New York – U.S. stocks rallied to extend the best April advance in four years, lifted by earnings that topped estimates from some of the biggest industrial and technology companies.
Caterpillar Inc., Honeywell International Inc. and American Express Co. led the Dow Jones Industrial Average to a third consecutive record after their profit reports signaled the global economic expansion remains strong. The Standard & Poor’s 500 Index and the Nasdaq Composite Index climbed to six-year highs, buoyed by Google Inc.’s first-quarter rise in net income.
Better-than-expected results spurred analysts to boost estimates for first-quarter earnings growth at S&P 500 companies to 6.2 percent from last week’s 3.1 percent, Bloomberg data show. The Dow and S&P 500 are headed for their third straight weekly gain, the longest stretch since October.
“Everybody expected earnings to be weak and they look very good,” said Greg Church, who helps manage $2.3 billion as chief investment officer of Church Capital Management in Yardley, Pennsylvania. “Growth worldwide is expanding, and these companies that are reporting are benefiting from that.” The Dow industrials increased 123.77, or 1 percent, to 12,932.40 as of 2:50 p.m. in New York. The S&P 500 added 10.81, or 0.7 percent, to 1481.54, the highest since September 2000. The Nasdaq rose 19.59, or 0.8 percent, to 2524.94. It earlier climbed as high as 2532.24, the highest since February 2001.
Weekly Advance
In the past five days, the Dow average has risen 2.5 percent, the S&P 500 has climbed 2 percent and the Nasdaq has advanced 1.3 percent. For the month, the Dow has surged 4.7 percent and the S&P 500 has rallied 4.3 percent.
Almost 11 stocks rose for every three that declined on the New York Stock Exchange. Some 1.4 billion shares changed hands on the Big Board, 42 percent more than the same time a week ago.
Caterpillar, Honeywell and American Express made up more than half of the Dow average’s gain.
Caterpillar rallied $3.15 to $71.77, the highest since August. First-quarter earnings per share rose to $1.23 from $1.20 after the biggest maker of earthmoving equipment repurchased shares. Analysts expected a drop to $1.08. Caterpillar said full- year profit will be as much as $5.80 a share, up from an earlier prediction of as much as $5.70, because of increased demand from China and India.
Honeywell, American Express
Honeywell climbed $2.36, or 4.8 percent, to $51.42 for the best gain since December 2002. Earnings last quarter rose to 66 cents a share from 52 cents a year earlier on higher demand for energy-saving building products and jet parts. Analysts expected 62 cents, on average. The largest maker of airplane controls also boosted its full-year profit forecast.
American Express increased $1.54 to $60.49 after the fourth- largest U.S. credit-card issuer said first-quarter net income rose to 87 cents a share from 69 cents a year earlier. Profit topped the 79-cent average estimate of analysts surveyed by Bloomberg.
Google jumped $15.70 to $487.35. Net income climbed to $3.18 a share from $1.95 a year earlier as the company increased advertising sales worldwide and took more market share from Yahoo! Inc. Excluding costs for stock options, profit was $3.68 a share, exceeding the average analyst estimate.
“Pessimism over the outlook for earnings is beginning to ease as you see profits from companies like Caterpillar growing,” said Stanley Nabi, who helps oversee about $8 billion at Silvercrest Asset Management in New York. “The market should rally further.” Earnings Beat Estimates About 67 percent of companies in the S&P 500 that reported quarterly results topped analysts’ estimates, according to data compiled by Bloomberg. In the fourth quarter, about 61 percent of S&P 500 members beat estimates.
Xerox Corp. climbed 41 cents to $18.49, the highest since July 2000. The world’s largest maker of high-speed color printers said profit rose 17 percent, more than analysts expected, because of higher sales of color copiers and supplies.
About 126 members in the S&P 500, or 25 percent, are scheduled to report quarterly results next week, according to data compiled by Bloomberg. They include Boeing Co., the world’s second-largest commercial-airplane maker, which will release results on April 25, and Microsoft Corp., the biggest software maker, which will report the day after.
Energy shares in the S&P 500 climbed 1.4 percent for the best gain among 10 industry groups.
Crude oil rose 2.5 percent to $63.36 a barrel in New York on concern that tomorrow’s presidential election in Nigeria, Africa’s biggest oil producer, may result in a disruption of shipments.
Exxon Mobil Corp., the world’s biggest oil producer, added $1.70 to a record $79.16. ConocoPhillips, the third-largest U.S. oil company, increased $1.28 to $70.56.
H&R Block
H&R Block Inc. jumped 71 cents to $22.54. The largest tax preparer in the U.S. agreed to sell its money-losing subprime home-loan unit to Cerberus Capital Management LP.
Declines in McDonald’s Corp. and Pfizer Inc. limited the advance in the Dow industrials.
McDonald’s dropped 62 cents, or 1.3 percent, to $48.16 for the steepest slide in the Dow average. The world’s largest restaurant chain said it will take a $1.6 billion charge in the second quarter after agreeing to sell almost 1,600 restaurants in Latin America and the Caribbean. McDonald’s also confirmed preliminary first-quarter earnings released a week ago.
Pfizer Slips
Pfizer declined 4 cents to $27.03. The world’s biggest drugmaker said first-quarter profit fell 18 percent and cut its 2007 forecast as competition from cheaper drugs hurt two of its best-selling products, Norvasc for blood pressure and Zoloft for depression.
Genesco Inc. jumped $6.25, or 14 percent, to $49.66 for its best gain since May 2004. Foot Locker Inc., the largest U.S. athletic-shoe retailer, made an unsolicited $1.2 billion bid for the owner of shoe chains including Journeys and Johnston & Murphy. Foot Locker offered to pay $46 a share and said it may consider increasing the bid. Foot Locker shares gained 70 cents to $24.32.
Palm Inc., maker of the Treo e-mail phone, gained 28 cents to $17.66. Lehman Brothers Holdings Inc. upgraded the stock to “equal weight” from “underweight,” citing “rapid market growth, a steadying competitive landscape and modest valuation.” Federal Reserve Governor Frederic Mishkin said the central bank’s current stance on interest rates is likely to slow price gains outside of food and fuel, though it “may take time” to reduce inflation. Mishkin spoke at an economics conference at Bard College in Annandale-on-Hudson, New York.
-With reporting by Allen Wan in New York and Dave Pierson in Princeton.
