Strong earnings boost appetite of US investors

US stocks rose yesterday, rebounding from two days of losses, as investors turned their focus to the first prominent results of the earnings season.

Stocks had retreated at the start of the week from the S&P 500’s highest point in five years, hit last Friday, on worries about possible earnings weakness.

Shares of Alcoa were down 0.5 per cent to $9.08 after early gains, following the company’s earnings release after the bell on Tuesday. The largest US aluminum producer said it expects global demand for aluminum to grow in 2013.

Herbalife stock rose 4.2 per cent to $39.95 in its most active day of trading in the company’s history after hedge fund manager Dan Loeb took a large stake in the nutritional supplements seller. Prominent short-seller Bill Ackman had previously accused the company of being a “pyramid scheme,” which Herbalife has denied.

Traders have been cautious as the current quarter shaped up like the previous one, with companies recently lowering expectations, said James Dailey, portfolio manager of Team Asset Strategy Fund in Harrisburg, Pennsylvania. Lower expectations leave room for companies to surprise investors even if their results are not particularly strong. “The big question and focus is on revenue, and Alcoa had better-than-expected revenue,” which calmed the market a little, Dailey said.

Overall, corporate profits were expected to beat the previous quarter’s meager 0.1 per cent rise. Both earnings and revenues in the fourth quarter are expected to have grown by 1.9 per cent, according to Thomson Reuters data.

The Dow Jones industrial average gained 61.66 points, or 0.46 per cent, to 13,390.51. The Standard & Poor’s 500 Index rose 3.87 points, or 0.27 per cent, to 1,461.02. The Nasdaq Composite Index gained 14.00 points, or 0.45 per cent, to 3,105.81.

Facebook shares rose above $30 for the first time since July 2012, trading up 5.3 per cent at $30.59. Facebook, which has been tight-lipped about its plans after its botched IPO in May, invited the media to its headquarters next week.

Clearwire shares jumped 7.2 per cent to $3.13 after Dish Network bid $2.28bn for the company, beating out a previous Sprint offer and setting the stage for a takeover battle for the wireless service provider that owns crucial mobile spectrum.

Apollo Group slid after heavier early losses, a day after it reported lower student sign-ups for the third straight quarter and cut its operating profit outlook for 2013. Apollo’s shares were last off 7.8 per cent at $19.32.

Volume was below the 2012 average of 6.42bn shares traded per day, as 6.10bn were traded on the New York Stock Exchange, NYSE MKT and Nasdaq. Adancing stocks outnumbered declining ones on the NYSE by 2,014 to 963, while on the Nasdaq advancers beat decliners 1,603 to 859.