Apple and Fed combine to boost equities

US stocks rallied yesterday, with Apple’s surge giving the Nasdaq its biggest gain of the year, while the Fed chairman reassured markets that the central bank would do more if necessary to lift the economy.

Apple fueled optimism that the current earnings season would be much stronger than expected, generating gains across all market sectors. Quarterly profits at Apple nearly doubled, while its revenue easily topped expectations. The rally in Apple’s stock especially benefited the S&P 500 tech sector index . It jumped 3.2 per cent.

Federal Reserve chairman Ben Bernanke spurred further gains when he said the US central bank “would not hesitate” to launch another round of bond purchases to drive borrowing costs lower if it looked like the economy needed it.

Shares of Apple, which has the world’s biggest market capitalisation, jumped 8.9 per cent to $610. The stock had its best day since November 2008 and hit a session high at $618.

Apple’s results boosted S&P 500 companies’ earnings growth to an estimated 6.9 per cent for the first quarter, up from an estimate of 4.6 per cent before Apple, according to Thomson Reuters data.

Apple’s stock had sold off recently, partly on fears that its earnings could disappoint.

“It was a big relief” to many investors, said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois, referring to Apple’s results. “There were a lot of worries going into that earnings report. I think people were worried iPhone growth was going to slow, and it was the same thing with iPad growth.

“What they didn’t take into account was iPhone growth throughout the world. That’s what the market didn't see properly.”

The Dow Jones industrial average shot up 89.16 points, or 0.69 per cent, to 13,090.72 at the close. The Standard & Poor’s 500 Index rose 18.72 points, or 1.36 per cent, to 1,390.69. The Nasdaq jumped 68.03 points, or 2.3 per cent, to 3,029.63, and scored its best daily percentage gain since December.

The earnings season so far has been stronger than expected. With 200 of the S&P 500 companies reporting, three-quarters have topped estimates, according to Thomson Reuters data.

Giving the Dow its biggest lift was Boeing. It posted higher quarterly profit, helped by increased commercial aircraft sales, and raised its earnings forecast for the year. The stock shot up 5.3 per cent to $77.08.

Caterpillar shares dropped 4.6 per cent to $103.44 after it said profit rose 29 per cent. The equipment maker stoked Wall Street’s fears over emerging markets by repeatedly citing slowdowns in economic growth in China and Brazil.