Intel Corp. dropped 3.6%, leading a retreat in technology companies, as analysts at Evercore Partners Inc. and Citigroup Inc. lowered earnings forecasts for 2013 and 2014 amid weakening demand for personal computers.
The S&P 500 gained 1.6% last week as better-than- estimated economic data tempered concern over a possible scaling back of Federal Reserve stimulus. Employers added more jobs than forecast in June, and other data during the week showed jobless claims decreased and manufacturing improved. While the index has fallen 1.7% since its May 21 record, it’s still up 15% for 2013.
‘‘The world looks rosy to investors again, after the U.S. market rallied on much better-than-expected employment numbers that investors finally seem to be interpreting as good news,” said John Plassard, who helps oversee $28 billion as vice president at Mirabaud Securities LLP in Geneva. “With analysts having downgraded their expectations in recent weeks, we should be seeing fewer negative surprises in the U.S. earnings season, so sentiment is quite good.”
The same equity analysts who lowered second-quarter profit growth predictions to almost nothing in 2013 are raising price forecasts, convinced the economy is growing fast enough to lure more investors and boost valuations.
S&P 500 earnings grew 1.8% last quarter, down from a projection of 8.7% six months ago, according to more than 11,000 analyst estimates compiled by Bloomberg. At the same time, share-price targets for companies from GameStop Corp. to Goldman Sachs Group Inc. are rising at the fastest rate in two years. The U.S. equity gauge will increase 8.9% from last week’s close to a record 1,777.91 should the forecasts prove accurate.
Lower expectations helped about 73% of the companies in the benchmark measure exceed forecasts by an average of 5.1% for the first three months of the year, Bloomberg data show.