U.S. stocks rebounded after a two-day drop in the Standard & Poor's 500 Index, as Apple Inc. paced a rally in technology shares amid the start of corporate earnings season.
Equities pared gains as an S&P index of homebuilders tumbled after KB Home said its first-quarter profit will miss analysts' estimates. Apple climbed 1.6 percent after Credit Suisse Group AG said the iPhone maker could return another $ 200 billion to shareholders. Amazon.com Inc. jumped 2.3 percent on an analyst upgrade.
The S&P 500 added 0.6 percent to 2,039.76 at 12:37 p.m. in New York, trimming a gain of 1.4 percent. The index had fallen 1.6 percent over two days. The Dow increased 137.17 points, or 0.8 percent, to 17,778.01. The technology-heavy Nasdaq 100 Index advanced 1.1 percent. Trading in S&P 500 companies was 10 percent above the 30-day average for this time of the day.
"When earnings are positive as they have been and expectations are for good growth in the U.S., that's probably driving the market in the short term," John Culbertson, chief investment officer of Context Asset Management in Bala Cynwyd, Pennsylvania, said in a phone interview. As for oil, "the market will begin to differentiate what the impact should be asset by asset," he said.
Traders work on the floor of the New York Stock Exchange on Jan. 12, 2015. Close
Traders work on the floor of the New York Stock Exchange on Jan. 12, 2015.
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Traders work on the floor of the New York Stock Exchange on Jan. 12, 2015.
The S&P 500 has moved an average of 1.08 percent per day so far in 2015. That's more than double the average daily price change of 0.53 percent in 2014, the calmest year in U.S. stocks since 2006.
Alcoa Inc., the largest U.S. aluminum producer late yesterday unofficially kicked off the fourth-quarter earnings season by reporting profit and sales that beat analysts' estimates. The stock slipped 1.7 percent today.
Earnings Season
JPMorgan Chase & Co., Citigroup Inc., and Intel Corp. and 16 other S&P 500 companies report results this week. Earnings at companies in the gauge probably climbed 2 percent in the final quarter of 2014, and 2.8 percent in the current period, analysts forecast. That's down from October estimates of 8.5 percent and 9.5 percent, respectively.
"There was such a negative feeling about implications of lower oil and economic growth on earnings and we're seeing earnings at least initially with Alcoa are putting some cold water on that assumption," Bill Schultz, who oversees $ 1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. "We're going to have to see if this continues but I don't think anyone was expecting this right off the bat."
Specialist Charles Boeddinghaus, right, works with traders on the floor of the New York Stock Exchange on Jan. 12, 2015. Close
Specialist Charles Boeddinghaus, right, works with traders on the floor of the New York… Read More
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Specialist Charles Boeddinghaus, right, works with traders on the floor of the New York Stock Exchange on Jan. 12, 2015.
Oil Selloff
The S&P 500 declined 0.8 percent yesterday as the continuing selloff in crude pulled down energy shares. The benchmark gauge dropped 3 percent since a record in December through yesterday as oil prices fell to the lowest since April 2009.
Energy shares fluctuated today, sliding 0.3 percent for the second-worst performance in the S&P 500 as oil pared declines after plunging as much as 4.1 percent to below $ 45 a barrel.
Later this week, investors will also weigh economic reports, including retail sales, manufacturing in the New York region and industrial production, for clues on the health of the world's largest economy. The slump in oil has damped inflation, leaving it below the Fed's target even as the economy shows signs of accelerating.
Federal Reserve Bank of San Francisco President John Williams, who votes on policy this year, said raising interest rates in June would be a close call amid a strong labor market and weaker wage gains.
U.S. Wages
More U.S. small companies said they plan to raise wages in coming months after a net 25 percent recently boosted worker compensation.
A net 17 percent of managers said in December that they will increase wages, the most since September 2007, according to the seasonally adjusted results of 568 respondents in a survey by the National Federation of Independent Business. That's up two points from November, when 15 percent said they expected to pay more and 21 percent said they already had increased salaries.
Average hourly wages rose 1.7 percent in December from the previous year, down from a 1.9 percent gain in November, the Labor Department reported last week.
Eight of the 10 main groups in the S&P 500 advanced today. Technology shares soared 1.9 percent, rebounding from a two-day drop. Materials producers slid 0.5 percent.
Housing Stocks
Housing shares slumped after KB Home (KBH) said on a conference call that it will break even in the first quarter. Analysts estimated a profit of 17 cents a share. The stock plunged as much as 14 percent, the most in almost three years, while an S&P homebuilder index plunged 3 percent, the biggest drop in a month.
D.R. Horton Inc. sank 4.6 percent and Lennar Corp. lost 2.3 percent.
Apple advanced 1.6 percent after Credit Suisse analyst Kulbinder Garcha raised the company to outperform from neutral, citing "solid and sustainable" iPhone volume and the potential for cash returns. Garcha predicts the maker of iPhones' "excessive" net cash means it could return another $ 200 billion to shareholders.
Amazon increased 2.3 percent after Citigroup analyst Mark May upgraded it to buy from neutral amid "strong" profit growth.
Intel Earnings
Intel added 1.5 percent before its earnings on Jan. 15.
"Intel will be closely scrutinized and be a pretty good sentiment read for tech in general as well as the semiconductor space," Michael James, a Los Angeles-based managing director of equity trading at Wedbush Securities Inc., said in a phone interview. "You'll probably get a good sense of investor sentiment about semiconductors, technology, financials once you get to the end of the week."
McGraw Hill Financial Inc. jumped 5.5 percent for its biggest surge since April 2013. The unit of S&P may agree as early as this quarter to settle a case with the U.S. for allegedly misleading investors about its ratings of mortgage-backed securities before the subprime crisis, a person familiar with the matter said.
E*Trade Financial Corp. climbed 1.7 percent after Bank of America upgraded the stock to a buy from neutral.
Goodyear Tire & Rubber Co. lost 6.7 percent, the most since July, after the company said it sees 2014 global volume "essentially flat." The tiremaker cited a more challenging industry environment in Europe and a stronger dollar.
To contact the reporters on this story: Oliver Renick in New York at orenick2@bloomberg.net; Michelle F. Davis in New York at mdavis194@bloomberg.net
To contact the editors responsible for this story: Cecile Vannucci at cvannucci1@bloomberg.net; Jeff Sutherland at jsutherlan13@bloomberg.net Jeff Sutherland, Trista Kelley
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