Stocks rise before Yellen addresses Congress

U.S. stock futures rose, after the Standard and Poor’s 500 Index (CME:SPM14) dropped the most in three weeks, as earnings from Electronic Arts Inc. to First Solar Inc. topped estimates before Federal Reserve Chair Janet Yellen addresses Congress.

Electronic Arts jumped 17 percent and First Solar added 3.8 percent after reporting better-than-forecast results. Whole Foods Market Inc. declined 17 percent after cutting its 2014 profit forecast for a third time because of increasing competition. Groupon Inc. fell 7.7 percent as its sales and profit projections for the current quarter trailed some estimates.

Futures on the S&P 500 expiring next month rose 0.3 percent to 1,869.1 at 8:35 a.m. in New York. Dow Jones Industrial Average contracts climbed 53 points, or 0.3 percent, to 16,413. Futures on the Nasdaq 100 Index gained 0.3 percent.

“This earnings season has been better than the flat growth we expected,” said William Hobbs, the London-based head of equity strategy at Barclays Plc’s wealth-management unit. “There are always some shockers, and some industries where visibility is still low, which is concerning. Earnings will probably pick up quite briskly from here and economic data is pointing to better times ahead. It doesn’t really feel like the market needs much of a reassurance from the Fed.”

U.S. stocks fell yesterday as Twitter Inc. led a selloff in Internet shares while a profit decline at American International Group Inc. dragged down financial companies. Technology, small- cap and biotechnology companies were among the biggest losers as selling of the bull market’s best performers resumed.

The S&P 500 has gained 1.1 percent this year, while the Dow lost 1.1 percent. The Nasdaq Composite Index has retreated 2.3 percent in 2014.

 

Earnings Scorecard

Some 22 S&P 500-listed companies -- including Twenty-First Century Fox Inc., Prudential Financial Inc. and Allergan Inc. -- report earnings today. Of the 421 index members to have released results this season, 75 percent have beaten estimates for profit, while 52 percent have exceeded projections for revenue, data compiled by Bloomberg show. Tesla Motors Inc. and Moelis & Co. will also post first-quarter earnings today.

Profit for members of the S&P 500 probably climbed 4.6 percent in the first three months of the year from the year- earlier period, while sales rose 2.8 percent, according to analyst estimates compiled by Bloomberg.

Yellen will testify to the Joint Economic Committee of Congress on monetary policy and the outlook for the U.S. economy today. She will speak from prepared remarks from 10 a.m. in Washington. Yellen is also scheduled to speak to the Senate Budget Committee tomorrow.

 

Gaining Momentum

U.S. equities climbed last week, sending the Dow to a record, after the Fed said the economy is gaining momentum as consumers spend more. The Federal Open Market Committee pared monthly asset buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely.

Yellen is winding down record stimulus as the world’s largest economy shows signs of rebounding from a first-quarter standstill. At the same time, the Fed repeated that it’s likely to keep the benchmark interest rate near zero for a “considerable time” after bond purchases end.

Data today showed American workers were less productive in the first quarter as harsh winter weather prevented some from getting to their jobs. The measure of employee output per hour dropped at a 1.7 percent annualized rate, the weakest reading in a year, after rising at a 2.3 percent pace in the last three months of 2013, a Labor Department report showed today in Washington. The median forecast in a Bloomberg survey of 59 economists called for a 1.2 percent drop.

 

Electronic Arts

Electronic Arts jumped 17 percent to $32.75. Fiscal fourth- quarter profit of 48 cents a share and sales of $914 million exceeded projections. The company’s FIFA 14, Titanfall and Battlefield 4 games were three of the top five best-selling titles across all game consoles in the U.S., Canada and Europe, Chief Financial Officer Blake Jorgensen said.

First Solar added 3.8 percent to $70.01. Revenue from a 139-megawatt power plant in California helped first quarter net income jump to $112 million, or $1.10 a share. That’s more than double the 50-cent average estimate compiled by Bloomberg. The solar-panel maker increased its earnings forecast for the year to as much as $2.80 a share, from a March estimate of as much as $2.60 a share.

 

Coffee Combination

Mondelez International Inc., which makes Oreo cookies and Trident gum, rallied 7.3 percent to $37.78. The company will combine its coffee unit with D.E Master Blenders 1753 BV’s, according to a joint statement today. Mondelez will receive cash of $5 billion and a 49 percent stake in the new company, to be called Jacobs Douwe Egberts. Separately, Mondelez reported first quarter earnings of 39 cents a share, more than the 35 cents projected by analysts.

Whole Foods slumped 17 percent to $39.81. The natural-goods grocer lowered its profit forecast for the 12 months ending in September to as much as $1.56 a share, excluding certain items, compared with a previous projection of as much as $1.65. Analysts on average predict $1.61 a share. Whole Foods had cut its projections in February and November.

Groupon, which operates a website offering daily deals, dropped 7.7 percent to $6.20. For the second quarter, the Chicago-based company forecast $725 million to $775 million in revenue and adjusted earnings of zero to 2 cents a share. Analysts estimated sales of $754.4 million and an adjusted profit of 3 cents a share.

 

Twitter, Yahoo

Twitter dropped 1.8 percent to $31.27 after leading a selloff in social-media stocks yesterday. LinkedIn Corp. added 0.8 percent to $143.50 after dropping 5.7 percent yesterday, while Yelp Inc. gained 1.3 percent to $52.80 after losing 13 percent. Facebook Inc. climbed 0.6 percent to $58.90.

Yahoo! Inc. rose 0.7 percent to $36.74. Alibaba Group Holding Ltd., a Chinese online marketplace valued at $168 billion, filed yesterday for its U.S. initial public offering, without specifying the number or price of shares it will sell or what valuation it will seek. Agreements between the two companies will force Yahoo to sell part of its 22.6 percent stake in Alibaba.

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