U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding from a six-week low, as companies from Capital One Financial Corp. to Google Inc. (GOOG:US) reported earnings that topped analysts’ forecasts.
Google and Microsoft Corp. gained at least 3.4 percent. Capital One rallied 6.4 percent as income from continuing operations exceeded estimates. International Business Machines Corp., the biggest computer-services provider, tumbled 8.3 percent after quarterly profit missed projections for the first time since 2005. McDonald’s Corp. slumped 2 percent as it said soft global demand has continued this month.
The S&P 500 advanced 0.9 percent to 1,555.25 at 4 p.m. in New York, paring its biggest weekly loss since November to 2.1 percent. The Dow Jones Industrial Average added 10.37 points, or 0.1 percent, to 14,547.51. About 6.4 billion shares traded on U.S. exchanges, in line with the three-month average. Options contracts expire today, leading investors to adjust their holdings of some stocks.
“Earnings are going to continue to come in better than most people think,” Jeffrey Saut, who helps oversee about $420 billion as chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, said in a phone interview. “Companies have pretty much guided down and expectations are pretty low in terms of upside surprises.”
The S&P 500 fell below its 50-day moving average yesterday for the first time this year. That level, currently at around 1,544, is watched by some analysts to gauge the trend of the market.
The benchmark gauge for U.S. equities has fallen 2.4 percent from a record close on April 11, spurring concern over what UBS AG strategist Jonathan Golub called a “spring break” in equities. Stocks began short-term declines in April of each of the last three years. Still, the benchmark measure has surged 130 percent from a 12-year low in 2009 as the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy.
Thirteen S&P 500 companies including General Electric Co. posted quarterly earnings today. Of the 103 that have reported so far, 72 percent have exceeded analysts’ predictions, data compiled by Bloomberg show. Profits at S&P 500 companies dropped 1.1 percent in the first three months of the year, according to forecasts compiled by Bloomberg. That would mark the first year- over-year decrease since 2009.
“This has been the first week in a while where we’ve seen significant volatility,” Ben Schwartz, the Chicago-based chief market strategist at broker Lightspeed Financial Inc., said by phone. “There’s a lot of uncertainty right now, especially in the technology sector. The S&P 500 and the Nasdaq have traded soft in the last week which is something we haven’t seen all year. People are tentative with regard to the earnings.”
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, briefly erased its loss for the year yesterday. The VIX, which moves in the opposite direction as the S&P 500 about 80 percent of the time, has risen 32 percent since reaching a six- year low in March, including a 43 percent jump on April 15 for its biggest one-day gain since August 2011. The gauge retreated 15 percent to 14.97 today.
Google rose 4.4 percent to $799.87 after the owner of the world’s most popular search engine posted first-quarter profit, excluding some items, of $11.58 a share, surpassing the average analyst forecast of $10.68 a share as advertisers increased spending on mobile and video promotions.
Microsoft climbed 3.4 percent to $29.77 as third-quarter profit for the world’s largest software maker exceeded analysts’ estimates, buoyed by cost controls and sales of business and server software amid weak demand for personal computers running the new Windows 8 operating system.
Consumer-staples shares, phone companies and health-care companies rose more than 1.5 percent.
Capital One gained 6.4 percent to $56.17 for the biggest gain in the KBW Bank Index (BKX), which increased 1.5 percent. The eighth-largest U.S. lender by assets reported a first-quarter profit that beat analysts’ estimates as lending margins improved.
SunTrust Banks Inc. (STI:US) increased 3.6 percent to $28.31 for the second-biggest gain in the banking benchmark after earnings exceeded projections.
Investors bought shares of corporations most tied to economic growth today. The Morgan Stanley Cyclical Index (CYC) of 30 U.S. equities and the 20-stock Dow Jones Transportation Index rallied at least 1.2 percent.
Honeywell International Ltd. increased 3.8 percent, the most since July, to $74.18. The maker of cockpit controls and thermostats predicted second-quarter earnings will increase more than analysts estimated, as demand for energy services surges.
PepsiCo Inc. climbed 1.9 percent to $82.77 and foodmaker Mondelez International Inc. jumped 5.3 percent to $31.69. PepsiCo said it held meetings with billionaire Nelson Peltz’s Trian Fund Management LP as the investor disclosed a $269 million stake and also revealed a holding in Mondelez.
Peltz could push for a merger of the companies, the Daily Telegraph of London reported last month, citing unidentified people.
Kimberly-Clark Corp. (KMB) rose 4.7 percent to $106.10 for the biggest gain since October 2009 after the maker of Kleenex tissues and Huggies diapers boosted its annual earnings forecast amid sales growth in its North American tissues unit.
Chipotle Mexican Grill Inc. (CMG) soared 12 percent to $366.25 for the biggest gain in the S&P 500. The Denver-based fast- casual dining chain reported first-quarter sales that topped analysts’ estimates, helped by an acceleration of store openings.
IBM dropped 8.3 percent to $190 after missing profit estimates, hurt by a hardware slump and the failure to sign customers to contracts. The shares dropped the most since April 2005, wiping out gains for the year a month after hitting a record high. IBM, which accounts for 10 percent of the price- weighted Dow average, took 132 points off the 30-stock gauge today.
McDonald’s slumped 2 percent to $99.92. The world’s largest restaurant chain by sales posted first-quarter profit that was little changed as same-store sales dropped in the U.S. and said soft global demand has continued this month.
General Electric lost 4.1 percent to $21.75 after posting first-quarter profit that matched analysts’ estimates as lower sales in the Power & Water business curbed manufacturing growth.
“Europe was weaker than we expected, and in particular the power and water and oil and gas businesses were very soft,” Nick Heymann, an analyst at William Blair & Co. who has a market-perform rating on the stock, said in a telephone interview.
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