy Oil Corp. said it will spin off its U.S. refined fuels business. PulteGroup Inc. (PHM:US) surged 15 percent, driving homebuilders to the biggest advance since June, after new-home construction jumped to a four-year high.
The S&P 500 added 0.3 percent to 1,433.19 for the week, trimming a three-day gain of 2.3 percent. The Dow Jones Industrial Average climbed 14.66 points, or 0.1 percent, to 13,343.51. The gauges are up 14 percent and 9.2 percent, respectively, for the year.
“It’s a choppy environment,” Ralph Shive, the South Bend, Indiana-based manager of the $1.3 billion Wasatch-Large Cap Value Fund, said in a phone interview. “Housing is a welcome uptick. The global economy is slowing down and technology has been one of the biggest culprits.”
Equities gained as reports showed retail sales and industrial production increased more than forecast in September and new-house construction jumped to the highest since 2008. Better-than-expected data have driven the Bloomberg Economic Surprise Index, which compares 38 indicators with analysts’ predictions, to 0.19, the highest level since April 13. The index this week turned positive for the first time since May.
The S&P 500 rallied as much as 15 percent from a June low amid unprecedented monetary stimulus from the Federal Reserve to boost economic growth. Since peaking at its highest level since December 2007 on Sept. 14, the index has been stuck in a 37- point range on a closing basis.
The drop on the final day of the week took the S&P 500 below its average in the past 50 days for the first time since June 28 on a closing basis, ending a 78-day streak that was the second-longest since the bull market began in March 2009, data compiled by Bloomberg show.
“The market has been decently resilient,” Tim Hoyle, director of research at Radnor, Pennsylvania-based Haverford Trust Co., which manages $6 billion, said in an Oct. 18 phone interview. “We went into the earnings season with very dire expectations. So far they haven’t been specifically horrible, but there are definitely specific cases where we do see earnings came in weaker than expected.”
Per-share profits have exceeded analysts’ estimates at about 69 percent of the 117 companies in the S&P 500 that released results so far, according to data compiled by Bloomberg. Earnings have increased less than 0.1 percent for the group on a 1.8 percent gain in sales.
Forecasts for third-quarter profits have grown more optimistic as the earnings season progresses. Analysts now project a 0.3 percent drop in S&P 500 earnings for the period, according to a Bloomberg survey, compared with a decrease of 2 percent predicted on Sept. 28.
An index of computer and Internet stocks slumped 2.4 percent for the biggest retreat for the week among 10 S&P 500 industry groups. Sales by technology companies have missed analysts’ estimates by an average 1.4 percent during the earnings season, worse than any other groups, data compiled by Bloomberg show.
Google (GOOG:US) tumbled 8.5 percent for the week, the most in more than a year, to $681.79. The operator of the largest search engine reported third-quarter revenue, minus some items, of $11.3 billion, short of the average estimate for $11.8 billion, according to data compiled by Bloomberg.
The biggest seller of search-based advertising hasn’t yet translated to mobile devices the success it’s had with desktop advertising. The average amount advertisers paid each time a user clicks on a promotion declined about 15 percent from a year earlier, and was 3 percent less than the prior period.
Microsoft slipped 1.9 percent to $28.64. The largest software maker reported fiscal first-quarter sales and profit that missed estimates (MSFT:US) on declining sales of Windows, its flagship operating system.
International Business Machines Corp. (IBM:US) fell 7 percent to $193.36 for the biggest retreat in the Dow. The largest computer-services company reported third-quarter revenue that fell short of estimates as clients delayed orders.
Advanced Micro Devices Inc. (AMD:US) plunged 20 percent, the most since November 2008, to $2.18. The second-largest maker of processors for personal computers forecast fourth-quarter sales that will miss analysts’ estimates and said it will cut 15 percent of its staff.
Financial shares in the S&P 500 advanced 2 percent during the week as the group’s earnings exceeded analysts’ estimates by an average 13 percent, the most among the 10 industries, data compiled by Bloomberg show.
Citigroup rose 6.9 percent to $37.16. The lender reported a surprise (C:US) third-quarter profit and a surge in bond-trading revenue that beat analysts’ estimates. The company’s board replaced Chief Executive Officer Vikram Pandit with Michael Corbat, who ran the Europe, Middle East and Africa unit.
Pandit was ousted after the board concluded he had mismanaged operations, leading to setbacks with regulators and a loss of credibility with investors, a person with knowledge of the discussions said. The change prompted Michael Mayo, a CLSA Ltd. analyst who spent the past five years telling investors to sell Citigroup stock, to reverse his stance.
Travelers Cos. rallied 7 percent to $73.51 for the biggest increase in the Dow. The insurer said its profit more than doubled on lower claims costs tied to natural disasters.
Bank of New York Mellon Corp. (BK:US), the world’s largest custody bank, climbed 8.1 percent to $24.68 after earnings increased a bigger-than-estimated 11 percent amid an expansion in customer assets.
Murphy Oil (MUR:US) advanced 6 percent to $62.20. The energy company plans to spin off its U.S. refined fuels business, which provided 85 percent of its 2011 revenue, after hedge fund Third Point LLC said the company should shed assets. The spinoff includes distribution terminals and ethanol plants, the company said.
An S&P index of homebuilders jumped 8.8 percent to the highest level since August 2007. PulteGroup soared 15 percent to $17.89 while Lennar Corp. (LEN:US) gained 8.3 percent to $38.73.
Johnson & Johnson (JNJ:US) climbed 5.7 percent to $71.86. The world’s biggest maker of health-care products beat analysts’ earnings estimates on demand for new prescription medicines and medical tools acquired with the Synthes Inc. purchase. The company raised its 2012 forecast.
Dean Foods Co. (DF:US), the largest U.S. dairy processor, rose the most in the S&P 500, surging 22 percent to $18.30. Its WhiteWave Foods Co. unit, the maker of Silk almond milk, filed to raise as much as $320 million as Dean tries to generate cash to pay off debt.
Apollo Group Inc. (APOL:US) tumbled 29 percent, the most in the S&P 500, to $20.39. The largest U.S. for-profit college chain forecast revenue for fiscal 2013 that missed analysts’ estimates and said it would close campuses and cut jobs.
McDonald’s Corp. (MCD:US) lost 4.1 percent, the most since June, to $88.72. The world’s largest restaurant chain by sales reported third-quarter profit fell 3.5 percent. Sales at U.S. stores open at least 13 months rose 1.2 percent in the quarter, marking the slowest growth in 11 quarters.
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