U.S. stocks rose, breaking a two- week slump, as industries considered the safest investments led gains after reports on home sales and jobless claims tempered optimism about the economy while earnings lifted companies from Travelers Cos. to General Electric Co. (GE)
Gauges (SPXL1) for utilities, consumer staples, health-care and phone stocks climbed the most among 10 groups in the Standard & Poor’s 500 Index, jumping at least 1.5 percent. Travelers and GE added more than 2.5 percent after their profit beat analysts’ estimates. Technology companies were the only group to retreat, falling for a second week. The industry was dragged down by declines of 5.3 percent by Apple Inc. (AAPL) and 1.6 percent by International Business Machines Corp. (IBM), offsetting Microsoft Corp. (MSFT)’s 5.2 percent rally on better-than-estimated results.
The S&P 500 rose 0.6 percent to 1,378.53 for the first weekly advance since March 30. The Dow Jones Industrial Average added 179.67 points, or 1.4 percent, to 13,029.26.
“It’s just a small rotation as some investors reduced the amount of risk in their portfolio, maybe trying to reposition in anticipation of a correction,” Robert Pavlik, who helps manage $1.3 billion as chief market strategist at Banyan Partners LLC in New York, said in a phone interview. “We’ve got some decent earnings. But people are still a little bit nervous that we may not see that continued follow-through with earnings expansion.”
The week’s gain extended the benchmark index’s 2012 rise to 9.6 percent as investors bought stocks this year amid better- than-estimated economic and corporate earnings. S&P 500 (SPX)companies are on pace to beat analysts’ profit estimates for a 13th straight quarter. Of the 94 companies that have reported results since April 10, 85 percent have topped expectations, according to data compiled by Bloomberg.
Analysts raised their first-quarter earnings estimates this week, projecting per-share profits grew 3.3 percent, up from last week’s 1.7 percent estimate. Earnings will grow 8.8 percent for all of 2012, according to the data.
“We are bullish,” Thomas Sowanick, chief investment officer of Omnivest Group LLC, which oversees $3 billion in Princeton, New Jersey, said in a telephone interview. “We have powerful earnings. If you look at the underlying trends of the economy, things are not as fast as they were, but they are not falling apart.”
The S&P 500 jumped the most in a month on April 17 after the International Monetary Fund raised its 2012 global growth projection to 3.5 percent. Stocks retreated April 19 as more Americans than forecast filed claims for jobless benefits and sales of previously owned homes unexpectedly dropped.
The out performance in defensive stocks this week marked a reversal from the first quarter, when the S&P 500 jumped 12 percent, led by a surge of at least 21 percent in the financial and technology industries. During that period, utilities posted the only decline among the 10 groups while phone stocks gained only 0.6 percent.
The gauge of utilities had the biggest gain this week, rallying 2.1 percent, the most since December. NRG Energy Inc. (NRG), the Princeton, New Jersey-based power producer, jumped 5.6 percent to $15.39, after being boosted to buy from hold by Deutsche Bank AG.
Verizon Communications Inc. (VZ) helped drive phone stocks to a 1.6 percent advance. The second-largest U.S. phone company rose 4 percent to $38.73 after earnings beat analysts’ estimates as smartphone demand boosted subscriber count.
Travelers rallied 8 percent, the most in the Dow, to $62.75. The insurer said first-quarter profit beat analysts’ estimates as policy sales increased. The company also boosted its dividend 12 percent.
Among other financial companies that announced results, Morgan Stanley (MS) advanced 1.2 percent to $17.48 after beating estimates and reporting stock- and bond-trading revenue that rose more than at any other major U.S. bank. Citigroup Inc. (C) climbed 1.4 percent to $33.89 after fixed-income trading revenue more than doubled from the fourth quarter.
Bank of America Corp. (BAC) fell 3.7 percent, the most in the Dow, to $8.36 even as its earnings beat estimates. Mike Mayo, an analyst at CLSA Ltd., cut the bank’s rating to sell from under-perform.
GE rose 2.5 percent to $19.36. The maker of jet engines and power generation equipment topped analysts’ estimates as profit gains at the energy business, its largest industrial division, outpaced finance for the first time in two years.
The S&P 500 Information Technology Index (S5INFT) fell 1.5 percent. Apple sank 5.3 percent to $572.98 amid speculation that demand for the iPad may wane and that mobile-phone carriers will cut subsidies for the iPhone, eroding profitability of Apple’s best- selling products. The company has erased 9.9 percent since April 9, when it reached an all-time high of $636.23. The stock is still up 41 percent in 2012.
IBM retreated 1.6 percent to $199.60. The world’s biggest computer-services provider said first-quarter revenue was $24.7 billion, falling short of the average analyst estimate of $24.8 billion.Intel Corp. (INTC) slipped 1.7 percent to $27.60. The world’s largest semiconductor maker forecast gross margin that was lower than some analysts predicted.
IBM’s revenue climbed 0.3 percent, while Intel sales rose 0.5 percent, the smallest increases for both companies since the third quarter of 2009, when the U.S. economy was just emerging from recession. Even so, Intel predicted a pickup in sales for the current quarter.
Microsoft increased 5.2 percent to $32.42. The world’s largest software maker reported fiscal third-quarter profit that topped estimates on better-than-expected sales of Windows and Office software for business.
EBay Inc. (EBAY) surged 12 percent to $40.29, reaching the highest level since 2006 on April 19. The world’s largest Internet marketplace reported sales and profit that topped analysts’ estimates, led by growth in its PayPal online-payments business.