Tuesday, October 22, 2013

U.S. Stocks Little Changed on Earnings Before Jobs Data

U.S. stocks were little changed, after the Standard & Poor's 500 Index rallied to a record, as investors watched corporate earnings to assess the strength of the economy before tomorrow's employment data.

Apple Inc. (AAPL) rose 2.5 percent as Chief Executive Officer Tim Cook will likely introduce a high-definition iPad mini and thinner iPad tomorrow. General Electric Co. gained 2.3 percent to the highest level since 2008. VF Corp. (VFC) and Hasbro Inc. climbed at least 3.4 percent, reaching all-time-highs, on better-than-estimated earnings. Homebuilders slumped 2 percent as a group amid a report showing existing-home sales declined for the first time in three months. Halliburton Co. dropped 3.5 percent as revenue fell short of forecasts.

The S&P 500 added less than 1 point to 1,744.66 at 4 p.m. in New York. The Dow Jones Industrial Average fell 7.45 points, or less than 0.1 percent, to 15,392.20. About 5.7 billion shares changed hands on U.S. exchanges, in line with the three-month average.

"There are certainly some digestions going on as these earnings are being reported," Jim King, president and chief investment officer who helps oversee about $2.4 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. "What we know is that earnings are continuing to come through pretty strongly and the Fed continues to promote asset growth. Those two things are the drivers of seeing higher stock prices over the next several quarters."

The S&P 500 had its best weekly gain since July last week as results from Google Inc. topped estimates and speculation grew that the Federal Reserve will delay cutting monetary stimulus. The index has gained 3.8 percent so far in October as Congress agreed on a new federal budget that avoided a default and ended the first partial government shutdown in 17 years.

New Highs

The benchmark measure has advanced 22 percent this year as Fed Chairman Ben S. Bernanke refrained from reducing $8! 5 billion of monthly bond purchases to stimulate the economy.

The Labor Department will tomorrow release the September jobs report, which was delayed from its original Oct. 4 date because of the 16-day partial federal shutdown that ended Oct. 17. The data will probably show employers added 180,000 workers in September, the most since April, after a 169,000 gain in August, according to the median estimate of 93 economists surveyed by Bloomberg.

Money has been flowing in and out of financial markets more rapidly than ever before this year, a bullish signal as the threat of a U.S. sovereign default fades.

Since Sept. 1, about $47 billion has gone to exchange-traded funds that track everything from stocks to bonds to commodities, according to data compiled by Bloomberg. That followed $18 billion pulled in August, $40 billion added in July and $11 billion pulled in June, making it the most volatile period on record for flows. Almost $7 billion went to ETFs on Oct. 17 alone.

Earnings Forecasts

Analysts have raised their forecasts for profits and now forecast an average increase of 2.5 percent for all companies in the S&P 500, according to estimates compiled by Bloomberg. That compares with an expected gain of 1.7 percent at the beginning of the month.

Earnings at the 108 companies that have reported so far grew 4.5 percent, while sales gained 2.1 percent. Some 70 percent of the companies have topped analysts' profit estimates, while 54 percent have beaten on sales.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, climbed 0.9 percent today to 13.16, following three days of declines. The measure has fallen 21 percent this month.

Industry Groups

Four out of 10 S&P 500 main industries gained as telephone and technology stocks rose at least 0.5 percent for the best performance. Health-care, energy and consumer-staples shares fell more than 0.3 percent.

Apple climbed 2.5 percent ! to $521.3! 6. The stock is up nine straight days, the longest stretch since October (SPX) 2010. The company is upgrading its iPad lineup to fend off a growing list of competitors, which are introducing their own tablets at lower prices with snazzier features.

Cook, facing two straight quarters of declining profit and a stock that's down by more than a quarter from a September 2012 record, will introduce the new models at a San Francisco event tomorrow, people with knowledge of the plans have said.

GE rallied 2.3 percent to $26.14, the highest level since September 2008. The company has climbed 8.1 percent over four days, the biggest gain for that time span since December 2011. The maker of jet engines, power generation equipment and locomotives was added to Citigroup Inc.'s U.S. focus list. The company last week assured investors that its industrial business is poised to meet a goal for profit-margin growth.

Dividend Increase

VF gained 3.4 percent to $211.23. The world's largest apparel maker increased its quarterly dividend to $1.05 a share from 87 cents as profit exceeded analysts' estimates. The company announced a 4-for-1 stock split.

Hasbro jumped 5.3 percent to $49.72. The world's second-biggest toymaker reported third-quarter earnings and sales that topped analysts' estimates.

AT&T (T) Inc., the largest U.S. phone company, advanced 1.8 percent to $35.22. The company announced yesterday it has agreed to sell or lease 9,700 wireless towers with Crown Castle International Corp. for $4.85 billion, giving it extra cash as it considers a European expansion. The agreement makes AT&T the latest carrier to offload towers to independent operators.

Netflix Inc. jumped 6.4 percent to $354.99 ahead of its earnings announcement. After the market close, the world's largest subscription-video service reported third-quarter profit that beat analysts' estimates, and signed up U.S. customers faster than projected. The shares added 9.4 percent as of 4:47 ! p.m. New ! York time.

Homebuilders Decline

An S&P index of homebuilders slipped 2 percent as all its 11 members dropped. Purchases of previously owned homes fell 1.9 percent to a 5.29 million annual rate in September, retreating from an almost four-year high as rising prices and mortgage rates discouraged would-be buyers, a report from the National Association of Realtors showed.

D.R. Horton Inc. declined 1.8 percent to $18.67 while PulteGroup Inc. lost 1.2 percent to $16.38.

Halliburton slid 3.5 percent to $50.66. The world's largest provider of hydraulic-fracturing services reported third-quarter revenue that missed forecasts. Excluding one-time items, earnings beat analysts' estimates.

Goodyear Tire & Rubber Co. tumbled 6.7 percent to $21.12. The biggest U.S. tiremaker was cut to hold from buy at Deutsche Bank AG on concern the company's profit margins may have peaked. Separately, Goodyear said it hasn't received any new offer for its Amiens Nord plant in France.

J.C. Penney Co. slumped 8.3 percent to $6.42, extending a 13 percent plunge from last week, when the company was forced to fend off anonymous attacks on Twitter saying it had hired a bankruptcy attorney and had lost access to credit in Canada.

Mary Ross-Gilbert, an analyst at Imperial Capital LLC in Los Angeles, cut the stock's price target to $1 from $5. While the Twitter posts "may be inaccurate or potentially misleading," they appear to be "wearing down vendors and management," Ross-Gilbert wrote in a note today.

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