BIG earnings surprises gave a positive turn to investor sentiment yesterday, propelling US stocks to their best day in a month and lifting the Dow to its highest in almost three years.
Investors had been set up for a series of disappointments but got an unexpected treat from blue chips Intel and United Technologies, sparking a broad-based rally that puts equities on the path for more gains in coming weeks.
The Dow Jones industrial average gained 186.79 points, or 1.52 per cent, to 12,453.54. The Standard & Poor’s 500 rose 17.74 points, or 1.35 per cent, to 1,330.36. The Nasdaq Composite added 57.54 points, or 2.10 per cent, to 2,802.51.
The Nasdaq posted its largest daily percentage gain since October while the Dow hit its highest close since early June 2008. The broad S&P 500 had its best performance in a month.
The S&P 500 broke decidedly above its 20-day moving average, setting a near-term target at 1,340, according to its Bollinger bands chart, a technical indicator that tracks momentum and volatility.
“Until yesterday, earnings were lacklustre, not too exciting, even disappointing,” said Nick Kalivas, senior equity index analyst at MF Global. He said the last round of reports “shifted the psychology quite significantly”.
Intel rose 7.8 per cent while United Tech gained 4.3 per cent.
Among companies adding to the positive tone were VMware, Freeport-McMoRan Copper & Gold and EMC, which also raised its profit view.
The PHLX Semiconductor index jumped 4.3 per cent, the largest percentage gain since early July.
About 7.6bn shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below last year’s estimated daily average of 8.47bn.
Advancing stocks outnumbered declining ones on the NYSE by a ratio of nearly five to one, while on the Nasdaq, about 10 stocks rose for every three that fell.
Sales of previously owned US homes rose more than expected in March, a trade group said yesterday, suggesting the housing market’s downward trend may be close to hitting a bottom.The PHLX housing sector index rose 1.2 per cent with home builder DR Horton up three per cent.
On the downside, International Business Machines slipped 0.4 per cent after reporting a drop in signings of new business at its global services division during the first quarter. However, the Dow component’s profit and revenue came in above analysts’ projections and it raised its full-year profit view.