US stocks rose, with the Standard & Poor's 500 Index capping its best three-day rally in two months, as Yahoo! earnings topped estimates and industrial production gained more than forecast.
Yahoo rallied 6.3 per cent after sales surged at Alibaba Group, where it holds a stake. Southwest Airlines Co. paced gains among carriers after saying it will freeze the size of its jet fleet through 2015, a one-year extension, to focus on boosting its return on invested capital. Bank of America Corp. fell 1.6 per cent after reporting a quarterly loss.
The Standard & Poor's 500 Index added 1 per cent to 1,862.21 at 4pm in New York, bringing its three-day advance to 2.6 per cent.
"The macro data continues to come in reasonably firm and we don't think valuations on the stock side suggest we're overdone," Jim Russell, a senior equity strategist at US Bank Wealth Management, said by phone. "The market is finding some sort of natural trading level to bounce out of and we're seeing slightly better-than-expected earnings and second-quarter outlooks from management that seem to be encouraging."
The S&P 500 gained 0.7 per cent yesterday as earnings from Coca-Cola Co. and Johnson & Johnson outweighed concern about escalating conflict in Ukraine. The index dropped 2.5 per cent from its April 2 record through yesterday as investors sold Internet and biotechnology stocks, the best performers during the five-year bull market, amid concern valuations had become too expensive before earnings.
Yellen Comments
Yellen, speaking to the Economic Club of New York, told investors to pay attention to shortfalls in both inflation and the jobless rate for signals on the Federal Open Market Committee's decisions on the policy rate. The Fed has a "continuing commitment" to support the economic recovery, she said.
The central bank said the US economy continued to expand in most regions as businesses benefited from a bounce back from harsh winter weather earlier in the year. Eight of 12 Fed districts characterized growth as "modest or moderate," the Fed said today in its Beige Book business survey, based on reports gathered before April 7.
Economic data today showed gains in manufacturing are helping power the US out of the winter doldrums, while homebuilding shows signs of lagging behind. Industrial production rose more than forecast in March after a February gain that was twice as big as previously estimated. A Commerce Department report showed the pace of US home construction rebounded less than forecast in March.
Seventeen companies in the equities benchmark, including Google and International Business Machines Corp., report earnings today. Profit per share for the index's constituents probably dropped 0.9 per cent in the first quarter, according to analyst estimates compiled by Bloomberg. Revenue climbed 2.6 per cent from a year earlier, the projections show.
Russell Investments, the US asset manager that oversees $257 billion, bought protection against a drop in equities shortly before last week's selloff. The firm acquired puts on the S&P 500 last week's 2.7 per cent slide, Alain Zeitouni, head of multi-management at Russell Investments France said.
"Protection is cheap and we're a bit cautious," Zeitouni said in Paris on April 10. "We don't see a big rally in equities in the US. We've been expecting a correction."
Bloomberg
