Stocks liking recent corporate earnings

U.S. stocks rose, sending the Standard & Poor’s 500 Index (CME:SPM14) higher for a second day, after results from Merck & Co. to Sprint Corp. topped estimates as the Federal Reserve begins a two-day policy meeting.

Merck gained 2.8 percent as earnings were helped by cuts in spending on promotions and research. Sprint added 11 percent after sales beat estimates as the company held onto more subscribers than forecast. Coach Inc. fell 8.9 percent after sales at its North American stores plunged 21 percent amid increased competition and bad weather.

The S&P 500 climbed 0.3 percent to 1,874.42 at 11:15 a.m. in New York. The Dow Jones Industrial Average increased 61.81 points, or 0.4 percent, to 16,510.55. The Nasdaq Composite Index advanced 0.3 percent, after jumping 0.7 percent in the first half hour of trading. Trading in S&P 500 stocks was in line with the 30-day average at this time of day.

“Earnings have been beating expectations and guidance will remain strong for coming quarters because of this spring thaw and economic rebound,” Patrick Spencer, who helps oversee more than $100 billion as London-based head of equity sales at Robert W. Baird & Co., said in a telephone interview. “That will continue to underpin the market.”

The S&P 500 was little changed for the month as of yesterday’s close, after reaching an all-time high on April 2. The Nasdaq Composite is heading toward its worst monthly performance since October 2012, with a decline of 2.6 percent, as technology stocks have sold off amid concern valuations have outpaced estimates for earnings growth. Nasdaq companies trade at 35 times reported earnings, about double the level of S&P 500 members.

Some 37 companies on the S&P 500 report earnings today, including EBay Inc. Twitter Inc. also posts results after the market close.

 

Earnings Season

Earnings for members of the S&P 500 climbed 3.4 percent in the first quarter, according to analyst estimates compiled by Bloomberg. They had predicted an increase of 0.7 percent as recently as April 17. Revenue for the index’s members probably rose 2.8 percent in the quarter.

About 74 percent of the 274 S&P 500 members that have reported earnings so far this season have posted profit that exceeded analysts’ estimates, data compiled by Bloomberg show. FedEx Corp., General Motors Co. and McDonald’s Corp. have all blamed weather for poor earnings performance as snow storms during the first three months of the year slowed shipments and kept shoppers indoors.

The Fed’s policy makers begin a two-day meeting in Washington today. At the conclusion, they will probably announce a fourth consecutive reduction to their monthly bond-buying program designed to stoke the economy, according to economists polled by Bloomberg.

 

Fed Stimulus 

Three rounds of monetary stimulus have helped fuel economic growth, sending the S&P 500 surging as much as 180 percent from its 2009 low.

“The economy is in a sweet spot,” Spencer said. “Growth isn’t so exuberant that the Fed needs to withdraw their support quickly, and not so anemic that they need to be concerned about further weakening.”

A report today showed home prices in 20 U.S. cities rose at a slower pace in the year ended February as the residential real-estate market cooled. The S&P/Case-Shiller index of property values increased 12.9 percent from February 2013, the smallest 12-month gain since August, after rising 13.2 percent in the year ended in January, a report from the group showed today in New York.

 

Consumer Confidence

The Conference Board’s index of U.S. consumer confidence decreased to 82.3 in April from 83.9 a month earlier, the New York-based private research group said today. The median forecast in a Bloomberg survey of 78 economists called for a reading of 83.2.

Data later this week will give investors more clues about the strength of the economy. The government’s initial tally of first-quarter gross domestic product tomorrow may show the slowest expansion in a year.

Payroll growth probably accelerated in April as companies remained upbeat about the economy’s prospects after a setback in demand caused by snowstorms and colder temperatures earlier this year. Employers added 215,000 workers, the most since November, economists project a May 2 report from the Labor Department will show.

Merck rose 2.8 percent to $58.28. The second-biggest U.S. drugmaker posted first-quarter profit excluding certain items of 88 cents a share, 9 cents above the average of 16 analysts’ estimates compiled by Bloomberg. Sales were $10.3 billion, down from $10.7 billion a year earlier.

Sprint jumped 11 percent to $8.25. Sales topped analysts’ estimates as the company held onto more subscribers than forecast in the face of cheaper wireless plans from T-Mobile US Inc. and AT&T Inc. The carrier raised its full-year forecast.

 

Exploring Options

Allergan Inc. rose 0.2 percent to $166.35. The Botox maker has contacted companies including Sanofi and Johnson & Johnson to see if either would be interested in acquiring it, said people with knowledge of the matter, as Allergan explores options after receiving an unsolicited $45.7 billion bid from Valeant Pharmaceuticals Inc.

Yahoo! Inc. advanced 2.7 percent to $34.89 after saying it will start two comedy shows to attract viewers to its website. The company will make the series of 30-minute episodes available through its website and mobile applications. The company will start offering new programming from television journalist Katie Couric this summer as it seeks to attract more video viewers.

Coach lost 8.9 percent, the most since October, to $45.94. U.S. retailers of all stripes have been hampered by repeated winter storms and weak store traffic, while Coach also faces stepped-up competition in the handbag segment from the likes of Michael Kors Holdings Ltd.

Gogo Inc. plunged 23 percent to $14.23 after AT&T Inc. said it will offer Internet access on airplanes in a direct challenge to the inflight Wi-Fi provider.

 

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