U.S. Stocks Rise As Earnings Season Kicks Off
NEW YORK (MarketWatch) -- U.S. stocks rose early on Monday, as investors hold out hopes that second-quarter earnings, which kicks off with Alcoa Inc.'s report after the close, will easily top lowered expectations.
"Again investors will be focused upon company's comments about the future - not so much of the past," said Paul Nolte, director of investments at Hindsdale Associates. "The first earnings salvos begin this week - it should be a good show."
Still, traders will likely hold out before placing big bets. "I would suspect we will get a mixed session, as the market awaits earnings reports," said Peter Cardillo, chief market economist at Avalon Partners.
The Dow Jones Industrial Average gained 33 points to 13,646, as 19 of its 30 components advanced, led by the likes of Intel Corp. Verizon Corp. and General Motors Corp. .
Among blue chips, Boeing Co. led the gains, rising 2.2% after the company unveiled its 787 Dreamliner and announced new orders for the plane.
And Home Depot Inc. , whose shares were upgraded to buy at Goldman Sachs, rose 0.3%. The broker cited changes in management and culture as well as an improved business mix and capital structure.
Alcoa Inc. , which traditionally kicks off the earnings season, gained 0.4%. The aluminum producer's report is expected to benefit from demand in the aerospace sector, which should compensate for weakness from U.S. housing.
Still, traders will likely hold out to get a sense of where earnings are headed before placing big bets. "I would suspect we will get a mixed session, as the market awaits earnings reports," said Peter Cardillo, chief market economist at Avalon Partners.
The S&P 500 rose 1.4 points to 1,531, while the Nasdaq Composite gained 2.4 points to 2.668.
Trading volumes showed 278 million shares trading on the New York Stock Exchange and 437 million trading on the Nasdaq stock market. Gaining issues topped decliners by 15 to 13 on the NYSE, while decliners topped gainers by 7 to 6 on Nasdaq.
By sector, gold , biotechnology and transportation led the gains, while computer technology , hardware , and telecommunications dropped.
Earnings are here
Last week, major averages all closed higher in a holiday-shortened week, as gains in technology and energy shares helped overcome concerns about rising crude oil prices and higher bond yields.
On Monday, investor's attention turned to earnings. Strategists are predicting that profits of the largest U.S. companies most likely increased at a slower pace in the second quarter, constrained by rising interest rates and weakness in the auto and housing sectors.
Earnings are expected to rise 4.1% from the year earlier, according to Thomson Financial estimates. But as in previous times, many companies tend to lower the bar before reports, which tends to help them easily beat expectations.
Industrial shares, such as Dow components Boeing and Honeywell Inc. are expected to see the best results for the quarter, closely followed by the technology sector. The likes of Apple Inc. and Google Inc. are expected to see earnings grow 34% and 44% respectively.
The sole economic report of the day is the Federal Reserve's consumer credit report for May, due at 3 p.m. The MarketWatch forecast, based on a poll of economists, is that consumer credit shot up to $7.7 billion in May from $2.6 billion in April.
The consumer credit data excludes home mortgages, but includes credit cards and other types of revolving credits.
Other markets
Treasurys were higher, pushing yields below recent highs. Lower yields should reassure stock market investors. The benchmark 10-year Treasury note last was up 8/32 at 95 with a yield of 5.153%.
Oil prices remained above $72 a barrel. The August crude futures contract was recently down 2 cents at $72.79 a barrel.
However, gold was trending higher, benefiting fom dollar softness. The August gold contract was up $9 at $663.80 an ounce.
The dollar was little changed from late Friday. Overall the dollar in recent weeks has been weakened by widespread perception that foreign rates are moving higher, while the U.S. fed funds rate is likely to remain stalled at 5.25% for the foreseeable future.
Stocks on the move
Investors in the Chicago Board of Trade are due to vote on whether to accept a sweetened offer from the Chicago Mercantile Exchange . The Wall Street Journal reported that the Intercontinental Exchange won't raise its offer for the Chicago Board of Trade.
CBOT Holdings rose 0.7%.
In other merger news, Marshall & Ilsey is buying First Indiana for $32 a share. The stock Friday closed at $22.05 a share. The Carlyle Group agreed to pay $2.7 billion for Sequa Corp. , a diversified manufacturer.
Shares of Lexmark International fell over 10% after it warned over second- and third-quarter earnings, blaming weaker-than-forecast sales of inkjet supplies and pricing.
Alnylam Pharmaceuticals jumped over 50% after news it will receive payments of $331 million upfront and up to $1 billion in milestones from Roche Holdings in return for a license to Alnylam's platform for RNA interference therapeutics.
Sony Corp. fell slightly after news that it cut the price of its PlayStation 3 game console by $100 to $499.
By Nick Godt