Stocks rebound from worst loss of the year
Stocks rallied, with benchmark indexes rebounding from the worst losses of the year, as more companies posted improving earnings and Dell Inc. agreed to the largest leveraged buyout since the financial crisis. Italian notes rose and oil gained; the yen weakened and Treasuries slid.
The Standard & Poor's 500 Index climbed 1.2 per cent at 2:20 p.m. in New York, its biggest gain in a month, and the Stoxx Europe 600 Index closed up 0.6 per cent. Ten-year US note yields jumped six basis points to 2.02 per cent. The yen declined at least 0.4 per cent against its 16 major peers after Bank of Japan Governor Masaaki Shirakawa said he would step down next month. Oil rose following its biggest loss in two months.
Stocks jumped after slumping yesterday on renewed concern Europe's debt crisis will intensify. Companies from Computer Sciences Corp. and Estee Lauder Cos. in the US to Munich Re and ARM Holdings Plc in Europe posted results that beat estimates. Data today showed service industries shrank less than initially estimated in Europe while growing more than economists forecast in the US
"It's looking like we're getting into a 'buy on dips' mentality as people try to increase their positioning," Rex Macey, who oversees $US20 billion as chief investment officer at Wilmington Trust Advisors in Atlanta, said in a telephone interview. "People have thought, 'Gee, I need to be in the market.' But they've been waiting for a buying opportunity and now they may be getting nervous that may not materialize and some money's flowing."
The S&P 500 has rallied 6.1 per cent in 2013 as US lawmakers reached a budget compromise and companies reported better-than-estimated earnings. The gauge is less than 4 per cent below the record 1,565.15 it reached in October 2007. The Dow Jones Industrial Average is about 1 per cent from its all-time high.
The S&P 500 rebounded from yesterday's 1.2 per cent drop, its biggest since Nov. 14. Computer Sciences rallied 11 per cent for the biggest gain in the S&P 500 after also increasing its 2013 forecast and saying "our turnaround is tracking to plan." Estee Lauder jumped 6 per cent after the maker of Mac cosmetics and Clinique skin products topped the average estimate for adjusted earnings by 10 per cent and lifted its profit forecast for the year.
Archer-Daniels-Midland Co. jumped 3.4 per cent after the world's largest corn processor reported better-than-forecast earnings and revenue as its US soybean-crushing operations ran at record capacity. Yum! Brands Inc., owner of the KFC and Pizza Hut fast-food chains, fell 4 per cent after saying profit this year will be less than it previously expected as a probe into its chicken suppliers hurt sales in China.
More than 20 companies in the S&P 500 were scheduled to report quarterly results today. Earnings per share beat the average analyst estimate at 75 per cent of the 281 companies that released results so far in the reporting season, according to data compiled by Bloomberg.
The Institute for Supply Management's non-manufacturing index, which covers about 90 per cent of the economy, fell to 55.2 in January from 55.7 the prior month. The median forecast of 76 economists projected the index would reach 55. Readings above 50 signal growth.
Dell added 1.4 per cent to $US13.46 after the world's third- biggest maker of personal computers said it is going private in a deal valued at $US24.4 billion. Chief Executive Officer Michael Dell and Silver Lake Management LLC will pay $US13.65 a share, the companies said today in a statement.
"These are indications that there's long-term confidence in the economy and the markets," Macey said of the Dell LBO. "It signals there's a long-term appetite for stocks because they're going to have to exit at some point."
Two shares advanced for every one that fell in the Stoxx 600. Munich Re, the world's largest reinsurer, rose 4 per cent after proposing to raise its dividend. ARM Holdings, whose chip designs power Apple Inc.'s iPhone and iPad, climbed 3.6 per cent as fourth-quarter sales rose more than analysts predicted.
Virgin Media Inc. rallied 17 per cent in London as the U.K.'s second-largest pay-television provider said it's in talks with Liberty Global Inc. on a "possible transaction."
Royal KPN NV sank 16 per cent as the Dutch phone company reported an unexpected loss and said it plans to sell 4 billion euros ($US5.4 billion) of shares to strengthen its finances.
The Markit iTraxx Europe index of credit-default swaps linked to 125 companies dropped two basis points to 116, signaling an improvement in creditworthiness.
Italy's two-year note yield slid 10 basis points to 1.64 per cent after earlier reaching 1.77 per cent, the highest since Jan. 3.
The yen slid 1 per cent to 93.33 yen per dollar and fell 1.2 per cent versus the euro. Shirakawa told reporters in Tokyo that he would step down on March 19, earlier than his previous plan for an April 8 departure.
Oil climbed 0.7 per cent to $US96.84 a barrel in New York, recovering some of yesterday's 1.6 per cent drop. The S&P GSCI index added 0.5 per cent as 16 of its 24 commodities increased, led by cocoa and energy products.
The MSCI Emerging Markets Index lost the most in a week, dropping 0.6 per cent as Asian markets slumped following yesterday's retreat in the US and Europe.
The Hang Seng China Enterprises Index of companies listed in Hong Kong sank 2.8 per cent, the biggest decline since July, led by China Petroleum & Chemical Corp. on a plan to sell shares. The Shanghai Composite Index gained 0.2 per cent. Chinese companies traded on the mainland are priced at the biggest premium to Hong Kong-listed counterparts since Oct. 9, according to data compiled by Bloomberg.