BLBG: U.S. Stocks Advance as CA Earnings, Libor Temper Jobless Claims
U.S. stocks advanced, snapping a three-day losing streak for the Standard & Poor’s 500 Index, as better-than-estimated earnings at CA Inc. and a decrease in bank borrowing costs overshadowed an increase in jobless claims.
CA Inc., the world’s second-largest maker of software for mainframe computers, climbed 5.4 percent. Regions Financial Corp., KeyCorp and Citigroup Inc. posted the top gains in the KBW Bank Index after three-month Libor dropped the most in two months. Exxon Mobil Corp. and Freeport-McMoRan Copper & Gold Inc. led commodity producers lower as oil and copper prices retreated on concern the economic rebound will stall.
The S&P 500 has fallen more than 4 percent this week after a rally of as much as 37 percent since March 9, the steepest nine-week gain since the 1930s, pushed the benchmark for American equity to the most expensive price relative to earnings in seven months. The loss wiped out most of the rally last week that was driven by speculation the banking industry is improving following the government’s stress tests.
“The last few weeks, expectations got a little ahead of themselves,” said Dean Gulis, part of a group that manages about $2.5 billion for Loomis Sayles & Co. in Bloomfield Hills, Michigan. “We’re just in a period of consolidation at least, given the extraordinary move we’ve had since early March off the bottom.”
The S&P 500 climbed 0.9 percent to 891.71 at 11:28 a.m. in New York. The Dow Jones Industrial Average added 42.93, or 0.5 percent, to 8,327.82. Europe’s Dow Jones Stoxx 600 Index increased 0.5 percent.
Sixteen stocks fell yesterday for each that rose on the New York Stock Exchange, the broadest sell-off in three weeks. The ratio was more than three-to-one in favor of rising shares today.
CA Earnings Beat
CA rose 94 cents to $18.26. Excluding expenses such as reorganization costs, fourth-quarter profit was 31 cents a share, CA said. That compares with the 29-cent average estimate of analysts in a Bloomberg survey.
Companies in the S&P 500 have beaten analysts’ earnings estimates by an average 9.3 percent even as profits fell 36 percent at the 439 that have reported first-quarter results, helping fuel the index’s rally.
Libor Drops
The cost of borrowing in dollars for three months between banks dropped the most in eight weeks as government and central bank efforts to unlock credit markets showed signs of bearing fruit.
The London interbank offered rate, or Libor, for such loans fell almost three basis points to 0.85 percent today, according to the British Bankers’ Association. The Libor-OIS spread, a measure of the unwillingness of banks to offer each other cash, narrowed three basis points to 65 basis points, the lowest level since June 16.
More Americans than forecast filed unemployment-insurance claims last week because of the Chrysler LLC bankruptcy that is likely to reverberate through the economy for months. Initial jobless claims rose by 32,000 to 637,000, the Labor Department said. A good part of the jump was from states reporting an increase in claims related to the auto industry, a Labor official said without providing a more precise estimate. The department also said that wholesale prices rose in April, spurred by a gain in food costs.
Wal-Mart Stores Inc. dropped 81 cents, or 1.6 percent, to $49.22. The world’s biggest retailer, founded in 1962 when Sam Walton opened a discount store in Rogers, Arkansas, said first- quarter profit and sales were little changed as purchases of groceries and $4 medicines countered a drop in international revenue. The company projected per-share profit of as little as 83 cents a share in the current quarter, compared with an average analyst estimate of 85 cents.
‘Lost Decade’
The world economy may face near-stagnation for 10 years similar to Japan’s “lost decade” in the 1990s, Nobel Prize- winning economist Paul Krugman said at a forum today in Taipei. His prediction of a protracted slowdown echoes comments by Citigroup Inc.’s James Wolfensohn, the former World Bank president, and fellow Nobel laureate Joseph Stiglitz
Whole Foods Market Inc., the largest natural-goods grocer in the U.S., added 4 percent to $20.79. Excluding some costs, the company earned 24 cents a share in the fiscal second quarter, exceeding the 19-cent average of 14 analysts’ estimates compiled by Bloomberg.
