Stocks rise amid home sales data as earnings beat estimates

Posted April 24, 2012, at 7:47 p.m.

NEW YORK — Stocks advanced Tuesday amid better than estimated earnings at companies from AT&T to 3M and as data indicated the housing market is stabilizing.

The Standard & Poor’s 500 Index rose 0.4 percent to 1,371.97. The Dow Jones Industrial Average added 74.39 points, or 0.6 percent, to 13,001.56. The Nasdaq Composite Index lost 0.3 percent to 2,961.60. About 6.2 billion shares changed hands on U.S. exchanges, or 7.8 percent below the three-month average.

“Stocks have room to move higher,” said David Kelly, chief market strategist at JPMorgan Funds in New York. “Earnings are healthy. The bar has been lowered so far that you can just walk over it. Housing is on the mend. A sign of a market top is when people are exuberant. There’s no exuberance, as witnessed yesterday.”

Equities rebounded from Monday’s slump, extending this year’s rally in the S&P 500 to 9.1 percent. Earnings per share beat forecasts at 82 percent of S&P 500 companies that reported results since April 10, according to data compiled by Bloomberg. Per-share profits grew 3.3 percent in the first quarter, Bloomberg data show. That’s up from the 0.8 percent growth projection before the earnings season started.

Economic optimism helped fuel gains Tuesday as new home sales data indicated that cheaper borrowing costs are helping stabilize the real estate market. Federal Open Market Committee members began a two-day meeting Tuesday and on Wednesday will probably repeat their plan to keep the benchmark interest rate low at least through late 2014, economists say.

A gauge of homebuilders in S&P indexes jumped 2.4 percent. D.R. Horton, the largest U.S. homebuilder by volume, rose 3.2 percent to $15.54. KB Home added 4.5 percent to $7.91.

Phone shares had the biggest gain among 10 S&P 500 groups, rallying 2.8 percent. AT&T added 3.6 percent to $31.72. Earnings beat estimates on lower smartphone upgrade costs and an increase in wireless data sales related to Apple’s iPad.

3M increased 1.6 percent to $88.49. The U.S. market drove sales at the industrial and transportation unit, the largest division at the St. Paul, Minn.-based company.

IBM gained 0.7 percent to $200 after the company boosted its buyback plan by $7 billion and raised its dividend. The quarterly payout will rise 10 cents to 85 cents a share. IBM had $5.7 billion remaining from a previous buyback plan, bringing the total available for repurchases to $12.7 billion.

Technology companies are approaching consumer staples as the largest dividend payers, according data compiled by Howard Silverblatt, S&P’s New York-based senior index analyst. The technology group contributes about 14 percent of the S&P 500′s dividends, up from 5.1 percent in 2004. Consumer staples companies account for almost 15 percent.

Apple gained 7.5 percent to $602.25 after the close of regular trading. Net income in the fiscal second quarter climbed to $11.6 billion, or $12.30 a share, as revenue increased 59 percent to $39.2 billion. Analysts had predicted profit of $10.02 a share on revenue of $36.9 billion.

Chief Executive Officer Tim Cook is increasingly relying on regions outside the U.S. for sales growth. That helped make up for sales declines from the previous quarter at the top U.S. mobile-phone carriers, Verizon Wireless and AT&T. It also quelled speculation that Apple’s growth pace may slacken.

“China has been a very fast-growing region for them,” said Abhey Lamba, an analyst at Mizuho Securities USA in New York. “There’s more disposable income, strong demand for high-end products and their penetration has been very low in that market. They have been highlighting that region as one of their focus areas.”

The company’s shares slumped 2 percent to $560.28 Tuesday, dropping for a fifth straight day. Motorola Mobility Holdings won a partial U.S. International Trade Commission judge’s ruling in its bid to block imports of Apple’s devices, including the iPhone and iPad tablet computer.

Juniper Networks climbed 7.2 percent to $21.63. Results suggest that demand from cable companies and other Internet service providers for Juniper’s switches and routers may be improving, said Brian Marshall, an analyst at ISI Group.

Wal-Mart Stores slumped 3 percent to $57.77. The shares have dropped 7.5 percent in two days, the most since January 2009. The retailer is investigating allegations that executives in Mexico paid more than $24 million in bribes to speed expansion there. The company also is the subject of a Justice Department criminal investigation, a person familiar with the probe said Monday.

Big Lots plunged 24 percent, the biggest decline in the S&P 500, to $34.71. The discontinued-merchandise retailer with more than 1,400 U.S. stores reduced its fiscal first- quarter sales forecast amid lower demand for electronics.

Netflix tumbled 14 percent to $87.68. The world’s largest video-subscription service projected a slowdown in growth of U.S. streaming customers.

Coach lost 4.3 percent to $71.87. The largest U.S. luxury handbag maker reported fiscal third-quarter sales that beat analysts’ estimates by the smallest margin in 11 quarters.

With assistance from Adam Satariano in San Francisco.

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