U.S. stocks rose, following the worst plunge since the bull market began in 2009, as an unexpected drop in jobless claims and improved corporate earnings tempered concern Europe’s debt crisis is worsening.
Cisco Systems Inc. (CSCO), the world’s largest maker of networking equipment, soared 14 percent as profit beat analysts’ estimates. Bank of America Corp. (BAC) and Citigroup Inc. (C) added at least 0.7 percent, leading financial companies in the Standard & Poor’s 500 Index higher after the group plunged 7.1 percent yesterday. All 10 groups in the S&P 500 climbed.
The S&P 500 advanced 1 percent to 1,132.11 at 9:58 a.m. in New York. The gauge has fallen 17 percent from its April 29 high and is close to a so-called bear market. The Dow Jones Industrial Average gained 135.09 points, or 1.3 percent, to 10,855.03 today.
“We’re in the process of trying to establish a bottom,’ James Paulsen, the chief investment strategist at Minneapolis- based Wells Capital Management, which oversees about $340 billion, said in a telephone interview. ‘‘The jobless claims number was calming in the middle of the storm. It’s a good reminder that -- hey, we have stuff going on in Europe, but if the economy does not roll into a recession, there’s no reason for stocks to be selling at these levels.”
The S&P 500 has fallen 17 percent from July 22 through yesterday on concern about Europe’s debt crisis and a political battle over the U.S. debt ceiling that prompted S&P to cut the country’s credit rating. Both European shares and the Russell 2000 Index of small companies entered a bear market this week, falling at least 20 percent from their previous highs.
Economic Reports
Stock-futures erased losses after a report showed that claims for unemployment insurance payments in the U.S. unexpectedly fell last week, signaling the recent slowdown in payroll gains is due to a lack of hiring rather than more firings. Applications for jobless benefits decreased 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April, the Labor Department said. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey.
A separate report showed that the U.S. trade deficit unexpectedly increased in June to the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas.
A rout in global equity markets since July 26 has erased $7.9 trillion in equity values. Central bankers are trying to restore investor confidence, with the Federal Reserve pledging to keep interest rates near zero through at least mid-2013 to bolster U.S. growth and the European Central Bank buying bonds to cap borrowing costs.
Earnings Strength
Stocks were lifted by improved corporate earnings. Since July 11, about 76 percent of S&P 500 companies that have released quarterly results beat projections, according to data compiled by Bloomberg. Profits for companies in the index may rise 18 percent to a record $107.64 a share in the next 12 months, analysts’ estimates show.
Cisco rose 14 percent to $15.70. The world’s largest maker of networking equipment reported profit that beat analysts’ estimates as the company reined in expenses while refocusing on its high-margin routers and switches.
News Corp. (NWSA) gained 11 percent to $15.23. The owner of Fox TV and the Wall Street Journal posted profit that beat analysts’ estimates and raised its dividend 27 percent, cushioning investor losses after a phone-hacking scandal hurt the stock. Rupert Murdoch, chairman and chief executive officer, said the company’s board of directors wants him to remain in his current roles.
Bank of America added 3.4 percent to $7.00 after falling 11 percent yesterday. Citigroup gained 0.7 percent to $28.70.
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