Tuesday, July 19, 2011

U.S. Stocks Climb as IBM, Coca-Cola Rally

U.S. stocks rose, sending the Standard & Poor’s 500 Index rebounding from a three-week low, after profit topped estimates at companies from International Business Machines Corp. (IBM) to Coca-Cola Co.

IBM, the biggest computer-services company, climbed 3.9 percent after lifting its profit forecast amid buoyant demand for software. Coca-Cola, the largest soft-drink company, rose 2.9 percent after results beat estimates and the company said it plans to buy back shares. All 12 stocks in an S&P gauge of homebuilders advanced after U.S. housing starts increased to a five-month high. Bank of America Corp. (BAC) fell 2.1 percent after reporting the biggest quarterly loss in its history.

The S&P 500 gained 0.9 percent to 1,317.76 at 11:10 a.m. in New York, climbing from its lowest closing level since June 28. The Dow Jones Industrial Average advanced 116.06 points, or 0.9 percent, to 12,501.22.

“Everything out of the earnings box continues to drive the message that from the corporate side, things are pretty good all across the board,” said James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, which oversees $110 billion. “It’s early in the season, but that daily dose of the micro side feels a little better than investing against a macro, political backdrop.”

The S&P 500 declined 4.3 percent through yesterday from a three-year high in April amid speculation that the sovereign debt crisis in Europe is spreading across the region and concern that U.S. lawmakers will fail to reach a deal on raising the nation’s debt limit before the Aug. 2 deadline. The drop has left the gauge trading at 14.8 times reported earnings, the cheapest this month, according to data compiled by Bloomberg.

Fed Stimulus
The S&P 500 has still rallied 93 percent since March 2009 as the Federal Reserve maintained a policy of record-low interest rates and emergency stimulus to spur growth in the world’s largest economy.

Positive earnings reports pushed shares higher. Among the 36 companies in the S&P 500 that posted results since July 11, 31 beat the average analyst estimate for per-share profit, data compiled by Bloomberg show.

IBM climbed 3.9 percent to $182.09, the largest advance in the Dow. The Armonk, New York-based company reported sales that beat analysts’ estimates and lifted its profit forecast amid buoyant demand for software. Second-quarter revenue rose 12 percent to $26.7 billion. That topped $25.4 billion, the average estimate of analysts surveyed by Bloomberg. Rival Oracle Corp. (ORCL) increased 2.8 percent to $32.37.

Coke, Goldman Sachs
Coca-Cola Co. rose 2.9 percent to $69.03, the second biggest gain in the Dow. The world’s largest soft-drink maker posted second-quarter earnings and sales that exceeded the average analyst estimate, helped by sales in Latin America and Asia. The company also said it plans to buy back at least $2.5 billion worth of shares by the end of the year.

Goldman Sachs Group Inc. (GS) slumped 0.9 percent to $128.18. The fifth-biggest U.S. bank by assets reported second-quarter profit that fell short of analysts’ estimates as fixed-income trading revenue plunged 63 percent from the previous quarter. Net income was $1.85 a share, compared with the $2.30 per share average estimate of analysts in a survey.

Bank of America declined 2.1 percent to $9.52. The bank reported a quarterly loss of $8.83 billion, the biggest in its history, as it booked more costs tied to defective mortgages and revenue continued to slide.

Homebuilders advanced after housing starts in the U.S. rose more than forecast in June to the highest level in five months, led by a surge in multifamily dwellings. D.R. Horton Inc. climbed 4.3 percent to $11.78. Lennar Corp. gained 5 percent to $18.25. PulteGroup Inc. rose 3.3 percent to $7.17.

Housing Starts
Work began on 629,000 houses at an annual pace, up 15 percent from the prior month, figures from the Commerce Department showed. The level of starts exceeded the most optimistic forecast in a Bloomberg News survey of economists. Building permits, a sign of future construction, unexpectedly climbed 2.5 percent.

Harley-Davidson Inc. (HOG) rallied 10 percent to $45.74, the biggest gain in the S&P 500. The largest U.S. motorcycle maker reported a 37 percent increase in profit, beating analyst estimates, as it boosted home market sales for the first time in almost five years and said it will ship more bikes than previously planned.

News Corp. (NWSA) rose 3.8 percent to $15.54 as people with knowledge of the situation said the company is considering elevating Chief Operating Officer Chase Carey to chief executive officer to succeed Rupert Murdoch.

A decision hasn’t been made and a move depends in part on Murdoch’s performance before the U.K. Parliament today, said the people, who weren’t authorized to speak publicly. Murdoch would remain chairman, the people said.

Mosaic Co. (MOS) gained 4.9 percent to $69.73. North America’s second-largest fertilizer producer posted earnings and sales that exceeded the average analyst projection.

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