In the U.S.: U.S. Stock Futures Rise As Caterpillar Surges On Earnings

25 July 2012

Earnings season brings joy to U.S. investors (for today at least).

U.S. stock futures rose, indicating the Standard & Poor’s 500 Index will snap a three-day decline, as companies including Caterpillar Inc. and Boeing Co. (BA) raised their forecasts after better-than-estimated earnings. (SPX)

Caterpillar, the largest maker of construction and mining equipment, and Boeing, a planemaker, gained at least 3.2 percent. Broadcom Corp. (BRCM), a maker of chips that help mobile devices connect to the Internet, rallied 5.7 percent as it forecast sales that may top some estimates.Apple Inc. (AAPL) slumped 4.4 percent as iPhone sales missed forecasts. Netflix Inc. (NFLX), the largest video-subscription service, tumbled 18 percent after saying it may not add as many users this year as predicted.

S&P 500 futures expiring in September added 0.7 percent to 1,338.50 at 8:56 a.m. New York time. Dow Jones Industrial Average futures rose 129 points, or 1 percent, to 12,653.

“The earnings picture is not too bad,” said David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York. “If there’s a rebound going on in housing, it strongly suggests that the U.S. economy will be able to weather whatever weakness coming out of Europe.”

Equity futures advanced as investors watched second-quarter corporate results. Earnings at 71 percent of the 196 S&P 500 companies which reported results so far have beaten analysts estimates, according to data compiled by Bloomberg. Demand for new U.S. homes climbed in June to the highest level in two years, economists project a report today will show.

European Central Bank council member Ewald Nowotny said there are arguments in favor of giving Europe’s rescue fund a banking license, reviving the debate on bolstering its firepower as leaders face the prospect of a full-scale Spanish bailout.

Caterpillar, Boeing

Caterpillar (CAT) rallied 4.3 percent to $84.90. The company is selling more excavators, scrapers and dozers as customers in developed countries replace aging equipment and U.S. construction spending gains, rising 11 percent through May from an 11-year low in February last year.

Boeing gained 3.2 percent to $74.30. Total jet deliveries should rise to a range of 585 to 600 this year, the company said. That may help the U.S. planemaker reclaim the top spot in commercial production it lost to European rival Airbus SAS in 2003. The planemaker lifted its sales forecast by $1.5 billion, to a range of $79.5 billion to $81.5 billion.

Broadcom rose 5.7 percent to $32.53. The company saw strength across all of its business groups, Chief Executive Officer Scott McGregor said on a conference call with analysts. While growth was limited by weaker demand in some regions, Broadcom is increasing market share by winning orders from rivals, he said.

Apple Tumbles

Apple sank 4.4 percent to $574.19. Customers delayed purchases of existing iPhone versions while awaiting the next model. Samsung Electronics Co. releases several designs a year to defend its lead in the $219.1 billion smartphone market. That raises the stakes for Apple Chief Executive Officer Tim Cook, who relies on a once-a-year upgrade of the device that makes up half of the company’s sales.

“Pressure is mounting,” said Michael Obuchowski, a portfolio manager at North Shore Asset Management LLC, an owner of Apple shares. “Because everybody else has a much faster design cycle, Apple has to come up with a new phone that’s competitive not just when it comes out, but will stay competitive for a long period of time. That’s going to be increasingly difficult.”

Netflix plunged 18 percent to $65.69. The summer Olympics are likely to hamper efforts to sign up new customers, Chief Executive Officer Reed Hastings said in his quarterly letter to investors. The full year-goal of adding 7 million new U.S. users will be “challenging” if this quarter’s most optimistic targets aren’t met, he said.

WellPoint Inc. (WLP) lost 9 percent to $55.90. The second-biggest U.S. health plan reduced its full-year forecast after quarterly profit missed analyst estimates because of higher medical costs.


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