Tech shares push S&P to 10-week high
US stocks rose yesterday for a third straight day, with the S&P 500 at a 2-1/2 month high, as earnings from technology companies and expectations for more monetary stimulus outweighed weak economic data.
So far in this earnings season a majority of companies have beaten analysts’ lowered expectations. In the latest boost, IBM raised its full-year outlook, eBay’s profit beat forecasts and Qualcomm said its expects a “strong December quarter.”
“Europe has been quiet and earnings news, while not earth-shattering, is slightly better than expected,” said Fred Dickson, chief market strategist at D.A. Davidson & Co. “A trading range environment is how we see it.”
Weak manufacturing and employment data as well as falling revenue at investment bank Morgan Stanley, which sent its shares down more than 5 per cent, capped gains in the wider market. The S&P financial index fell 1 per cent.
Even so, expectations that the Federal Reserve will soon step up stimulus efforts have helped the market shake off bad news. Fed Chairman Ben Bernanke said this week that the U.S. central bank would act if the outlook worsened.
The Dow Jones industrial average gained 34.66 points, or 0.27 per cent, to 12,943.36. The Standard & Poor’s 500 Index rose 3.73 points, or 0.27 per cent, to 1,376.51. The Nasdaq Composite Index added 23.30 points, or 0.79 per cent, to 2,965.90.
But despite the Nasdaq’s out-performance compared with the other indexes, decliners in the index beat advancers by a ratio of more than 5 to 4. Investors like to see advancers beating decliners by a wide margin to confirm market strength.
The S&P is at its highest level since early May. Some investors are pointing to a trading range between recent highs above 1,400 and a low in June around 1,280.
“People are focusing on individual stocks after earnings and trying to figure out (through) outlooks how weak the economy really is,” said Giri Cherukuri, head trader at OakBrook Investments.
“It is baked into stock prices that growth is going to be slow for a little while,” he said.
Manufacturing in the US mid-Atlantic region shrank for a third month and home resales were lower than forecast. That came shortly after a report showed more Americans applied for unemployment insurance in the latest week.
IBM shares jumped 3.8 per cent to $195.34, making it the largest boost to the Dow industrials a day after it raised its full-year profit forecast. Semiconductor company Qualcomm cut its revenue and earnings forecast for the current quarter, but investors took heart as it said sales would improve for a strong last quarter.