U.S. stocks rose for the week, capping the longest stretch of daily gains since 2004, amid better-than-estimated corporate earnings and economic data as lawmakers voted to temporarily suspend the federal debt limit.
Netflix Inc. (NFLX) surged 71 percent after beating its forecast for subscriber growth and posting an unexpected profit. International Business Machines Corp. rose 5.4 percent after forecasting earnings that topped estimates. 3M Co., the maker of Scotch tape, added 1.9 percent as sales growth in Asia, excluding Japan, rose the most in about two years. Apple Inc. (AAPL) fell 12 percent, losing the title of most valuable company to Exxon Mobil Corp. (XOM) amid the slowest profit growth in a decade.
The Standard & Poor's 500 Index rose 1.1 percent for the week to 1,502.96. It has added 2.2 percent in eight days, the longest rally since November 2004. (SPX) The Dow Jones Industrial Average gained 246.28 points, or 1.8 percent, to 13,895.98. Both measures are trading at the highest levels since 2007.
“People are jumping on the bandwagon,” said Wayne Lin, a fund manager at Baltimore-based Legg Mason Inc. His firm oversees $648 billion. “The earnings are better. Economic figures are trending the right way. The legislators and the administration have gotten the message that they need to work together and investors are seeing that as a positive sign.”
Stocks rose as earnings at 76 percent of the S&P 500 companies which reported results so far have topped analysts' estimates. Claims for jobless benefits unexpectedly dropped to a five-year low. The index of American leading indicators rose by the most in three months. The U.S. House voted to temporarily suspend the nation's borrowing limit, removing the debt ceiling for now as a tool for seeking deeper spending cuts.
The S&P 500 is poised for a third straight month of gains after advancing 5.4 percent so far in January. Energy producers and health-care companies have led the rally, adding at least 7.2 percent. The benchmark gauge is trading at 14.9 times reported earnings, below the average since 1954 of 16.5.
“The trend favors the march of the bulls,” said Brian Jacobsen, who helps oversee $212 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “If we continue to see economic improvement and financial conditions thaw, we'll see markets marching higher.”
Measures of consumer discretionary and financial shares rose the most among 10 S&P 500 groups for the week, gaining more than 1.8 percent. The Dow Jones Transportation Average jumped 3.1 percent to a record. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 3.5 percent to 12.89, after falling to the lowest level since 2007.
Netflix surged 71 percent, the most ever, to $169.56. The company, which faces increased competition from rivals such as Coinstar Inc.'s Redbox unit, posted fourth-quarter net income of $7.9 million, defying analysts' forecasts of a loss. It also signed more than 2 million new U.S. Internet subscribers, bringing the total to 27.2 million in the U.S.
Billionaire Carl Icahn, with a 10 percent stake, added to the enthusiasm when he predicted further gains for the stock after the Jan. 23 earnings report. While down from the July 2011 record high of $298.73, Netflix has more than doubled since the investor disclosed his holdings on Oct. 31.
IBM climbed 5.4 percent to $204.97. Chief Executive Officer Ginni Rometty is shifting away from hardware to more profitable businesses such as cloud computing, a service that provides remote access to information. The company is also looking for more growth from developing markets such as Africa to help meet its target of $20 in earnings a share by 2015.
Google Inc. added 7 percent to $753.67. The owner of the world's largest search engine reported profit that topped analysts' estimates as advertisers boosted spending to reach consumers during the holiday season.
Advanced Micro Devices Inc. gained 16 percent to $2.85. The second-largest maker of processors for personal computers reported fourth-quarter revenue that topped analysts' forecasts, helped by sales of chips that run servers.
3M increased 1.9 percent to $100.59. Sales from existing business rose 10 percent in the Asia-Pacific region, driven by a 16 percent gain in China, Chief Financial Officer David Meline said. Including Japan, sales in the region rose 5.8 percent, compared with a decline of 0.1 percent in the third quarter.
Procter & Gamble Co. (PG) advanced 4.7 percent to $73.25. The company, whose chief executive officer is under pressure from activist investor Bill Ackman, raised its 2013 profit forecast and posted quarterly earnings that beat analysts' estimates after gaining market share in key categories.
AT&T Inc. rose 1.7 percent to $34.02. The largest U.S. phone company posted a narrower fourth-quarter loss after customers bought a record number of discounted smartphones, including 8.6 million of Apple's iPhones.
McDonald's Corp. (MCD) added 1.6 percent to $93.72. The largest restaurant chain by sales said fourth-quarter profit rose 1.4 percent as its dollar menu and McRib sandwich helped U.S. sales.
Starbucks Corp. climbed 3.7 percent to $56.81. The largest coffee-shop operator said profit rose 13 percent in its fiscal first quarter as sales increased in the Americas and fell in Europe, the Middle East and Africa.
The KBW Bank Index of 24 stocks gained 1.2 percent to the highest level since February 2011. Citigroup Inc. (C) increased 3 percent to $42.91. Bank of America Corp. advanced 4.3 percent to $11.62. Regions Financial Corp. (RF), Alabama's biggest bank, jumped 3.5 percent to $7.69 as earnings beat estimates.
Technology shares had the only decline in the S&P 500 among 10 industries, dropping 0.5 percent.
Apple sank 12 percent, the most since 2008, to $439.88. At least 20 analysts lowered their price targets after Apple on Jan. 23 posted its quarterly results. The report underscored the rising costs of product overhauls amid competition from Samsung Electronics Co. in the saturating smartphone market.
Apple surrendered the title of the world's most valuable company to Exxon Mobil Corp. after concern over slowing growth drove the shares down 17 percent this year for the biggest loss in the S&P 500. The decline reduced its market capitalization to $413 billion, below Exxon's $418 billion.
Coach Inc. (COH) plunged 17 percent, the most since 2009, to $51.21. The largest U.S. luxury handbag maker reported fiscal second-quarter profit that trailed analysts' estimates, hurt by lower demand in North America.
Cliffs Natural Resources Inc. decreased 4.1 percent to $35.71. The biggest U.S. iron-ore producer said it will take a $1 billion writedown for the fourth quarter related to its 2011 acquisition of Consolidated Thompson Iron Mines Ltd.