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April 29, 2014 at 11:41 AM
(Bloomberg) — U.S. stocks climbed with European equities as earnings from Merck & Co. and Deutsche Bank AG beat estimates. Treasuries reversed losses as the Federal Reserve starts a policy meeting to determine the future of stimulus.
The Standard & Poor’s 500 Index advanced 0.3 percent at 11:15 a.m. in New York, erasing this month’s decline. The Nasdaq Composite Index pared earlier gains as it headed for its worst month since 2012. The Stoxx Europe 600 Index climbed 1 percent. Treasury 10-year yields were little changed at 2.70 after earlier rising three basis points. The yen weakened against all but three of its 16 major peers. Russia’s Micex Index rose 0.9 percent, while crude prices climbed amid new sanctions by the U.S. and Europe.
Merck’s profit beat estimates as it cut spending on promotions and research. EBay Inc. and Twitter Inc. are among U.S. companies reporting results today. Deutsche Bank posted trading revenue that exceeded projections. The Fed is forecast to scale back monthly bond buying after its two-day meeting, amid signs the economy withstood the effects of harsh winter weather. The U.S. and the European Union stepped up sanctions against Russia yesterday.
“Earnings have been beating expectations and guidance will remain strong for coming quarters because of this spring thaw and economic rebound,” Patrick Spencer, who helps oversee more than $100 billion as London-based head of equity sales at Robert W. Baird & Co., said in a telephone interview. “That will continue to underpin the market.”
Earnings scorecard
Merck, the second-biggest U.S. drugmaker by sales, gained 2.8 percent for the steepest climb in the Dow Jones Industrial Average. Of the 274 companies in the S&P 500 that have posted results, 74 percent of earnings beat analysts’ estimates and 52 percent topped sales projections, data compiled by Bloomberg show.
The S&P 500 gained 0.3 percent yesterday, closing 1.1 percent below its record. The gauge was little changed for the month as of yesterday’s close, after reaching an all-time high on April 2.
The Nasdaq Composite has fallen 2.7 percent this month, as Internet stocks have sold off amid concern valuations have outpaced estimates for earnings growth. Nasdaq companies trade at 35 times reported earnings, about double the level of S&P 500 members. The Fed will probably cut bond buying to $45 billion at the meeting that starts today, according to the median of 43 economists’ estimates compiled by Bloomberg. Policy makers will keep their target interest rate for overnight bank lending in a range of zero to 0.25 percent, Bloomberg survey shows.
U.S. data
Data today showed the Conference Board’s index of U.S. consumer confidence decreased to 82.3 in April from 83.9 a month earlier. Reports later this week on gross domestic product and hiring in April will give investors more clues to how the economy withstood a severe winter.
FedEx Corp., General Motors Co. and McDonald’s Corp. have all blamed weather for poor earnings performance as snow storms during the first three months of the year slowed shipments and kept shoppers indoors.
“The economy is in a sweet spot,” Spencer said. “Growth isn’t so exuberant that the Fed needs to withdraw their support quickly, and not so anemic that they need to be concerned about further weakening.”
Apple Inc. is about to join the ranks of the biggest U.S. corporate borrowers as the company starts marketing bonds in what it says may rival last April’s then-record $17 billion offering. The iPhone maker is offering bonds in seven parts, according to a person with knowledge of the transaction. Apple shares slipped 0.1 percent, after three days of gains.
Europe shares
Five shares advanced for every one that declined in the Stoxx 600, with trading volumes 13 percent lower than the 30-day average, according to data compiled by Bloomberg. All but one of the 19 industry groups rose, led by oil and technology stocks.
