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Most U.S. Stocks Rise as Earnings, Jobs Overshadow Apple

By Inyoung Hwang and Sarah Pringle
January 24, 2013 5:12 PM EST 46 Comments
Traders work at the New York Stock Exchange in New York.
Photographer: Scott Eells/Bloomberg
Traders work at the New York Stock Exchange in New York.

Most U.S. stocks rose, with the Standard & Poor’s 500 Index briefly topping 1,500, as an unexpected drop in jobless claims and better-than-forecast earnings offset the worst slump for Apple Inc. (AAPL) in four years.

Apple, the world’s most valuable company, slid 12 percent after reporting the slowest profit growth since 2003 and weakest sales increase in 14 quarters. Microsoft Corp. dropped 1.8 percent after the close of regular trading as it posted results. Netflix Inc. surged 42 percent as the largest online-video service beat its forecast for fourth-quarter subscriber growth and posted an unexpected profit.

More than four stocks rose for every three that fell on U.S. exchanges as of 4 p.m. in New York. The S&P 500 (SPX) was unchanged at 1,494.82, after rallying as much as 0.5 percent earlier. The Dow Jones Industrial Average gained 46 points, or 0.3 percent, to 13,825.33. The Nasdaq 100 Index (NDX) slid 1.4 percent to 2,723.53. More than 6.8 billion shares traded hands on U.S. exchanges today, or 10 percent above the three-month average.

“We’ve been talking for a while that the market was going to get to 1,500,” Michael Vogelzang, chief investment officer at Boston Advisors LLC, which manages $2.4 billion, said by telephone. “The question now is, ‘To where from here?’” He said Apple’s drop is “a very interesting case in terms of understanding where the price should be and clearly the market doesn’t quite know.”

U.S. stocks rose yesterday as lawmakers voted to temporarily suspend the federal debt limit and Google Inc. (GOOG) and International Business Machines Corp. reported better-than- forecast earnings. The S&P 500 has rallied 4.8 percent this year and is 4.5 percent below its all-time high of 1,565.15. The Dow is 2.5 percent from its record of 14,164.53 reached in October 2007.

Earnings Season

Some 75 percent of the 134 companies in the S&P 500 that have released results so far exceeded profit projections, according to data compiled by Bloomberg. Analysts on average forecast growth of 3.8 percent in fourth-quarter profit, the data show.

Equities rose earlier today as a report showed claims for jobless benefits in the U.S. unexpectedly dropped last week. Applications for unemployment payments decreased to 330,000 in the week ended Jan. 19, compared with the median forecast of 355,000 claims. A separate release showed the index of leading economic indicators, a gauge of the outlook for the next three to six months, climbed 0.5 percent last month.

In China, manufacturing expanded at the fastest rate in two years, according to a survey of companies.

Apple Slumps

“People are just trying to digest all the earnings reports from all the various companies,” Giri Cherukuri, portfolio manager who helps manage $3 billion at Oakbrook Investments LLC in Lisle, Illinois, said in a telephone interview. “As long as the economy seems to get better, the stock market will do well.”

Apple fell 12 percent to $450.50. The results reinforce concern that the company’s growth is being hurt by higher production costs and step up pressure on Chief Executive Officer Tim Cook to demonstrate that Apple has more blockbuster products in the pipeline to reignite sales. The shares have fallen 36 percent since they set a record in September, and have lost 15 percent this year for the worst performance in the S&P 500.

For the fiscal second quarter, which is now under way, Apple forecast sales of $41 billion to $43 billion, compared with predictions by analysts for revenue of $45.5 billion.

Most Valuable

The company’s share price decline means the company may lose its status as the world’s most valuable company to Exxon Mobil Corp. Apple’s market value was $423 billion as of today’s close, compared with Exxon’s $416.5 billion.

Microsoft slumped 1.8 percent to $27.13 at 5:08 p.m. in New York as the world’s biggest software maker posted a decline in net income for the fiscal second quarter.

Technology stocks lost 2 percent as a group during regular trading, for the biggest decline among 10 industries in the S&P 500.

Altera Corp. erased 4.6 percent to $33.56. Fourth-quarter earnings at the maker of programmable chips used in phone systems were 37 cents a share, missing the average analyst estimate by 2 cents.

Netflix soared 42 percent, its biggest gain ever, to $146.86. The company signed 2.05 million new U.S. Internet subscribers in the fourth quarter, bringing total domestic online customers to 27.2 million, it said yesterday on its website. The gain led to a quarterly profit of 13 cents a share, compared with analysts’ predictions of a loss.

Amazon, EBay

Amazon.com Inc., the Seattle, Washington-based online retailer, jumped 2.1 percent to $273.62. The company announced today that it was acquiring IVONA Software, a text-to-speech technology company. EBay Inc., operator of the world’s largest online marketplace, advanced 3.4 percent to $55.19, its highest level since 2005.

Consumer discretionary stocks rose 0.7 percent as Netflix led gains. Bed Bath & Beyond Inc. (BBBY) increased 4.4 percent to $58.99. The operator of more than 1,400 home-furnishing stores was raised to outperform from market perform by Oppenheimer & Co.’s Brian Nagel, who said shares have likely reached a bottom and that the stock will rebound significantly in the next few quarters.

The Dow Jones Transportation Average extended gains into an eighth day, advancing 1.7 percent to a record. United Continental Holdings Inc. rose 2.2 percent to $25.54, while Southwest Airlines Co. added 0.8 percent to $11.45, as the airlines beat analysts’ estimates for fourth-quarter results amid steadying costs for fuel, their biggest expense.

F5 Networks

F5 Networks Inc. rallied 4.5 percent to $103.22. The provider of Internet traffic management solutions forecast second-quarter adjusted earnings of at least $1.21 a share, exceeding the average analyst projection of $1.20.

Xerox Corp. (XRX) jumped 2.2 percent to $7.75. The provider of document and business services reported earnings that beat analyst expectations as the company shifts away from its traditional printing business. Earnings excluding some items were 30 cents a share, above the average analyst estimate of 29 cents.

To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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