U.S. Stocks Advance Toward 4th Weekly Gain Amid Earnings Results
Some of the week’s biggest winners contributed to gains in the U.S. markets.
U.S. stocks advanced toward all-time highs, led by rallies in phone companies and utilities, amid a mix of corporate earnings reports.
Some of the week’s biggest winners were contributing the most to Friday’s climb as Microsoft Corp. and Biogen Inc. added to their strongest weekly increases since at least March. Verizon Communications Inc. rose 1 percent as it’s said to be near a deal to buy Yahoo! Inc. Gains were tempered by disappointment that followed earnings from General Electric Co., Honeywell International Inc. and Apple Inc. supplier Skyworks Solutions Inc., which weighed on Apple shares.
The S&P 500 Index rose 0.3 percent to 2,172.24 at 1:22 p.m. in New York, alternating between daily gains and losses for a sixth session. The benchmark is up 0.5 percent this week, the smallest such advance in its four-week run to records. The Dow Jones Industrial Average added 23.90 points, or 0.1 percent, to 18,541.13, and the Nasdaq Composite Index increased 0.5 percent. Trading volume in S&P 500 shares was about 9 percent below the 30-day average for this time of day.
“It’s been a bit of a mixed bag, but you have to say that the earnings reports have been positive overall,” said Chuck Self, chief investment officer of iSectors LLC, an Appleton, Wisconsin-based asset manager. “There’s certainly no trend to the negative in the earnings reports at all. There is a question of valuations out there and with interest rates so low, it’s hard to figure out whether it’s true to value.”
The S&P 500 is poised for the longest stretch of weekly gains since March. The benchmark on Wednesday posted its sixth record in eight sessions, while the Dow rose for nine straight days, its longest rally since 2013, before halting the advance yesterday. Speculation that central banks will act to cushion any fallout from the U.K.’s vote to leave the European Union, and signs of a strengthening U.S. economy have propelled stocks higher in recent weeks.
The earnings season has also spurred optimism corporate results will support equities near records. About a quarter of S&P 500 firms have released figures so far, of which 82 percent exceeded profit forecasts and 60 percent beat sales expectations. The flow is set to accelerate, with 195 companies scheduled to report results next week. Analysts forecast net income among S&P 500 members will slide 4.5 percent in the second quarter -- improving from a 5.8 percent drop predicted a week ago -- for a fifth straight decline.
Among shares moving after reporting results, Stanley Black & Decker Inc. rallied 4.9 percent to a record as the toolmaker’s sales and profit topped estimates. The company also boosted its full-year earnings outlook. American Airlines Group Inc. rose 3.6 percent after its profit also exceeded predictions, helped by lower fuel prices. Southwestern Energy Co. surged 9.8 percent after posting a smaller loss than estimated, and the company boosted its production outlook.
“We’ve had a major rise in global equities for almost a month, this has been accelerated during the earnings season,” said Christian Gattiker, head of research at Julius Baer Group in Zurich. “This is now a time of digesting these rises. Next week is really a bumper in terms of earnings, so everyone is looking at that. Overall it’s been a decent earnings season so far. Markets might enter the summer lull now.”
While better-than-forecast data has helped push stocks to fresh highs, it has also lifted odds of a Federal Reserve interest-rate increase. Traders are pricing in a 45 percent chance of higher borrowing costs by December, up from about 21 percent two weeks ago, and a less than 8 percent probability after the two-day equity selloff following the Brexit vote.
“The turn in economic data is what the stock market move has been discounting, stronger economic news and better earnings in the second half of the year,” Doug Ramsey, the chief investment officer of Leuthold Weeden Capital Management LLC, said in an interview on Bloomberg TV. “The S&P held very firm and this move off the February lows, and even more recently off the Brexit lows has been very powerful and broad.”
In Friday’s trading, the CBOE Volatility Index fell 5 percent to 12.10, declining for the seventh time in eight days. The measure of market turbulence known as the VIX yesterday snapped its longest streak of declines in three months with its biggest climb since June 24, the day after the Brexit vote.
Phone companies rose the most among the S&P 500’s 10 main industries, as AT&T Inc. and Verizon climbed more than 1 percent. AT&T was on pace for its best day in three weeks, with analysts generally positive on its quarterly results. Industrials fell for a second day after reaching an all-time high on Wednesday.
GE and Honeywell dragged down the industrial group, losing more than 2 percent. GE sank after its quarterly report showed orders fell 2 percent in the second quarter -- and tumbled 16 percent when excluding the effects of acquisitions and currency shifts. Honeywell cut its 2016 sales forecast amid sluggish global growth and lower demand for energy-related products and services.
Technology companies rose, despite the group being home to the benchmark’s two biggest losers today. PayPal Holdings Inc. tumbled 7.1 percent on concern about the cost implications of a new agreement between the digital payments company and Visa Inc. Skyworks Solutions sank 8.7 percent, the most in nine months, after its quarterly gross margin was short of estimates, even as revenue and profit beat predictions.
Source: Bloomberg