By Saumya Vaishampayan
U.S. stocks advanced Wednesday after reports suggested the
European Central Bank was set to deliver a bond-buying program that
matched investors' expectations.
A proposal from the ECB's executive board calls for bond
purchases of about EUR50 billion ($58 billion) a month that would
last for a minimum of one year, The Wall Street Journal reported.
The proposal suggests bond purchases could amount to at least
EUR600 billion, in line with forecasts that have recently centered
on a figure of around EUR500 billion or higher.
The Dow Jones Industrial Average rose 46 points, or 0.3%, to
17561.
The S&P 500 added 13 points, or 0.6%, to 2035 and the Nasdaq
Composite Index gained 30 points, or 0.6%, to 4684.
The ECB news helped stocks erase early losses posted in the wake
of weak earnings from International Business Machines Corp. Justin
Wiggs, a trader at Stifel Nicolaus, said there was a significant
amount of interest in buying stocks after the ECB headlines hit
this morning. "We've seen a massive reversal today," he said,
referring to the swings in stocks.
Also giving stocks a lift was a bounce in energy prices.
Crude-oil futures added 2.5% to $47.61 a barrel. Energy stocks rose
the most on the S&P 500, up 1.6%.
Easy monetary policy has helped drive gains in U.S. stocks in
recent years. Even as the Federal Reserve remains on track to raise
interest rates this year, efforts from other major central banks,
including the ECB, are likely to keep global interest rates low.
And that should continue to lift U.S. stocks, said Aaron Jett, vice
president of global equity research at Bel Air Investment
Advisors.
By buying bonds, the ECB is effectively saying it "wants
investors to take more risk and move into stocks," he said. "The
U.S. right now is the growth engine of the global economy," he
added, which means it will continue to attract foreign
investors.
Earnings continued to attract attention. IBM reported further
declines in quarterly profit and revenue, and issued a profit
forecast that fell below Wall Street's expectations. Shares fell
3.5%.
Netflix shares surged 17%. The company said it added 4.3 million
streaming customers as foreign markets grew faster than expected,
beating its forecast of 4 million.
UnitedHealth Group Inc. said earnings rose 5.8% in its December
quarter, beating expectations. Shares gained 2.7%.
Going into the fourth-quarter earnings season, analysts surveyed
by FactSet had expected earnings growth of 1.1%, the weakest since
the third quarter of 2012. U.S. companies faced dollar strength, a
sharp drop in oil prices and weak economic growth abroad during the
quarter. Early indications don't look rosy: factoring in 51
companies that have already reported, the S&P 500 is on track
to post earnings growth of just 0.36% from a year ago.
"Oil is probably the biggest story," said Bill Stone, chief
investment strategist at PNC Wealth Management. "I know that energy
earnings are going to be bad. The other side is, do any of the good
[effects] of lower oil start showing up?" Mr. Stone noted that
Delta Air Lines Inc.'s better-than-expected fourth-quarter results
were helped in part by savings on jet fuel.
European stocks closed sharply higher, with Germany's Dax 30
near its all-time high. The Stoxx Europe 600 rose 0.6%, a fresh
seven-year high.
Demand for haven assets ebbed. Gold futures lost 0.1% to
$1292.60 an ounce. The yield on the 10-year Treasury note rose to
1.858% from 1.806% on Tuesday. Yields rise as prices fall.
In economic news, housing starts climbed 4.4% in December from a
month earlier to an annual rate of 1.089 million, the Commerce
Department said Wednesday. Building permits, an early indicator of
construction activity, fell 1.9% to an annual rate of 1.032
million. Economists surveyed by The Wall Street Journal had
expected overall housing starts to reach a pace of 1.04 million in
December and building permits to hit a rate of 1.06 million. The
housing-starts report tends to be volatile and is often
revised.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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