S&P 500, Dow Average Post Biggest Gains This Year Amid Jobs Data

Feb 06, 2014 4:27 pm ET

Feb. 6 (Bloomberg) -- U.S. stocks rose, sending benchmark indexes to their best gains this year, as claims for unemployment benefits fell and earnings from Walt Disney Co. to Akamai Technologies Inc. surpassed estimates.

Disney gained 5.3 percent after posting quarterly profit that beat estimates. Akamai, which helps speed Internet-data delivery for customers such as Apple Inc. and Sony Corp., soared 21 percent after beating forecasts for quarterly earnings. Coca- Cola Co. advanced 1.1 percent after agreeing to buy 10 percent of Green Mountain Coffee Roasters Inc. for about $1.25 billion. Green Mountain surged 26 percent. Twitter Inc. plunged 24 percent after reporting a wider-than-projected loss and slowing user growth.

The Standard & Poor’s 500 Index climbed 1.2 percent to 1,773.43 at 4 p.m. in New York. The Dow Jones Industrial Average to added 188.30 points, or 1.2 percent, to 15,628.53. Both measures capped their biggest gains since Dec. 18. About 6.9 billion shares changed hands on U.S. exchanges, 9 percent above the three-month average.

“The economy is showing somewhat steady improvement and earnings have been good,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said in a telephone interview. He helps oversee $1.9 billion. “The better economic reports are helpful, it gives a little bit of a confidence booster.”

The S&P 500’s rally today trimmed its decline in 2014 to 4.1 percent. The gauge has lost 0.5 percent this week as disappointing data on manufacturing raised concern about the strength of the world’s largest economy.

Jobless Claims

A report today eased some of the concern, as jobless claims dropped for the first time in three weeks, falling 20,000 to 331,000 in the period ended Feb. 1, according to the Labor Department. The median forecast of economists surveyed by Bloomberg called for a decrease to 335,000.

The decline in dismissals shows employers are confident demand for goods and services will hold up at the same time fiscal restraints ease. A pickup in the pace of hiring and wage growth would help fuel bigger gains in the consumer spending that accounts for almost 70 percent of the economy.

The Labor Department may report tomorrow that businesses added 188,000 employees in January after an 87,000 increase in December, according to the median forecast of economists surveyed by Bloomberg.

Central Banks

The S&P 500 lost as much as 5.8 percent since reaching a record 1,848.38 on Jan. 15, the first decline of more than 5 percent since June 2013, amid signs of slowing growth in China and a rout in emerging-market currencies.

About $3 trillion has been erased from the value of equities worldwide this year as the Federal Reserve cut stimulus, helping fuel a capital flight from emerging markets.

The European Central Bank and Bank of England both kept rates unchanged today. ECB President Mario Draghi said at a press conference in Frankfurt that the risk to euro area growth remain “on the downside,” and that emerging-market turmoil may cloud the economic recovery.

“Investors have really turned their focus back on the larger macro data,” Greg Woodard, a portfolio strategist in Fairport, New York, at Manning & Napier Inc., which has about $50 billion under management, said in a phone interview. “With the tapering going on and with the slowing global economy, that’s going to result in some increase in volatility.”

The Chicago Board Options Exchange Volatility Index has rallied 26 percent this year. The gauge of S&P 500 options known as the VIX dropped 14 percent today to 17.23.

Earnings Scorecard

Some 23 S&P 500 companies including Philip Morris International Inc. report quarterly results today. About 330 of the gauge’s members have posted earnings this season, with 76 percent beating estimates for profit and 66 percent exceeding sales projections, according to data compiled by Bloomberg.

Profit for the S&P 500 companies will probably increase by 4 percent in the first quarter of 2014, while revenue may climb by 3.7 percent, analysts’ estimates compiled by Bloomberg show.

All 10 S&P 500 industries advanced as consumer- discretionary companies rallied 2.1 percent to lead the gains.

Walt Disney jumped 5.3 percent to $75.56, its biggest rally since November 2011. The world’s biggest entertainment company capitalized on the resurgence of its legendary animation studio with the hit film “Frozen” to post first-quarter profit that beat estimates.

Akamai Reliance

Akamai soared 21 percent to $57.18, the highest level in seven years. The company also forecast first-quarter earnings that beat analysts’ projections, allaying concern that Apple may build its own content-delivery network, reducing its reliance on Akamai.

Coca-Cola advanced 1.1 percent to $38.03. The company will buy 16.7 million newly issued shares in the maker of Keurig coffee brewers for about $74.98 each. Green Mountain shares surged 26 percent to $102.10.

Coca-Cola’s move spurred speculation that rival PepsiCo Inc. will pursue a deal with SodaStream International Ltd., an Israeli maker of home soda machines. SodaStream rallied 7.2 percent to $38.35.

Dunkin’ Brands Group Inc. gained 3.4 percent to $48.89. The owner of Dunkin’ Donuts and Baskin-Robbins restaurants reported adjusted earnings per share of 43 cents, exceeding the 40 cents analysts had projected.

An S&P index of homebuilders jumped 2.9 percent to the highest level since May. Lennar Corp. climbed 5.4 percent to $41.71 as Goldman Sachs Group Inc. boosted the stock’s rating to conviction buy from neutral.

Twitter, Pandora

Twitter sank 24 percent, the most since it began trading in November, to $50.03. Its first earnings report as a public company included a loss that was wider than analysts’ estimates. The operator of the microblogging website said it had 241 million monthly active users in the quarter, up 30 percent from a year earlier and slower than 39 percent seen in the third quarter.

Pandora Media Inc. tumbled 10 percent, the most since September, to $32.23. The biggest U.S. online radio service forecast results in the current quarter that trailed analysts’ estimates as hiring and content costs rise.

Chesapeake Energy Corp. fell 6.9 percent to $24.41, the lowest level since July. The second-largest producer of natural gas in the U.S. said it sees a funding cap of about $1 billion in 2014 and plans more asset sales.

Spirit Aerosystems plunged 20 percent, the most since October 2012, to $26.51. The company, which supplies and makes parts for Boeing Co. and Airbus Group NV, reported a net loss in the fourth quarter due to costs related to its Dreamliner program and a reduced value of potential tax benefits.

--With assistance from Corinne Gretler in Zurich. Editor: Jeremy Herron