Bloomberg News

U.S. Stocks Rise as Earnings Overshadow Europe Concerns

February 06, 2013

S&P 500 Caps Longest Weekly Advance Since August Amid Earnings

The Standard & Poor’s 500 Index advanced for a sixth straight week, capping the longest winning streak since August, amid better-than-estimated corporate earnings as European leaders reached a budget agreement. Photographer: Scott Eells/Bloomberg

U.S. stocks rose, erasing earlier declines, as better-than-estimated earnings overshadowed concern over Europe’s debt crisis before a gathering of euro-area leaders tomorrow.

Time Warner Inc. (TWX:US) surged 4.1 percent after affiliate fees from cable-TV providers boosted profit. Walt Disney Co. gained 0.4 percent after sales topped estimates (DIS:US) and its interactive unit posted its first profit since 2009. GameStop Corp. plunged 6 percent after a report said Microsoft Corp.’s next Xbox console will require an Internet connection. DreamWorks Animation SKG Inc (DWA:US). dropped 3.9 percent after the company pulled one movie from its schedule and delayed the release of another.

The Standard & Poor’s 500 Index rose 0.1 percent to 1,512.12. The Dow Jones Industrial Average gained 7.22 points, or 0.1 percent, to 13,986.52. More than 6.5 billion shares changed hands on U.S. exchanges today, or 5.1 percent above the three-month average.

“Most of the bad news is well-known and the better news is still playing,” David Sowerby, fund manager at Boston-based Loomis Sayles & Co., said in a telephone interview. His firm oversees about $180 billion. “In a tug-of-war with Europe, the good news, which is earnings, respectable valuations, and continued low interest rates, is winning the war.”

U.S. equities slumped earlier in the day amid concerns Europe’s debt crisis may worsen. European Central Bank President Mario Draghi will head a meeting of policy makers tomorrow in Frankfurt as euro-area leaders gather for a summit in Brussels. The euro has retreated from a 14-month high against the dollar reached on Feb. 1 as Spain’s premier faced opposition calls to resign.

Record High

The S&P 500 has rallied 6 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than- estimated earnings. The benchmark equity gauge is 3.4 percent below its record high reached in October 2007. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.

Visa Inc., News Corp. and Prudential Financial Inc. are among 24 companies in the S&P 500 reporting earnings today. About 74 percent of the 303 index members that have released results so far in the earnings season exceeded profit projections, and 67 percent beat sales estimates, data compiled by Bloomberg show.

Time Warner, owner of the HBO cable network and the Warner Bros. film studio, rose $2.05 to $52.01. Chief Executive Officer Jeffrey Bewkes has concentrated the company’s growth strategy on its TV business. He fostered the development of costly shows, such as HBO’s “Game of Thrones,” and signed rights deals for major sports programming, including the NCAA basketball tournament, to command higher fees from pay-TV providers such as Comcast Corp. and DirecTV.

Buyback Program

The New York-based company also announced a new buyback program and boosted its dividend 11 percent to almost 29 cents a share, up from 26 cents.

Disney, the world’s largest entertainment company, advanced 23 cents to $54.52. The owner of the “Star Wars” and “Avengers” franchises said first-quarter profit adjusted for some items was 79 cents a share, topping the 77-cent average of 26 analysts’ estimates compiled by Bloomberg. Sales rose 5.2 percent to $11.3 billion.

Ralph Lauren Corp (RL:US). surged 5.9 percent to $174.63. The retailer of its namesake brand clothing reported fiscal third- quarter profit that topped analysts’ estimates, helped by lower- than-expected expenses and cheaper cotton.

3M Jumps

3M Co. jumped 1.2 percent to $102.69, for the biggest advance in the Dow. The maker of products ranging from Scotch tape to dental braces authorized a stock buyback program of as much as $7.5 billion and increased the quarterly dividend (MMM:US) by 7.6 percent.

Aflac Inc. fell 4.3 percent to $51.18 after the largest seller of supplemental health insurance forecast profit that fell short of analysts’s estimates. A weaker yen is pressuring results at Aflac, which gets most of its revenue in Japan.

GameStop (GME:US) tumbled $1.61 for the second-biggest decline in the S&P 500 to $25.20. The world’s largest video-game retailer surged 16 percent over the previous three days. Microsoft’s next console will include technology that registers video games over the Internet and renders resold titles useless, the gaming website Edge.com said today, without saying where it got the information.

Mr. Peabody

DreamWorks, the independent studio behind the “Madagascar” films, dropped 68 cents to $16.75. “Me and My Shadow” was pulled from the schedule and put back in development, DreamWorks Animation said. “Mr. Peabody & Sherman,” planned for theaters in November 2013, will now be released in March 2014. The change reduces the company’s 2013 release slate to two movies from three.

C.H. Robinson Worldwide Inc. led declines in the S&P 500, falling 9.7 percent to $60.50. The freight broker reported fourth-quarter earnings that missed analysts’ estimates.

Wynn Resorts Ltd., which depends (WYNN:US) on its Macau unit for most of its revenue, dropped 2 percent to $123.30. China’s government will start taking action this month to clamp down on junket operators that bring gamblers from the mainland to Macau, the London-based Times reported on its website, citing unidentified people in law enforcement.

Apple Inc. (AAPL:US) fell 0.1 percent to $457.35, erasing an earlier rally of as much as 1.9 percent. A report showed that Legg Mason Inc. fund manager Bill Miller said the stock may be worth 50 percent more than its current price. Miller told the Financial Times the shares could be worth more if the company were to keep all its cash on its balance sheet and put future free cash flow into a dividend.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net

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


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Companies Mentioned

  • TWX
    (Time Warner Inc)
    • $83.02 USD
    • -1.47
    • -1.77%
  • DIS
    (Walt Disney Co/The)
    • $85.88 USD
    • -1.33
    • -1.55%
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