Bloomberg News

S&P 500 Caps Longest Rally in 2014 on Takeover, Earnings

April 22, 2014

U.S. stocks rose a sixth day, with the Standard & Poor’s 500 Index (SPX) capping its longest rally since September, as health-care shares surged amid a $45.7 billion bid for Allergan Inc. and earnings from Netflix (NFLX:US) Inc. to Harley-Davidson Inc. (HOG:US) topped estimates.

Allergan surged 15 percent after Valeant Pharmaceuticals International Inc. offered to merge with the maker of the Botox wrinkle treatment. Netflix soared 7 percent after saying it expects to increase prices for new customers. Harley-Davidson Inc. added 6.4 percent after its earnings release.

The S&P 500 added 0.4 percent to 1,879.55 at 4 p.m. in New York, and earlier rose to within six points of its all-time high. The Dow Jones Industrial Average climbed 65.12 points, or 0.4 percent, to 16,514.37. About 5.9 billion shares changed hands on U.S. exchanges today, 15 percent below the three-month average.

“Sentiment had gotten too negative, and some decent earnings reports have started helping the market,” Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. “That, combined with the positive deal talk and chatter in health care, gives a better tone to the market overall and certainly some support.”

The S&P 500 jumped 3.5 percent in the past six days and is now 0.6 percent below its record reached April 2. The index has added 1.7 percent in 2014. The Dow average is at its highest level since April 3.

Drugmaker Rallies

Health-care stocks paced gains in the S&P 500 today with a 1 percent advance, as a flurry of deal activity boosted the sector. The Nasdaq Biotechnology Index rallied 3.2 percent as all but three of its 121 members advanced.

Allergan jumped 15 percent to $163.65. Valeant proposed to buy the maker of the Botox wrinkle treatment for about $152.89 a share in the Canadian company’s plan to become one of the world’s largest drugmakers. Valeant’s U.S.-listed shares climbed 7.5 percent to $135.41.

The bid comes as Novartis AG agreed to buy GlaxoSmithKline Plc’s cancer drugs as part of a series of deals among major pharmaceuticals makers. Separate reports said Pfizer Inc., the world’s largest drugmaker, and AstraZeneca Plc had held talks that fizzled.

Vertex Pharmaceuticals Inc., Regeneron Pharmaceuticals Inc. and Alexion Pharmaceuticals Inc. each rose at least 2.6 percent.

Intuitive Surgical Inc. also contributed to health-care gains, as the stock climbed 2.7 percent to $422.33. The company received regulatory clearance for a version of its da Vinci surgical system. The advance halted an 11-day losing streak that erased nearly a quarter of the stock’s value.

Earnings Scorecard

Thirty companies in the equities benchmark disclosed results today, while a further 121 members report before the end of the week. Profit for the index’s constituents probably increased 0.7 percent in the first quarter, analysts forecast. They had predicted a 0.9 percent decrease as recently as April 11.

Netflix rallied 7 percent to $372.90. The company behind the drama “House of Cards” said that it plans to charge new customers $1 to $2 a month more for its online video service. Netflix currently offers unlimited Web streaming for $7.99 a month. Netflix also reported first-quarter profit and subscriber growth that beat analysts’ forecasts.

Harley-Davidson jumped 6.4 percent to $71.87, the highest since January 2007. The maker of Road King motorbikes reported first-quarter earnings of $1.21 a share, beating the average analyst projection of $1.08. Sales also exceeded projections (HOG:US).

Comcast, McDonald’s

Comcast Corp. (CMCSA:US) advanced 1.9 percent to $50.83 as the largest U.S. cable company said increased numbers of video subscribers helped it post first-quarter profit of 68 cents a share, excluding some items. That beat the 64 cents that analysts had estimated. Comcast also reported revenue of $17.4 billion. Analysts had predicted (CMCSA:US) $17 billion.

McDonald’s Corp. dropped 0.4 percent to $99.32. The hamburger chain posted falling sales at its established U.S. locations and first-quarter profit that trailed analysts’ estimates.

Pentair Ltd. slid 6.9 percent to $74.95 for the steepest drop in the S&P 500. The provider of water systems reported first-quarter revenue below analysts’ estimates and forecast revenue in the current period that was less than predicted.

Zions Bancorporation slipped 2 percent to $29.62. The bank, which failed the Federal Reserve’s annual stress test, reported first-quarter earnings of 31 cents a share yesterday, missing the average analyst forecast of 42 cents. The company was cut to equalweight from overweight today by Evercore Partners Inc.

Home Data

Eight of the 10 main industries in the S&P 500 advanced today. Consumer-discretionary shares gained 0.8 percent, led by Harley-Davidson and Netflix.

The Dow Jones Transportation Index (TRAN) rallied 0.6 percent for a sixth straight gain that left the gauge at an all-time high. United Continental Holdings Inc. jumped 4.6 percent and Delta Air Lines added 3 percent as oil futures slumped the most in three months.

Facebook Inc. (FB:US) climbed 2.9 percent to $63.03. Credit Suisse raised its rating on the company to outperform from neutral, and increased its price estimate on the shares by 34 percent to $87. The brokerage said Facebook will increase its average revenue per user in the medium to long term through new products. The company reports earnings tomorrow.

To contact the reporter on this story: Joseph Ciolli in New York at jciolli@bloomberg.net

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


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Companies Mentioned

  • NFLX
    (Netflix Inc)
    • $415.63 USD
    • -7.09
    • -1.71%
  • HOG
    (Harley-Davidson Inc)
    • $61.7 USD
    • -0.12
    • -0.19%
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