April 26th, 2012

S&P 500 Futures – U.S. stocks gained, giving the Standard & Poor’s 500 Index its biggest three-day advance since February, after better-than-estimated housing data overshadowed disappointing earnings at United Parcel Service Inc.

A measure of homebuilders in S&P indexes rose 4.8 percent as PulteGroup Inc. rallied 10 percent amid a narrower loss. Chevron Corp. (CVX) advanced 2.3 percent as the energy company lifted its dividend. Amazon.com Inc. (AMZN), the largest Internet retailer, surged 12 percent at 4:57 p.m. New York time as revenue beat estimates. UPS (UPS), the biggest package-delivery company that is considered a proxy for the economy, retreated 1.8 percent.

The S&P 500 increased 0.7 percent to 1,399.98 at 4 p.m. New York time. It has advanced 2.4 percent in three days. The Dow Jones Industrial Average climbed 113.90 points, or 0.9 percent, to 13,204.62 today. About 6.7 billion shares changed hands on U.S. exchanges, almost in line with the three-month average.

“Things are better,” said Michelle Gibley, director of international research at San Francisco-based Charles Schwab Corp. Her firm has $1.83 trillion in client assets. “We did get several months of better-than-expected economic data. The earnings season has been pretty good.”

Equities rose as data showed that signed contracts to buy U.S. homes increased more than forecast in March. The Federal Reserve yesterday upgraded its estimates for growth and unemployment this year. Policy makers are holding off on additional steps to boost the economy amid signs that the more than two-year expansion is gaining strength. Yet earlier today, data signaled a cooling labor market as more Americans than forecast filed applications for unemployment benefits.

Earnings Season

Investors also watched earnings data as profits have topped forecasts at 75 percent of S&P 500 companies reporting since April 10, according to data compiled by Bloomberg. Per-share profits are forecast to have grown 3.3 percent in the first- quarter, Bloomberg data show. That’s up from the 0.8 percent growth projection before the earnings season started.

“The most recent concern of the bears was that earnings this quarter were going to disappoint and take the market lower,” Birinyi Associates Inc., the Westport, Connecticut- based firm founded by Laszlo Birinyi, said in a note to clients. “That this was a concern last quarter, as well, was conveniently forgotten.”

Today’s gain extended this year’s advance in the S&P 500 to 11 percent and the benchmark gauge for American equities trimmed its monthly decline to 0.6 percent. If the S&P 500 erases its April drop, it will cap the fifth straight month of gains, the longest winning streak since 2009. Financials and energy shares had the biggest losses in April, while telephone companies rose.

Homebuilders Rally

All 11 stocks in a measure of homebuilders in S&P indexes gained. PulteGroup (PHM) jumped 10 percent to $9.58. The largest U.S. homebuilder by revenue, which has reported a loss in six of the last seven quarters, has been focused on cutting costs after the acquisition of Centex Corp. in August 2009.

Chevron rose 2.3 percent to $106.22. The second-largest U.S. energy company boosted its quarterly dividend to 90 cents a share from 81 cents.

More S&P 500 companies are paying dividends than at any time since 2000 after Apple Inc., Nasdaq OMX Group Inc. and six other corporations initiated payouts this year. The number has risen to 401, according to Howard Silverblatt, S&P’s senior index analyst. His estimate for total payouts this year, which Silverblatt said is under review, is a record $279 billion.

Companies are increasing shareholder returns in the form of dividends and buybacks after the 2008 financial crisis led them to hoard cash to a record $1 trillion by the end of 2011. The rise in payouts coincides with a 13th quarter of better-than- estimated earnings.

Record High

“Given underlying fundamentals, low payouts and cash reserves, 2012 should set a record high for cash dividend payments,” Silverblatt wrote in an e-mail today.

Amazon surged 12 percent to $220 after the close of regular trading. Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster. The Kindle Fire tablet is the best-selling item on Amazon’s site, the company said.

Wal-Mart Stores Inc. (WMT) rallied 2.8 percent, the most in the Dow, to $58.95. The world’s largest retailer rebounded after an 8.2 percent slump in three days, which was triggered by allegations that executives in Mexico paid more than $24 million in bribes to speed expansion.

Citrix Systems Inc. (CTXS) surged 12 percent to $86.76. The software maker forecast earnings in 2012 will be at least $2.75 a share, topping the average analyst estimate of $2.72.

UPS Slumps

The Dow Jones Transportation Average (TRAN) slid 1.1 percent. UPS dropped 1.8 percent to $78.25. Package volume gains at UPS, an economic bellwether because it carries goods from mobile devices to pharmaceuticals, have slowed in recent quarters as Asian economic growth cools. Average revenue per piece stagnated as the company struggles to raise rates.

FedEx Corp. (FDX), which operates the world’s biggest cargo airline, last month projected a profit range for this quarter whose low end trailed analysts’ estimates as the company pared its global growth forecast.

Starbucks Corp. (SBUX) slumped 4.5 percent to $57.90 after the market close. The world’s largest coffee-shop chain reported second-quarter same-store sales that trailed analysts’ estimates amid weaker demand in Europe.

Exxon Mobil Corp. (XOM) declined 0.9 percent to $86.07. The world’s largest energy company by market value said net income fell 11 percent as its biggest first-quarter production decline since 2008 wiped out most of the benefit of record oil prices.

Dow Chemical

Dow Chemical Co. slumped 3.4 percent to $34.85 after rising costs for oil-based raw materials in Europe (DOW) and Asia cut earnings in plastics.

Akamai Technologies Inc. (AKAM) plunged 14 percent, the most in the S&P 500, to $33.15 after forecasting profit that missed estimates. The company that helps businesses deliver data at faster speeds over the Internet said Chief Executive Officer Paul Sagan will leave by the end of 2013. Akamai’s sales more than quadrupled during his leadership.

Aetna Inc. (AET) plunged 8.2 percent to $45.31. The third-biggest health insurer by sales reported first-quarter profit that missed analyst estimates.

The S&P 500 may lose as much as 10 percent from current levels given the market’s tendency to give back some gains after a “strong” rally, according to Bank of America Corp.’s Mary Ann Bartels.

‘In a Correction’

“We’re in a correction,” Bartels, the New York-based head of technical and market analysis at Bank of America, said in a phone interview yesterday. “We’re starting to get sell signals on our intermediate indicators.”

Industries such as consumer staples, telecommunications and utilities have fallen too much as investors favor more “defensive” industries, Bartels said. Stocks driven by the economy, including materials, energy and industrial shares, have fallen out of favor, pointing to a potential “deeper pullback” for the U.S. equity market, she said.

“The market is still staying away from commodity-sensitive cyclicals,” Bartels said. “As long as that continues, that means the market is more likely to go down.”

- Rita Nazareth in New York at Bloomberg.