U.S. stocks jumped, with the Standard & Poor’s 500 Index rebounding from its worst drop since April, as Google Inc. (GOOGL:US) rose after sales beat analysts’ estimates and concerns eased over crises in the Ukraine and Middle East.
Google, the world’s third-largest company by market value, jumped 3.7 percent after second-quarter revenue exceeded analysts’ projections as the company sold more advertising alongside Web-search results. Johnson & Johnson, Boeing Co. and Nike Inc. jumped more than 1 percent to lead gains in the Dow Jones Industrial Average. Advanced Micro Devices Inc. (AMD:US) tumbled 16 percent after it forecast sales below estimates.
The S&P 500 (SPX) rose 1 percent to 1,978.22 at 4 p.m. in New York, marking its biggest gain in three months and capping a weekly advance of 0.5 percent. The Dow climbed 123.37 points, or 0.7 percent, to 17,100.18. The Russell 2000 Index of smaller companies rallied 1.6 percent, paring its weekly loss to 0.7 percent. Trading in S&P 500 companies was 6.1 percent above the 30-day average for this time of day.
“I think when all these things hit the headlines, there’s a knee-jerk reaction,” Jim Paulsen, who helps oversee $357 billion in assets as chief investment strategist at San Francisco-based Wells Capital Management Inc., said in a phone interview. “Traders reacted yesterday and it’s bringing in investors today. Maybe they’re thinking of buying and all of a sudden stocks got a lot cheaper.”
The gain in the S&P 500 erased almost all of yesterday’s 1.2 percent decline in the S&P 500 as the market resumed an advance that has added more than $1 trillion to share values in 2014. Stocks rose as Google’s results helped bolster Wall Street forecasts for annual S&P 500 earnings growth of about 8 percent this year amid an expansion in gross domestic product forecast by economists to exceed 3 percent in the next two quarters.
The S&P 500 yesterday ended a string of 62 straight days without a gain or decline of more than 1 percent.
A Malaysian Airlines jet went down yesterday over eastern Ukraine, killing all 298 people on board, just a day after the U.S. and the European Union imposed further sanctions on Russia over the conflict. Russia and Ukraine blamed each other for the downing of the jet as moves to investigate the crash got under way. President Barack Obama said the violence in Ukraine is facilitated by Russia’s support for separatists and called for an immediate cease-fire.
Stocks extended losses late yesterday after Israel began a ground operation in the Gaza Strip.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX (VIX), rallied 32 percent yesterday, the most since April 2013, closing at 14.54, a three-month high. The VIX dropped 17 percent today to 12.06.
Equities have rallied this year amid better-than-estimated corporate earnings and central bank stimulus as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter. The S&P 500 closed at a record on July 3 while the Dow (INDU) reached an all-time high on July 16.
The index of U.S. leading indicators rose in June for the fifth straight month, showing the economy continues to gain momentum following a slowdown at the start of 2014. A gauge of consumer sentiment declined this month. The Thomson Reuters/University of Michigan preliminary July index of sentiment decreased to 81.3 from 82.5 the prior month.
More than 140 companies in the S&P 500 are scheduled to report earnings next week, including Netflix Inc., McDonald’s Corp., Boeing, Apple Inc. and Microsoft Corp.
About 77 percent of the 82 companies in the S&P 500 that have posted results this earnings season beat analysts’ profit projections, and 70 percent exceeded sales estimates, data compiled by Bloomberg show. Profit by the gauge’s members increased 6.2 percent in the second quarter, and revenue rose 3.3 percent, according to analysts’ estimates compiled by Bloomberg.
About 5.8 billion shares changed hands on U.S. exchanges today, in line with the three-month average.
“We had a bit of a low expectation going into the second quarter, given the first quarter,” Jim Russell, who helps oversee $120 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati, said by phone. “We do feel the second quarter finished much stronger than it began. We think the economic drumbeat is growing louder and more constructive for the markets moving forward.”
Google rose 4.2 percent to $605.11 today in its biggest gain since October. Chief Executive Officer Larry Page is adding new features in mobile, video and Web services to boost user traffic and attract marketers as he seeks to bolster Google’s main ad business. The number of clicks on ads on YouTube, search and other Google sites increased 33 percent in the latest quarter, making up for a decline in ad prices.
All 10 main industries in the S&P 500 advanced. Health-care and technology stocks climbed more than 1.3 percent for the best performances.
The Bloomberg U.S. Airlines Index rose 2 percent to rebound from yesterday’s 3.2 percent slide. American Airlines Group Inc., Spirit Airlines Inc. and United Continental Holdings Inc. rose more than 2 percent to lead all 11 stocks in the index higher.
General Electric Co. slipped 0.6 percent as it reported profits that matched estimates. The company said it will hold an initial public offering for the Synchrony Financial unit, its Capital’s North American consumer operations, this month.
AMD tumbled 16 percent, the biggest drop since 2012. The third-quarter sales (AMD:US) projection may indicate the chipmaker isn’t benefiting from a rebound in corporate spending on computers that has buoyed other companies in the personal-computer industry.
To contact the reporters on this story: Jacob Barach in New York at firstname.lastname@example.org; Callie Bost in New York at email@example.com
To contact the editors responsible for this story: Lynn Thomasson at firstname.lastname@example.org Jeff Sutherland, Michael P. Regan