Fastenal Co., the largest U.S. retailer of nuts, bolts and other fasteners, jumped 1.9 percent to lead industrial shares higher after profit topped analyst estimates. Home Depot Inc. rallied 3.1 percent. Intel Corp. climbed 0.9 percent before reporting earnings after financial markets close. Alcoa slid 2.2 percent after sales trailed estimates.
The Standard & Poor’s 500 Index rose 0.2 percent to 1,198.47 at 3:32 p.m. in New York. The Dow Jones Industrial Average gained 25.69 points, or 0.2 percent, to 11,031.66. The Russell 2000 Index of smaller U.S. companies increased 0.3 percent.
“Maybe investors’ reaction to Alcoa’s earnings report was too harsh,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, who oversees $55 billion. “We’re going to see very good first-quarter results. Historically analysts have underestimated the ability of companies to deliver profits.”
As earnings season begins, U.S. stocks are about to have the most momentum since 1986. The 14-day relative strength index for the S&P 500 has exceeded 65 since March 5, the longest stretch since 1995, according to data compiled by Bloomberg. Today would mark the 27th consecutive day, the most in 24 years.
Earnings Estimates
Combined profit for S&P 500 companies increased 30 percent in the first quarter from a year earlier, according to analyst estimates compiled by Bloomberg. The S&P 500 has jumped 77 percent from a 12-year low in March 2009 as the economy returned to growth and the Federal Reserve kept its benchmark interest rate near zero to safeguard the recovery.
Alcoa dropped 2.2 percent, the most in the Dow, to $14.25. The metal producer reported quarterly sales of $4.89 billion, missing the $5.23 billion average estimate of eight analysts surveyed by Bloomberg. UBS downgraded the stock to “neutral” from “buy.”
The S&P 500 Regional Banks Index slumped 1.9 percent and earlier dropped as much as 2.7 percent for the biggest intraday drop since Feb. 25. UBS said valuations are unsustainable and earnings are likely to fall short of expectations. The shares may be poised for a “meaningful pullback” in the second half of 2010 as the pace of earnings recovery disappoints investors, according to UBS.
Banks Drop
Huntington Bancshares fell 5.8 percent to $5.68 and KeyCorp retreated 1.9 percent to $8.18.
The S&P 500 Banks Index fell the most out of 24 industry groups, losing 1.1 percent. It still has the best one-month performance, rising 8.5 percent, bolstered by last week’s rally after Credit Suisse Group AG said SunTrust Banks Inc. could be a takeover target and Wells Fargo & Co. raised U.S. large-cap bank shares to “market weight” from “underweight.”
Avon Products Inc., the world’s largest door-to-door cosmetics seller, tumbled 7.8 percent to $32.04 for the biggest loss in the S&P 500. The company said in October 2008 that it started an investigation into compliance with the Foreign Corrupt Practices Act, which outlaws bribing foreign officials, at its China division. Avon generated 3.2 percent of its sales in China during the quarter that ended Dec. 31.
Home Depot, Fastenal
Home Depot, the largest home-improvement retailer, rallied 3.1 percent to $34.53 for the Dow’s biggest advance. Fastenal reported first-quarter profit excluding some items of 38 cents a share, topping the average analyst estimate of 33 cents. Its shares jumped 1.9 percent.
The U.S. trade deficit widened 7.4 percent in February, more than expected, to $39.7 billion from a revised $37 billion the prior month, the Commerce Department said in Washington.
The Dow’s close over 11,000 yesterday was its first above that level since September 2008. The S&P 500 is hovering just under a milestone of its own -- 1,200. Resistance can be expected at both levels, said Ryan Detrick, senior technical analyst at Schaeffer’s Investment Research in Cincinnati.
“You’ve got 1,200 and 11,000 -- two big, round numbers,” Detrick said. “That’s an area people look at” when watching for resistance or a possible pullback.
DeVry Inc. gained 10 percent, the most in the S&P 500, to $71.87 after the for-profit education company was raised to “outperform” from “neutral” at credit Suisse.
Goodyear Tire & Rubber Co. advanced 7.8 percent to $13.97 today, the day of the tiremaker’s annual meeting. Richard J. Cramer became president and chief executive officer, succeeding Robert J. Keegan, who remains executive chairman.
