Neal Bhai Reports ~ U.S. stocks advanced, with energy shares leading a rebound sparked by rising crude-oil prices, as investors weighed corporate earnings and prospects for global growth.
Equities whipsawed amid a slew of quarterly results on the reporting season’s busiest day, a session after the Federal Reserve said it’s monitoring global developments to assess their impact on U.S. growth. Facebook Inc.’s better-than-expected report sparked gains in technology, while Abbott Laboratories sank 9.3 percent, weighing on health-care shares after its forecast trailed estimates. Amazon.com Inc. fell in late trading while Microsoft Corp. rallied following their earnings reports after markets closed.
The Standard & Poor’s 500 Index climbed 0.6 percent to 1,893.36 at 4 p.m. in New York, after swinging between a 1.1 percent gain and a 0.5 percent loss. The Dow Jones Industrial Average rose 125.18 points, or 0.8 percent, to 16,069.64. The Nasdaq Composite Index climbed 0.9 percent, rising from a three month low. About 8.8 billion shares traded hands on U.S. exchanges, 16 percent above the three-month average.
“It’s no longer about whether we’re rebounding from the financial crisis back to normal levels,” said Jason Pride, the Philadelphia-based director of investment strategy at Glenmede, which oversees $30 billion. “It’s about whether growth is going to be sustained, how good is that growth and where is the market incorrectly placing value. The takeaway for the market from the Fed announcement yesterday is that they’re seeing growth as being a little slower and they definitely see the risks from possible contagion from China and what’s going on in the oil markets.”
While oil’s direction has been a strong influence on equities, earnings results are gaining clout as the pace of the reporting season intensifies. Stocks dropped yesterday amid an Apple-led slump and Boeing Co.’s biggest decline in 14 years after outlooks from both companies disappointed. Caterpillar Inc. contributed to today’s revival, leading the Dow with a 4.7 percent gain after reporting better-than-estimated earnings as cost cuts blunted the effects of a commodities meltdown.
Amazon slid 10 percent as of 4:44 p.m. after its holiday quarter profit and sales missed estimates, taking the shine off of a year marked by record earnings and an expansion of the company’s businesses. The Web retailer’s cloud-computing division had fourth-quarter sales of $2.4 billion, up 69 percent from a year earlier. Meanwhile, Microsoft gained 3.6 percent in late trading after posting better-than-projected sales and profit, fueled by cloud services and Office productivity programs.
Investors are looking to earnings as a possible bright spot in the worst month for stocks in five years, down 7.4 percent. Analysts estimate profit at S&P 500 firms fell 6.3 percent in the fourth quarter, better than predictions a week earlier that called for a 7 percent slump. Of those that have already posted results, 80 percent beat earnings projections and 50 percent exceeded sales forecasts.
Fed policy makers left interest rates unchanged yesterday and said they still expect to raise borrowing costs at a “gradual” pace, while watching to see the impact of the global economy and markets. The comments sent the probability of a March hike lower, to 14 percent from about one-in-four odds before the meeting.
Since the Fed last month raised rates for the first time in almost a decade, turbulence in financial markets and a dimming of the outlook for worldwide growth have spurred investors to expect a slower rise in borrowing costs.
Data today showed orders for business equipment fell in December by the most in 10 months. Orders for all durable goods slumped 5.1 percent, the most since August 2014. A separate report showed contracts to purchase previously owned homes rose less than forecast in December, indicating more tempered progress in residential real estate early this year.
The Chicago Board Options Exchange Volatility Index fell 3 percent Thursday to 22.42. The measure of market turbulence known as the VIX is up 23 percent in January, its biggest monthly surge since a record jump in August.
Among the S&P 500’s 10 main groups, energy companies rallied 3.2 percent and technology shares added 1.5 percent to pace the advance. Health-care companies slumped 2.3 percent, the only industry retreating today.
Energy stocks rose to a three-week high, buoyed by stronger oil prices. Hess Corp. added 9.5 percent, the most since 2008, after reporting better-than-expected quarterly results yesterday. Kinder Morgan Inc. and Devon Energy Corp. each rose at least 8.4 percent.
Crude rose as much as 7.8 percent after Russia’s energy minister said that OPEC and other producers may meet to discuss output, before paring gains as OPEC delegates said no talks were planned. The commodity closed 2.9 percent higher in New York.
Facebook’s 16 percent rally was its best in more than two years and it closed at an all-time high of $109.11. Among other tech companies, PayPal Holdings Inc. rose 8.4 percent after its quarterly profit and revenue beat estimates, and Google parent Alphabet Inc. increased 4.3 percent, the most since October.
Juniper Networks Inc. offset some gains within the tech group, tumbling 15 percent, the most in more than four years. The network equipment maker forecast earnings for the current quarter that missed estimates and said its chief financial officer is stepping down. EBay Inc. fell 12 percent, its steepest loss in seven years after sales stalled last quarter and the company’s first-quarter profit and revenue forecasts were below analysts’ estimates.
Health-care companies sank to a four-month low, dragged down by Abbott’s worst drop since 2002. The largest maker of heart stents provided a profit forecast range that trailed analysts’ estimates, citing the impact of the stronger dollar and its struggling Venezuelan business.
Biotech stocks saw even greater losses, as the iShares Nasdaq Biotechnology ETF tumbled 3.6 percent to the lowest since October 2014. The fund, which is down 22 percent in January, is on track for its worst month of performance since it was created in 2001.
Incyte Corp. fell 9.6 percent after halting a mid-stage trial looking at an experimental drug for colorectal cancer, while Celgene Corp. lost 5 percent to its lowest since October 2014 after providing an outlook that disappointed investors.
“Biotechs are running counter to the good day that oil is having and energy stocks are having,” said Tim Ghriskey, who helps oversee $1.5 billion as managing director and chief investment officer at Solaris Asset Management in New York. “The health-care sector is just taking it on the chin today and I think that’s a valuation issue.”
Better-than-expected earnings results helped send Under Armour Inc. almost 23 percent higher, the strongest gain in two years. Meanwhile, United Rentals Inc. slumped 18 percent, the most since 2008, after forecasting sinking rental rates next year and UBS AG downgraded the stock to neutral from buy. Alliance Data Systems Corp. tumbled 19 percent, the most in seven years, after trimming first-quarter guidance. ~ Gold Silver Reports