BLBG: U.S. Stocks Rise on Earnings Reports, Trade Deficit
U.S. stocks rose, as the Standard & Poor’s 500 Index erased a weekly decline, amid corporate earnings that topped estimates and a report showing the trade deficit narrowed more than forecast.
Nine out of 10 groups in the S&P 500 rose. LinkedIn Corp. surged 18 percent after the online professional-networking service provider posted earnings that beat estimates. Activision Blizzard Inc. rose 8.5 percent after the largest U.S. video-game maker more than tripled fourth-quarter net income.
The S&P 500 rose 0.5 percent to 1,517.23 at 10:03 a.m. in New York. The Dow Jones Industrial Average added 65.79 points, or 0.5 percent, to 14,009.84 today. Trading in S&P 500 companies was 19 percent below the 30-day average at this time of day.
“Confidence is emerging here,” said James Paulsen, chief investment strategist at Minneapolis, Minnesota-based Wells Capital Management in a television interview on Bloomberg Surveillance with Tom Keene. His firm oversees $332 billion in assets. “People are finally deciding that this looks more like a sustainable recovery.”
The S&P 500 has rallied 6.4 percent in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The benchmark equity gauge is 3.1 percent below its record high reached in October 2007. The index erased a weekly decline today after being lower earlier on renewed concerns about the euro-area debt crisis and as European Central Bank President Mario Draghi said the euro’s advance could hamper a recovery.
Earnings Season
About 75 percent of the 341 S&P 500 companies that have released results so far in the reporting season have exceeded profit projections, and 67 percent have beaten sales estimates, according to data compiled by Bloomberg.
Data today showed the U.S. trade deficit narrowed more than forecast in December, led by record exports of petroleum that gave the world’s largest economy a boost at the end of 2012. The gap shrank 20.7 percent to $38.5 billion, lower than any estimate in a Bloomberg survey of 73 economists and the least since January 2010, Commerce Department figures showed today in Washington.
Inventories at U.S. wholesalers unexpectedly fell in December for the first time in six months. The 0.1 percent decrease in stockpiles followed a revised 0.4 percent rise in November that was smaller than originally reported, the Commerce Department said. The median forecast in a Bloomberg survey called for a 0.4 percent gain.
Technology stocks rose the most out of 10 S&P 500 groups, climbing 1 percent. Apple Inc., the world’s most valuable company, added 1.2 percent to $474.03. Hewlett-Packard Co. jumped 1.6 percent for the biggest gain in the Dow to $16.70.
LinkedIn Climbs
LinkedIn climbed $22.89 to $146.98 after the company reported an 81 percent jump in revenue to $303.6 million, topping the average analyst estimate of $279.7 million according to data compiled by Bloomberg. Profit excluding some items was 35 cents a share, beating the average 19-cent projection.
Activision Blizzard gained $1.03 to $13.09 after net income soared to $354 million, or 31 cents a share, from $99 million, or 8 cents, a year earlier, beating analyst estimates.
AOL Inc. rose 13 percent to $35.56. The publisher of the Huffington Post and TechCrunch websites reported fourth-quarter earnings and sales that exceeded analysts’ estimates on improved advertising performance.
Nuance Communications Inc. slumped 18 percent to $20.16. The maker of speech-recognition software reported first-quarter adjusted earnings of 35 cents, missing the average analyst estimate by 1 cent. The Burlington, Massachusetts-based company was cut to hold from buy at Craig-Hallum Capital Group LP and Needham & Co.
Expensive Level
The U.S. stock-market rally to an almost-record high has left the S&P 500 trading at the most expensive level in 15 months. The price-earnings ratio for the U.S. equity benchmark has increased 25 percent to 14.9 since October 2011, according to data compiled by Bloomberg. That’s still 10 percent cheaper than the average multiple of 16.6 from the past decade.
“Stocks are fairly valued,” Donald Selkin, who helps manage about $3 billion as chief market strategist at National Securities Corp. in New York, said in a phone interview yesterday. “As long as interest rates stay low, I don’t think we’re going to get much multiple expansion.”
To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Leslie Picker in New York at lpicker2@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
