Bloomberg News

U.S. Stocks Erase Losses as Apple Offsets Earnings

October 22, 2012

U.S. Stocks Decline as Investors Watch Corporate Earnings

Caterpillar Inc., the biggest maker of construction and mining equipment, retreated 1.6 percent after forecasting sales growth that is the slowest in four years. Photographer: Daniel Acker/Bloomberg

U.S. stocks erased earlier losses, sending the benchmark Standard & Poor’s 500 Index higher for the first time in three days, as an advance in Apple (AAPL:US) Inc. shares overshadowed disappointing corporate results.

Apple, the world’s most valuable company, jumped 4 percent and paced gains in technology companies. Peabody Energy Corp. (BTU:US), the largest U.S. coal producer by volume, surged 12 percent after earnings beat projections. Freeport-McMoRan Copper & Gold Inc. (FCX:US), the world’s biggest publicly traded copper producer, and SunTrust Banks Inc. (STI:US) retreated at least 1.4 percent after reporting earnings that missed analysts’ estimates.

The S&P 500 rose less than 0.1 percent to 1,433.81 at 4 p.m. New York time, after falling 0.8 percent earlier. The Dow Jones Industrial Average added 2.38 points, or less than 0.1 percent, to 13,345.89. The Nasdaq-100 Index rose 0.6 percent to 2,694.56. Volume for exchange-listed stocks in the U.S. was 5.8 billion shares, or 3.4 percent below the three-month average.

“It really comes down to earnings at this point,” said Peter Jankovskis, co-chief investment officer for Oakbrook Investments in Lisle, Illinois, which manages more than $3 billion. He spoke in a telephone interview. “We’ve seen many companies beating earnings estimates. Yet investors are keeping an eye on their ability to grow revenue.”

Third-quarter results at about 69 percent of S&P 500 companies beat analysts’ estimates, according to data compiled by Bloomberg. Sales missed forecasts at 59 percent of companies, the data showed.

Presidential Race

Investors also watched the latest data on the presidential race. Treasuries extended last week’s decline as President Barack Obama and Republican challenger Mitt Romney were tied at 47 percent in a national NBC News/Wall Street Journal poll of likely voters before a final televised debate tonight.

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.

Technology shares had the biggest gain in the S&P 500 among 10 industries, adding 1 percent. Apple, which will announce a new, smaller version of its iPad tomorrow, people with knowledge of the matter have said, jumped 4 percent to $634.03. The shares had slumped 6.2 percent over the previous three days.

Peabody gained 12 percent to $28.95. Higher natural gas prices encouraged some electricity generators to resume burning coal from the Powder River Basin, Mitesh Thakkar, an analyst at FBR & Co. in Arlington, Virginia, wrote in an Oct. 18 note.

Ancestry.com

Ancestry.com Inc. (ACOM:US) surged 8 percent to $31.51. Permira Advisers LLP agreed to buy Ancestry.com in a transaction valued at about $1.6 billion, gaining the world’s largest family- history website.

Caterpillar (CAT:US) Inc. rose 1.5 percent to $85.08, rebounding from a loss of as much as 1.9 percent. The world’s largest maker of construction and mining equipment forecast sales growth for 2013 that is the slowest in four years as the global economy decelerates.

Supervalu Inc. (SVU:US) jumped 45 percent, the most since at least 1980, to $3.17. The grocery chain pursuing strategic alternatives rose after a JPMorgan Chase & Co. analyst upgraded the company’s bonds on the possibility of a buyout.

OpenTable Inc. (OPEN:US) climbed 6.4 percent to $46.36. The largest U.S. online restaurant-reservation service rose on a Reuters report that suggested it may be a takeover target for Yahoo! Inc. Anne Espiritu, a spokeswoman for Yahoo, didn’t respond to a request for comment, and Tiffany Fox, a spokeswoman for OpenTable, declined to comment.

Freeport’s Results

Freeport-McMoRan dropped 1.5 percent to $40.58. Earnings excluding $85 million of credits for adjustments to environmental obligations and $100 million of tax claims were 68 cents a share, trailing the 73-cent average estimate of 21 analysts surveyed by Bloomberg. Gold sales fell 51 percent to 202,000 ounces, missing a July forecast of 225,000 ounces.

SunTrust Banks slumped 3.4 percent to $27.67. Net income for the third quarter was $1.08 billion, or $1.98 per share, compared with $215 million, or 39 cents, a year earlier. The average estimate of 27 analysts surveyed (STI:US) by Bloomberg was for profit of $2.02 per share. The results included $753 million, or $1.40 per share, of previously announced actions, including the sale of its stake in Coca-Cola Co., a mortgage repurchase provision, the sale of non-performing loans and the movement of delinquent and current loans to held for sale.

Monster Beverage

Monster Beverage Corp. (MNST:US) slumped 14 percent to $45.73. Its energy drinks have been cited in the deaths of five people in the past year, according to incident reports that doctors and companies submit to the U.S. Food and Drug Administration. Evan Pondel, a spokesman for Monster, said the company is unaware of any fatality that has been caused by its drinks.

Coach Inc. (COH:US) retreated 3.3 percent to $54.17. The largest U.S. luxury handbag maker’s fiscal first-quarter earnings report tomorrow may show that adjusted per-share profit growth slowed to about 3.4 percent from 16 percent a year earlier, according to the average of 28 analysts’ estimates (COH:US) compiled by Bloomberg. Sales growth may ease to 10 percent from 15 percent.

Overseas Shipholding Group Inc. (OSG:US) tumbled 62 percent to $1.23, the lowest on record. The largest U.S. tanker company said it’s evaluating options including filing for bankruptcy protection amid the review of a tax issue.

U.S. stocks are beating every major asset class for the first time in 17 years even as economic growth weakens and profits rise at the slowest rate since 2009.

Five Decades

The S&P 500 (SPX) has rallied 14 percent in 2012, beating Treasuries, corporate bonds, commodities, the dollar and equities in Asia and Europe, data compiled by Bloomberg show. The last time that happened, in 1995, the S&P 500 was posting the biggest annual advance of the last five decades. With a price-earnings ratio close to today’s level, the index gained another 93 percent in the next 2 1/2 years.

For all the concern about unemployment and manufacturing growth, the best assets this year remain American companies after unprecedented steps by the Federal Reserve to support growth. Forecasts for a rebound in the U.S. economy and the central bank’s pledge to keep interest rates near zero for years convinced bulls the S&P 500 will extend gains. Bears say political gridlock will drag down prices after monetary stimulus wears off.

“We see good earnings growth and improving economic outlook, we see good equity valuations and easy monetary policy, we see skeptical investors and low positioning in equity assets,” said Max King, a multi-asset strategist at Investec Asset Management in London, which oversees $100 billion. “This is a major green light for equities and the fact that people don’t see it, is great.”

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


Later, Baby
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

Companies Mentioned

  • AAPL
    (Apple Inc)
    • $524.94 USD
    • 5.93
    • 1.13%
  • BTU
    (Peabody Energy Corp)
    • $16.71 USD
    • -0.15
    • -0.9%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus