Stocks Climb on Earnings Optimism; Dollar Gains, Oil Falls
By Michael P. Regan and Nikolaj Gammeltoft
July 12 (Bloomberg) -- Stocks rose, with the Standard & Poor’s 500 Index climbing for a fifth day, as analyst upgrades of technology shares boosted optimism before the start of the earnings season. The dollar strengthened and oil and copper retreated.
The S&P 500 climbed 0.1 percent at 1,078.75 at 4 p.m. in New York and the Stoxx Europe 600 Index increased 0.4 percent. The Dollar Index, which gauges the currency against six major trading partners, advanced 0.3 percent to 84.214, helping to drag oil down for the first time in four days. Copper snapped a five-session streak of gains in New York as a report showed falling imports in China. Treasuries were little changed.
Technology shares led U.S. equities higher after analysts advised buying stock in SanDisk Corp. and Qualcomm Inc. as the S&P 500 added to its 5.4 percent advance last week, its biggest in a year. Alcoa Inc. started the second-quarter reporting season with better-than-estimated results after markets closed, sending the largest U.S. aluminum company’s shares up 2.9 percent in extended trading.
“We don’t see the double dip in the economy,” said Patrick Becker Jr., chief investment officer of Becker Capital Management Inc. in Portland, Oregon, which oversees $2.3 billion. “We see stock valuations being very attractive at these levels, especially within technology.”
The S&P 500 last week rebounded from a 10-month low as the International Monetary Fund raised its growth forecast and investors speculated a 16 percent selloff since April was overdone given the outlook for earnings.
Technology Valuations
Technology companies in the S&P 500 fell as much as 17 percent this year, pushing prices down to 15.6 times reported annual income, according to data compiled by Bloomberg. The biggest industry in the index hasn’t been this cheap since at least 1992, excluding the six months between Lehman Brothers Holdings Inc.’s bankruptcy and the start of the bull market in March 2009.
Technology companies rose 0.7 percent as a group today for the biggest advance among 10 industries in the S&P 500. SanDisk Corp. surged 6.8 percent as UBS AG advised buying the shares, while Qualcomm Inc. jumped 3.5 percent as Goldman Sachs Group Inc. added the stock to its “conviction buy” list.
Companies in the S&P 500 are projected to post an average profit gain of 34 percent in the second quarter, according to analysts’ estimates compiled by Bloomberg. Raw-materials producers are forecast to lead the growth, with earnings projected to increase by 92 percent, followed by an 81 percent increase in financial earnings and 53 percent jump in technology company earnings.
Alcoa Earnings
U.S. benchmark indexes fluctuated for much of the day as declines in metal prices dragged down commodity producers before Alcoa reported results. Alcoa’s earnings from continuing operations were 13 cents a share in the second quarter, exceeding the 11-cent average estimate of 17 analysts surveyed by Bloomberg.
Hewitt Associates Inc. jumped 32 percent after Aon Corp., the world’s largest insurance broker, agreed to buy the company for $4.9 billion in cash and stock.
BP Plc rallied 9.4 percent in London, the most since 2008, to help lead Europe’s regional benchmark index higher after saying it may be able to stop the flow of oil from its leaky Gulf of Mexico well and as investors speculated the company may be acquired. The Stoxx Europe 600 Index climbed 0.4 percent, extending its advance to five days.
The Sunday Times said Exxon Mobil Corp. may bid for the company. BP is working to install a new, tighter-fitting cap over its leaking well in the Gulf of Mexico, Senior Vice President Kent Wells said yesterday.
Crude Retreats
Crude oil for August delivery declined 1.5 percent to $74.95 a barrel on the New York Mercantile Exchange. Copper for delivery in three months lost 1.9 percent to $6,630 a metric ton on the London Metal Exchange and September futures decreased 1.5 percent to $3.0075 a pound in New York. Aluminum slid 1.7 percent to $1,971 a ton in London.
Gold futures for August delivery dropped 0.9 percent to $1,198.80 an ounce on the Comex in New York as a stronger dollar reduced demand for the precious metal as an alternative asset.
The dollar gained against 13 of 16 major counterparts, with the euro weakening to $1.2599 as the shared currency fell against 12 of its 16 most-traded peers. The yen strengthened against 12 of 16 major counterparts.
The pound dipped against the dollar after S&P said there is “still a material risk that the U.K.’s net general government- debt burden may approach a level incompatible with the nation’s AAA long-term credit rating.” The pound was down 0.2 percent to $1.5029.
$35 Billion Auction
Treasuries were little changed, with the 10-year yield at 3.07 percent, after the U.S. sold $35 billion in three-year securities at the lowest yield on record, the first of three note and bond sales this week totaling $69 billion.
Yields on 10-year top-rated municipal bonds may decline further after falling to the lowest level since 2001, according to Matt Fabian, managing director of Municipal Market Advisors.
Tax-exempt general obligations remained at an average yield of 2.94 percent for the second straight day on July 9, the lowest in at least nine-and-a-half years, as investors boosted their holdings with reinvested June and July coupon payments. States and municipalities are scheduled to sell $6.3 billion in debt this week, 17 percent below the weekly average this year, according to data compiled by Bloomberg.
The MSCI Asia Pacific Index dropped for the first time in three days, losing 0.1 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, dropped 2.1 percent in Tokyo.
The MSCI Emerging Markets Index climbed less than 0.1 percent. Developers and banks led gains in China on speculation the government will relax curbs on mortgage lending after property-price gains slowed. The Shanghai Composite Index jumped 0.8 percent.
Brazil’s Bovespa stock index fell for the first time in four days, losing 0.8 percent, as declining commodities prices dragged down producers.
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