U.S. stocks rose, after benchmark indexes reached five-year highs, as lawmakers voted to temporarily suspend the federal debt limit and technology stocks rallied amid better-than-forecast earnings.
Futures on the Nasdaq 100 Index slid 1.8 percent following the close of U.S. markets as Apple Inc. (AAPL:US) tumbled 11 percent after reporting first-quarter sales below forecasts. Google Inc. (GOOG:US) and International Business Machines Corp. (IBM:US) jumped more than 4.4 percent in regular trading after earnings topped estimates. Advanced Micro Devices Inc. (AMD:US) surged 11 percent after revenue beat forecasts, helped by sales of chips that run servers.
The Standard & Poor’s 500 Index gained 0.2 percent to 1,494.81 at 4 p.m. in New York. The Dow Jones Industrial Average rose 67.12 points, or 0.5 percent, to 13,779.33. About 6.1 billion shares changed hands on U.S. exchanges, in line with the three-month average. Nasdaq 100 futures dropped 1.7 percent to 2,712 as of 6:18 p.m. on Apple’s earnings report.
“Right now it’s all earnings related and the fact that maybe we can put the debt ceiling to rest for maybe a couple more months,” Frank Ingarra, who helps manage $1.4 billion at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview.
The U.S. House voted to temporarily suspend the nation’s borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts. The measure, passed 285-144, lifts the government’s $16.4 trillion borrowing limit until May 19. It goes to the Senate, where Majority Leader Harry Reid said lawmakers will pass the measure unchanged and send it to President Barack Obama.
Global investors say the state of U.S. finances is the greatest risk to the world economy and almost half are curbing their investments in response to budget battles, a Bloomberg poll showed. Thirty-six percent of respondents cited the nation’s fiscal woes as the biggest threat, compared with 29 percent who chose Europe’s sovereign debt crisis and 15 percent who named a slowing Chinese economy, according to the Jan. 17 survey of Bloomberg subscribers.
The International Monetary Fund cut its global growth forecasts and now projects a second year of contraction in the euro region as progress in battling Europe’s debt crisis fails to produce an economic recovery. The world economy will expand 3.5 percent this year, less than the 3.6 percent forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report.
Improving corporate earnings and political steps to resolve fiscal issues in the U.S. have pushed the Dow within 2.8 percent of its October 2007 record of 14,164.53. The S&P 500 (SPX) is 4.5 percent below its record of 1,565.15. The index rose 4.8 percent in January through yesterday for the best start to a year since 1997, and has rallied six straight days for the longest streak in a month.
Some 75 percent of the 106 companies in the S&P 500 that have released results so far exceeded profit projections, according to data compiled by Bloomberg. Analysts on average forecast growth of 3.8 percent in fourth-quarter profit, the data show.
“Earnings expectations were optimistic and it’s very possible that they will be right,” Bernard Delattre, president of Altimeo Asset Management in Paris, said in a phone interview today. “The situation is improving in the U.S. Growth is sustained and companies will benefit.”
Apple lost 11 percent to $458.94 as of 6:18 p.m. New York time. The world’s most valuable company reported first-quarter sales below analysts’ predictions, adding fuel to investor pessimism that has sent shares down 27 percent since September.
Profit was little changed at $13.1 billion, or $13.81 a share, in the period that ended Dec. 29, Cupertino, California- based Apple said today in a statement. Sales rose 18 percent to $54.5 billion. Analysts had predicted profit of $13.53 a share on revenue of $54.9 billion, the average of estimates compiled by Bloomberg.
Technology shares had the largest gain among 10 groups in the S&P 500, advancing 1.2 percent. Google, owner of the biggest Internet search engine, jumped 5.5 percent to $741.50 as fourth- quarter profit, excluding certain items, rose to $10.65 a share. Analysts had projected earnings of $10.50, according to data compiled by Bloomberg.
IBM rallied 4.4 percent to $204.72 as per-share earnings exceeded projections. The largest computer-services provider’s profit forecast (IBM:US) also topped analyst estimates as the company shifts to data analysis and cloud computing.
AMD rose 11 percent to $2.73. The second-biggest maker of processors for personal computers reported fourth-quarter revenue that topped analysts’ estimates, helped by sales of chips that run servers. AMD is firing workers and selling assets to free up cash for new products, aiming to mitigate its dependence on the PC market.
Symantec Corp. advanced 2.9 percent to $21.46. The biggest maker of antivirus software company reported fiscal third- quarter sales and profit that beat estimates, aided by strong demand for data-management tools.
US Airways Group Inc. rallied 1.5 percent to $15.07. The Tempe, Arizona-based carrier, which is pushing for a merger with bankrupt American Airlines, reported fourth-quarter profits that topped forecasts on strong travel demand and record revenue.
An S&P index of homebuilders climbed 1.8 percent to the highest level since July 2007 as all 11 members advanced. U.S. home prices rose 5.6 percent in the 12 months through November as buyers competed for a dwindling inventory of properties, according to a report by the Federal Housing Finance Agency today.
KB Home surged 8.9 percent to $18.63. The Los Angeles-based homebuilder reported a 54 percent increase in orders for the first seven weeks of its fiscal first quarter. Trulia Inc., the operator of a residential-property listings website, rallied 4.7 percent to $24.50, while its larger rival Zillow Inc. added 3.3 percent to $34.69 on optimism that gains in home prices would help boost advertising revenue.
Cree Inc., a maker of energy-efficient lighting products, gained 22 percent to $40.85 after quarterly profit jumped 69 percent amid surging demand for its light-emitting diodes.
Map Pharmaceuticals Inc. rallied 59 percent to $24.71. Allergan Inc., the maker of the wrinkle filler Botox, agreed to buy Map in a deal valued at $958 million to gain an experimental inhalable migraine treatment.
Coach Inc., the largest U.S. luxury handbag maker, tumbled 16 percent to $50.75. Sales at stores open at least a year in North America fell 2 percent in the quarter. Chief Executive Officer Lew Frankfort said the company had a “challenging” holiday season amid increased competition for women’s handbags and economic pressure on consumers.
Texas Instruments Inc. lost 1.1 percent to $33.08. The largest maker of analog chips predicted first-quarter sales that fell short of some analysts’ estimates as electronic-device makers postpone orders to keep inventory low amid lackluster demand.
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