July 16 (Bloomberg) -- U.S. stocks advanced, sending the Dow Jones Industrial Average to an all-time high, as companies from Time Warner Inc. to Intel Corp. rallied amid deals and earnings reports.
Time Warner surged 17 percent as Rupert Murdoch’s 21st Century Fox Inc. made a takeover bid that was rebuffed. Intel jumped 9.3 percent as its third-quarter sales forecast fueled optimism the personal-computer market is emerging from a two- year slump. International Business Machines Corp. rose 2.1 percent after agreeing with Apple Inc. to develop applications for corporate users of wireless devices.
The Standard & Poor’s 500 Index added 0.4 percent to 1,981.57 at 4 p.m. in New York. The Dow increased 77.52 points, or 0.5 percent, to a record 17,138.20. The Russell 2000 Index of smaller companies fell 0.2 percent, after slumping 1 percent yesterday amid Federal Reserve concerns over valuations.
“I think Yellen might have derailed a few things yesterday, but today it’s back to earnings again and rightfully so,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “Earnings season is a big deal and you have a couple of big names that have looked good with many, many to come.”
Fed Chair Janet Yellen said today that asset valuations in general aren’t out of line with historical norms, after a central bank report yesterday indicated prices for smaller social-media and biotechnology companies are substantially stretched.
“I’m not seeing alarming warning signals,” Yellen said in response to questions from the House Financial Services Committee. While some asset values “may be on the high side and there may be some pockets where we see valuations becoming stretched,” in general “price equity ratios and other measures are not outside of historical norms,” she said.
The S&P 500 has rallied 7.2 percent this year amid better- than-estimated corporate earnings and central bank stimulus. The U.S. economy is showing signs of recovering from a 2.9 percent contraction in the first quarter.
Data today showed U.S. industrial production climbed 0.2 percent in June, capping the strongest quarter in almost four years. The Federal Reserve said in its Beige Book business survey released today that economic growth was modest to moderate in the latest period as all 12 of its districts reported stronger consumer spending and expanded manufacturing.
Equity futures climbed as a report showed China’s economic growth accelerated for the first time in three quarters. Gross domestic product rose 7.5 percent in the April-June period from a year earlier, beating the 7.4 percent median estimate in a Bloomberg News survey of economists.
“You’re starting to see the economy and leading indicators move in the direction that most people expected to start the year,” Chris Hyzy, chief investment officer of U.S. Trust in New York, said in a phone interview. That’s leading to better- than-forecast earnings for economically sensitive companies, he said, while increased merger activity is “emblematic of a corporate sector that has more comfort in the next couple of years.”
Fourteen companies in the S&P 500 including EBay Inc. and Yum! Brands Inc. are reported second-quarter results today. Profit by the gauge’s members increased 4.5 percent in the quarter, and revenue rose 3.1 percent, according to estimates compiled by Bloomberg.
Intel climbed 9.3 percent to $34.65, the highest level since 2002. The PC market has shown signs of improvement this year as corporate spending picked up and U.S. shipments returned to growth. Intel’s outlook indicates demand is starting to recover among consumers, who may be buying laptops and desktops again after years of opting for smartphones and tablets instead.
Intel also added $20 billion to its stock-repurchase program, including $4 billion planned for the third quarter.
Time Warner surged 17 percent, the most since 2000, to $83.13 for the largest gain in the S&P 500. Murdoch’s Twenty- First Century Fox is willing to pay more than $85 a share for Time Warner, according to people with knowledge of the matter, a sign the company is undeterred after being rebuffed in an initial offer. Fox shares fell 6.2 percent.
IBM gained 2.1 percent. The deal with Apple enables the iPhone maker to expand beyond individual customers and add more corporate clients through IBM’s sales force. IBM gets a boost in its effort to sell software and services to companies seeking to manage workers’ wireless devices. Apple shares fell 0.6 percent, reversing an earlier rally of 1.9 percent.
International Game Technology jumped 9.2 percent. Rome- based Gtech SpA agreed to buy the world’s biggest slot-machine maker for $4.7 billion.
General Electric Co. rallied 1.5 percent. The company is in talks with potential acquirers about selling its century-old household appliances business, said people familiar with the matter.
“This M&A just seems to have taken off, not that it was dead before, it just seems to be almost a daily event,” said Timothy Ghriskey, chief investment officer at New York-based Solaris Asset Management LLC, in a phone interview. “A bid for something like Time Warner, that’s big news. A takeover environment creates a lift to the markets. Everyone is looking for the next big name.”
The Russell 2000 fell, extending its loss to 1.2 percent over that period and erasing its gain for the year, after the Fed said valuations for smaller social-media and biotechnology companies are substantially stretched. Small-caps and Internet shares were the biggest victims of a market retreat earlier this year as investors dumped the best performers of the bull market amid concern valuations advanced too far.
The Dow Jones Internet Composite Index slid 0.5 percent today. Pandora Media Inc. retreated 1.8 percent, after a 1.2 percent loss yesterday. Groupon Inc. declined 1.6 percent.
Yahoo! Inc. fell 5.1 percent as the U.S. Web portal reported second-quarter earnings and sales that fell short of analysts’ estimates.
The Nasdaq Biotechnology Index declined 1.3 percent after tumbling 2.3 percent yesterday.
Seven of 10 main industries in the S&P 500 advanced today. Energy companies increased 1.6 percent for the largest gain. Technology shares jumped 1 percent.
The S&P Supercomposite Homebuilding Index rose 1.9 percent. Homebuilder confidence in July rose more than forecast to the highest level in six months as growing payrolls brightening the outlook. PulteGroup Inc. and D.R. Horton Inc. climbed more than 1.4 percent.
Financial shares dropped 0.1 percent and health-care companies lost 0.3 percent.
Bank of America Corp. dropped 1.9 percent. The second- biggest U.S. bank said profit declined 43 percent as it spent $4 billion to cover litigation costs, including a mortgage settlement with American International Group Inc.
The Chicago Board Options Exchange Volatility Index fell 8 percent to 11.00. The gauge known as the VIX jumped 17 percent last week for its biggest rally in three months, after closing July 3 at the lowest since 2007.
More than 6.3 billion shares changed hands on U.S. exchanges today, 9.2 percent above the three-month average.
--With assistance from Anna Hirtenstein in London and Joseph Ciolli in New York.