Stocks rallied, with benchmark indexes rebounding from the worst losses of the year, as more companies posted improving earnings and Dell Inc. agreed to the largest leveraged buyout since the financial crisis. Italian notes rose and oil gained; the yen weakened and Treasuries slid.
The Standard & Poor’s 500 Index climbed 1.2% at 3:30 p.m. in New York, posting its biggest gain in a month and returning to above its highest closing level since December 2007. Ten-year U.S. note yields jumped five basis points to 2.01%. The yen declined at least 0.6% against its 16 major peers after Bank of Japan Governor Masaaki Shirakawa said he would step down next month. Oil rose following its biggest loss in two months.
Stocks jumped after slumping yesterday on renewed concern Europe’s debt crisis will intensify. Companies from Computer Sciences Corp. and Estee Lauder Cos. in the U.S. to Munich Re and ARM Holdings Plc in Europe posted results that beat estimates. Data today showed service industries shrank less than initially estimated in Europe while growing more than economists forecast in the U.S.
“It’s looking like we’re getting into a ‘buy on dips’ mentality as people try to increase their positioning,” Rex Macey, who oversees $20 billion as chief investment officer at Wilmington Trust Advisors in Atlanta, said in a telephone interview. “People have thought, ‘Gee, I need to be in the market.’ But they’ve been waiting for a buying opportunity and now they may be getting nervous that may not materialize and some money’s flowing.”
Market Movers
The S&P 500 has rallied 6.1% in 2013 as U.S. lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The gauge is less than 4% below the record 1,565.15 it reached in October 2007. The Dow Jones Industrial Average is about 1% from its all-time high.
The S&P 500 erased yesterday’s 1.2% drop, its biggest since Nov. 14. Computer Sciences rallied 10% for the biggest gain in the S&P 500 after also increasing its 2013 forecast and saying “our turnaround is tracking to plan.” Estee Lauder jumped 6.4% after the maker of Mac cosmetics and Clinique skin products topped the average estimate for adjusted earnings by 10% and lifted its profit forecast for the year.
Earnings Season
Archer-Daniels-Midland Co. jumped 3.4% after the world’s largest corn processor reported better-than-forecast earnings and revenue as its U.S. soybean-crushing operations ran at record capacity. Yum! Brands Inc., owner of the KFC and Pizza Hut fast-food chains, fell 3% after saying profit this year will be less than it previously expected as a probe into its chicken suppliers hurt sales in China.
More than 20 companies in the S&P 500 were scheduled to report quarterly results today. Earnings per share beat the average analyst estimate at 75% of the 281 companies that released results so far in the reporting season, according to data compiled by Bloomberg.
The Institute for Supply Management’s non-manufacturing index, which covers about 90% of the economy, fell to 55.2 in January from 55.7 the prior month. The median forecast of 76 economists projected the index would reach 55. Readings above 50 signal growth.
Dell added 1.2% to $13.43 after the world’s third- biggest maker of personal computers said it is going private in a deal valued at $24.4 billion. Chief Executive Officer Michael Dell and Silver Lake Management LLC will pay $13.65 a share, the companies said today in a statement.
‘Long-Term Appetite’
“These are indications that there’s long-term confidence in the economy and the markets,” Macey said of the Dell LBO. “It signals there’s a long-term appetite for stocks because they’re going to have to exit at some point.”
McGraw-Hill Cos. slid 13%, extending its two-day slump to a more than 25%. The U.S. is seeking as much as $5 billion in penalties from McGraw-Hill and its Standard & Poor’s unit as punishment for inflated credit ratings that Attorney General Eric Holder said were central to the worst financial crisis since the Great Depression. Moody’s Corp. sank a similar amount, extending its two-day slump to a record 22 percent.
Two shares advanced for every one that fell in the Stoxx 600. Munich Re, the world’s largest reinsurer, rose 3.9% after proposing to raise its dividend. ARM Holdings, whose chip designs power Apple Inc.’s iPhone and iPad, climbed 4.3% as fourth-quarter sales rose more than analysts predicted.
European Movers
Virgin Media Inc. rallied 17% in London as the U.K.’s second-largest pay-television provider said it’s in talks with Liberty Global Inc. on a “possible transaction.”
Royal KPN NV sank 16% as the Dutch phone company reported an unexpected loss and said it plans to sell 4 billion euros ($5.4 billion) of shares to strengthen its finances.
The Markit iTraxx Europe index of credit-default swaps linked to 125 companies dropped three basis points to 115, signaling an improvement in creditworthiness.
Italian, Spanish and Portuguese bonds rebounded following losses yesterday. Italy’s two-year note yield slid 10 basis points to 1.64% after earlier reaching 1.77%, the highest since Jan. 3.
Yen Weakens
The yen slid 1.2% to 93.51 yen per dollar and fell 1.7% versus the euro. Shirakawa told reporters in Tokyo that he would step down on March 19, earlier than his previous plan for an April 8 departure.
Oil climbed 0.5% to $96.64 a barrel in New York, recovering some of yesterday’s 1.6% drop. The S&P GSCI index added 0.4% as 12 of its 24 commodities increased, led by cocoa and energy products.
The MSCI Emerging Markets Index lost the most in a week, dropping 0.5% as Asian markets slumped following yesterday’s retreat in the U.S. and Europe.
The Hang Seng China Enterprises Index of companies listed in Hong Kong sank 2.8%, the biggest decline since July, led by China Petroleum & Chemical Corp. on a plan to sell shares. The Shanghai Composite Index gained 0.2%. Chinese companies traded on the mainland are priced at the biggest premium to Hong Kong-listed counterparts since Oct. 9, according to data compiled by Bloomberg.
