Technology stocks led benchmark U.S. equity indexes higher as companies from Amazon.com Inc. to Microsoft (MSFT) Corp. beat estimates, while investors watched economic data for signs on when the Federal Reserve may scale back monetary stimulus.
Amazon.com surged 8.2 percent as consumers flocked to the largest online retailer ahead of the holiday shopping season, helping to curtail losses. Microsoft jumped 5.9 percent as the company relied on corporate software demand to make up for weak consumer personal-computer purchases. Eastman Chemical Co. slumped 6.2 percent after cutting its full-year forecast.
The S&P 500 rose 0.1 percent to 1,754.40 at 11:16 a.m. in New York. The index is up 0.6 percent for the week. The Nasdaq 100 Index climbed 0.5 percent to 3,380.55. The Dow Jones Industrial Average added 21.45 points, or 0.1 percent, to 15,530.66. Trading in S&P 500 (SPX) stocks was 5.6 percent above the 30-day average for this time of day.
“Earnings have been good enough and the liquidity spigot is open so that people see very little risk in the system,” Charlie Smith, chief investment officer of Pittsburgh-based Fort Pitt Capital Group Inc., said in a phone interview. His firm oversees $1.5 billion. “It’s like a giant game of musical chairs. The attitude on the part of most investors is that they have to play while the Fed got the music going.”
The S&P 500 has jumped 4.4 percent this month as lawmakers agreed to raise the government’s borrowing limit, avoiding a sovereign default. Equities are heading for their third weekly rally as signs of slower economic recovery fueled bets the Fed will wait until March before scaling back bond purchases.
Equity Valuations
Better-than-expected earnings and continued monetary stimulus have propelled the S&P 500 up 23 percent this year. While the rally lifted equity valuations to a four-year high, with the index trading at 15.9 times estimated operating earnings, that’s still below the multiples at the market’s two previous peaks, when the ratio reached 16.5 in October 2007 and 25.7 in March 2000, data compiled by Bloomberg show.
“Valuation is still reasonable and the economy appears to getting better,” Alan Gayle, senior investment strategist and director of asset allocation at RidgeWorth Capital Management, said by phone from Atlanta. His firm oversees about $48 billion. “The market does look a bit extended so it wouldn’t surprise me if we saw some near-term pullback.”
Consumer Confidence
Data today showed consumer confidence in the U.S. dropped in October to a 10-month low, showing the reopening of the federal government failed to reassure households. The Thomson Reuters/University of Michigan final consumer sentiment index for October decreased to 73.2 from 77.5 the prior month. The median estimate in a Bloomberg survey called for a decline to 75 compared with a preliminary reading of 75.2.
Orders for U.S. durable goods rose in September by the most in three months as stronger demand for commercial and military aircraft outweighed a drop in business equipment.
Sixteen S&P 500 reported earnings today. Of the 244 members of the gauge that have released results so far, 76 percent exceeded analysts’ predictions for profit, while 54 percent beat sales estimates, data compiled by Bloomberg showed.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, added 1.5 percent to 13.40, trimming its decline for the month to 19 percent.
Six out of the 10 S&P 500 groups gained as technology, phone and utility shares climbed more than 0.4 percent to lead the advance.
Amazon, Microsoft
Amazon jumped 8.2 percent to an all-time high of $359.58. Chief Executive Officer Jeff Bezos has poured money into the Seattle-based company’s delivery network, cloud-computing services and line of Kindle e-readers and tablets, sacrificing near-term profits to fuel growth. That could put Amazon on track to outpace the e-commerce market, where sales are seen climbing 15.5 percent to $83.2 billion, according to EMarketer Inc.
Microsoft rallied 5.9 percent to $35.71. The world’s largest software maker is undergoing unprecedented changes, conducting its first-ever CEO search to replace Steve Ballmer and starting an organizational overhaul aimed at bolstering sales by focusing on devices and services.
Alexion Pharmaceuticals Inc. (ALXN) climbed 4.4 percent to a record $121.79. The maker of a drug for rare blood diseases boosted its full-year earnings forecast to as much as $3.04 a share. That compared with the average analyst estimate of $3.03.
National Oilwell Varco Inc. rose 4 percent to $82.33. The biggest U.S. maker of oil-field equipment reported third-quarter earnings that topped analysts’ estimates and said it expects orders for the current quarter to be good, “maybe great.”
Smaller Loss
Zynga (ZNGA) Inc. surged 13 percent to $3.99. The maker of social-networking games reported its first quarter under Chief Executive Officer Don Mattrick, recording a smaller-than-forecast loss as purchases of items used in games exceeded the company’s forecast.
Eastman Chemical slumped 6.2 percent to $77.08. The producer of chemicals said it expects full-year earnings to be as low as $6.30 a share, trailing the average analyst estimate of $6.47 in a Bloomberg survey.
Express Scripts Holding Co. (ESRX) declined 3.8 percent to $61.33. The largest U.S. processor of prescription drug claims reduced its 2013 cash flow forecast, citing delays in some non-client integration activities.
Yahoo! Inc. lost 1.9 percent to $32.45 after Yahoo Japan Corp. (4689) forecast full-year sales and profits that missed analysts’ estimates.
