BLBG: U.S. Stocks Gain as Better-Than-Expected Results Boost Optimism
U.S. stocks advanced, with benchmark indexes rebounding from the biggest drop since August yesterday, as higher-than-estimated results at Boeing Co. and Yahoo! Inc. fueled optimism in corporate earnings.
Boeing, the largest aerospace company, climbed 2.3 percent after also raising its full-year earnings projection. Yahoo! rose 4.7 percent after third-quarter profit beat analysts’ estimates. Boston Scientific Corp. jumped 8.5 percent after reporting a quarterly profit, while Wells Fargo & Co. led a turnaround in bank shares after the biggest U.S. home lender said it plans to return capital to shareholders.
The Standard & Poor’s 500 Index rose 0.9 percent to 1,176.78 at 11:09 a.m. in New York. The Dow Jones Industrial Average increased 119.70 points, or 1.1 percent, to 11,098.32. The S&P 500 dropped 1.6 percent yesterday, the most in two months, amid concern banks will be forced to buy back soured mortgages and after Apple Inc. forecast profit that fell short of analyst predictions.
“Companies are for the most part beating their numbers this earnings season,” said Scott Armiger, who helps manage about $5.6 billion at Christiana Bank & Trust in Greenville, Delaware. “We’re back to the trend of a weaker dollar on the expectation that the Fed is going to initiate a second round of quantitative easing.”
The dollar slid against most of its major counterparts on concern the Federal Reserve’s regional business survey will show a slowing recovery, damping demand for the U.S. currency. The Fed is scheduled to release its Beige Book report at 2 p.m. New York time, two weeks before the central bank’s November meeting.
Fed Bets
The S&P 500 has climbed about 3 percent this month, following an 8.8 percent September rally, as Fed policy makers indicated a readiness to pump more cash into the economy to protect the recovery by buying Treasury securities, a tactic known as quantitative easing.
“I would suspect that when the Fed releases the Beige Book report we will be told that the economy is still not recovering to full potential, that unemployment remains stubbornly high and that inflation is low,” said Andreas Nigg, who helps oversee about $39 billion as head of North American Equities at Vontobel Asset Management in Zurich. “The way the market and commodities have rallied would make me suspect that expectations for further quantitative-easing actions are already quite high.”
‘Positive Run’
Per-share earnings have topped estimates at 62 of the 74 companies in the S&P 500 that reported results since Oct. 7, according to data compiled by Bloomberg. Net income has grown 54 percent for the group as sales increased 6.7 percent.
“Notwithstanding the likes of Apple and IBM, yesterday continued the positive run of earnings we have seen so far this reporting season,” Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London, wrote in a note.
Boeing climbed 2.3 percent to $70.65. Net income was $837 million, or $1.12 a share, compared with a net loss of $1.56 billion, or $2.23, a year earlier. Profit beat the average analyst estimate of $1.07 as compiled by Bloomberg. Sales rose 1.7 percent to $17 billion, exceeding analysts’ $16.8 billion prediction. Boeing shipped more 737s, as well as 777s, after receiving replacements for faulty seats, bolstering revenue from airlines.
Yahoo! Inc. added 4.7 percent to $16.22. The most-visited U.S. Web portal late yesterday said third-quarter net income more than doubled to $396.1 million, or 29 cents a share. Yahoo gained 13 cents a share from the sale of its HotJobs site and had a 4-cent benefit a year earlier from an investment in Alibaba.com. Analysts had estimated 15 cents on average, according to Bloomberg data.
The company predicted fourth-quarter sales of $1.13 billion to $1.23 billion. Analysts had estimated sales of $1.25 billion.
Boston Scientific Jumps
Boston Scientific surged 8.5 percent to $6.48. The second- biggest heart-device maker by revenue reported a third-quarter profit as sales of its key heart-rhythm devices matched the upper range of analysts’ estimates.
Wells Fargo gained 2.5 percent to $25.16, leading a rebound in a measure of financial companies. The largest U.S. home lender reported record third-quarter profit of 60 cents a diluted share as credit conditions improved and said it’s “eager” to return capital to shareholders. Analysts surveyed by Bloomberg estimated profit of 56 cents.
Stryker Corp. advanced 2.8 percent to $51.47. The maker of artificial body parts and hospital equipment said it expects to earn as much as $3.30 as share in 2010. Analysts, on average, had estimated profit of $3.26, according to a Bloomberg survey.
Intuitive Surgical, Delta
Intuitive Surgical Inc. slumped 8 percent to $256.80. The surgical-system maker reported third-quarter revenue of $344.4 million, below the $349.9 million average analyst estimate from a Bloomberg survey.
Delta Air Lines Inc. jumped 9.2 percent to $12.78. The world’s second-largest airline and the first of the major U.S. carriers to release results posted a profit excluding certain costs of $1.10 a share, beating the 94-cent average of 13 estimates compiled by Bloomberg, as demand boosted fare prices.
Morgan Stanley slipped 3 percent to $24.63. The owner of the largest brokerage reported a third quarter loss of 7 cents a share after writing down a stake in Revel Entertainment, an Atlantic City casino project. The firm had a profit of $131 million before preferred dividends, compared with $757 million in the same period a year ago.
Eli Lilly & Co. dropped 4.3 percent to $35.85 as the drugmaker, along with partners Amylin Pharmaceuticals Inc. and Alkermes Inc., failed to win approval for the second time from U.S. regulators for a once-weekly version of the injectable diabetes drug Byetta.
Cree Inc. sank 7.8 percent to $48.87 as the maker of energy-efficient lighting products forecast second-quarter sales of $280 million at most. That missed the average estimate of $296.2 million from analysts in a Bloomberg survey.
To contact the reporters on this story: Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net;
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
