BLBG: U.S. Stocks, Commodities Gain on Alcoa Earnings, Jobless Data
Oct. 8 (Bloomberg) -- U.S. stocks gained after Alcoa Inc. started the third-quarter earnings season with an unexpected profit and jobless claims decreased more than forecast. Commodities climbed as the dollar weakened, while Treasuries were little changed.
Alcoa, the largest aluminum producer, jumped 3.5 percent. Abercrombie & Fitch Co., Limited Brands Inc. and Macy’s Inc. led retailers higher after reporting better-than-estimated sales. Europe’s benchmark index rallied 0.9 percent, while Asian stocks rose as Australian employers unexpectedly added workers.
“The worst is behind us,” said Diane Garnick, who helps oversee more than $400 billion as investment strategist at Invesco Ltd. in New York. “Stocks are reacting to better-than- expected economic figures. And Alcoa is a leading indicator and gives us a good sense of industrial production and corporate earnings going forward.”
The Standard & Poor’s 500 Index climbed 0.8 percent to 1,066.27 at 10:47 a.m. in New York. The Dow Jones Industrial Average gained 65.45 points, or 0.7 percent, to 9,791.03. Almost six stocks rose for each falling on the New York Stock Exchange.
The S&P 500 climbed for a fourth straight day, the longest streak in a month, as the government said first-time jobless claims slid to 521,000 last week, the lowest since January. Economists in a survey estimated 540,000 claims. U.S. stocks yesterday extended a 7-month rally as analysts upgraded Bank of America Corp. and Wells Fargo & Co. announced plans to boost credit-card rates.
Earnings Watch
S&P 500 companies will report a ninth straight quarter of declining profits, the longest streak since the Great Depression, before returning to growth in the final three months of the year, analysts’ estimates compiled by Bloomberg show.
Even so, the S&P 500 has rebounded 57 percent from a 12- year low in March amid signs the worst of a global recession is over. The rally drove its valuation to more than 20 times reported operating income for its companies last month, the most since 2004.
Alcoa, the first company in the Dow average to report earnings, jumped 3.5 percent to $14.69. The New York-based company’s profit excluding certain items was 4 cents a share. That beat the average analyst estimate for a 9-cent loss, as metal prices climbed and the company cut jobs.
Gold climbed to a record before paring gains and copper and aluminum rose as the dollar’s slump prompted investors to buy commodities as a hedge against potential inflation. The dollar fell to a two-week low against the euro amid signs the global economy is recovering, boosting demand for higher-yielding assets.
Freeport, the world’s largest publicly traded copper producer, increased 1.3 percent to $73.74, while Barrick increased 0.2 percent to $39.37.
‘Broad Signs’
A gauge of 12 homebuilders rose 2.9 percent after Treasury Secretary Timothy Geithner told reporters on a conference call that housing markets are showing “broad signs” of improvement even though they haven’t yet healed.
Lennar Corp. had the biggest gain in the S&P 500, adding 6.3 percent to $14.01. D.R. Horton Inc., the largest U.S. homebuilder by revenue, rose 4.4 percent to $11.16.
“The stock rally should continue into the fourth quarter,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “Alcoa sent a very good indication for the overall earnings season. Commodities companies are early-cycle plays. That’s another indication that things are getting better.”
Bank Earnings
JPMorgan Chase & Co. and Goldman Sachs Group Inc., the largest banks to repay U.S. bailout funds, will probably post the industry’s biggest third-quarter profit gains while Citigroup Inc., still gripping its government lifeline, reports another loss.
Earnings at JPMorgan may have almost quadrupled to $2.05 billion from the height of the financial crisis a year earlier, according to analysts’ average estimates in a survey by Bloomberg. Goldman Sachs’s profit probably almost tripled to $2.3 billion. Citigroup’s expected $2.58 billion loss would mark its sixth unprofitable quarter in the past eight.
JPMorgan rose 0.2 percent to $45.81. Goldman Sachs added 0.1 percent to $190.72. Citigroup advanced 0.2 percent to $4.65.
Shares of some large regional banks fell after UBS AG initiated coverage of the industry with a “cautious” outlook, saying they “have run too fast.” UBS gave a “sell” recommendation for BB&T, Comerica Inc., Fifth Third Bancorp, PNC Financial Services Group Inc., SunTrust Banks Inc. and Wells Fargo & Co.
Marriott Slumps
Marriott International Inc. lost 2.6 percent to $26.25. Investors might be disappointed at the biggest U.S. hotel chain’s outlook for 2010, UBS analyst William Truelove wrote in a report today. Marriott said 2010 revenue per available room will fall as much as 5 percent after tumbling 21 percent in the third quarter.
Broadcom Corp. led chipmakers down as much as 1.6 percent for the biggest decline among 24 industries in the S&P 500. The maker of semiconductors for wireless headsets and television set-top boxes was cut to “neutral” from “outperform” at Robert W. Baird & Co. Inc. Broadcom declined 4.2 percent to $28.67.
The S&P 500 yesterday climbed above its level from a year ago, the first time that’s been true since January 2008. That could lead to more gains, Bespoke Investment Group said in a report yesterday.
After turning positive in 1933, the S&P 500 surged 79 percent in the next year. The end of the 559-day streak between Oct. 30, 1973, and May 12, 1975, led to a 14 percent gain in 12 months, while the 557-day year-over-year slump from June 6, 1969, to Dec. 15, 1970, gave way to a 9.9 percent advance.
“The S&P 500 has historically continued to do rather well,” Paul Hickey, an analyst at Harrison, New York-based Bespoke, wrote in a note to clients yesterday.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
