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 European Central Bank'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 homed in on a figure of around EUR500 billion or
higher.
The ECB's executive board met Tuesday to decide on the proposal,
which will form the basis of deliberations by the entire 25-member
governing council on Thursday, the Journal reported. The news
helped stocks erase early losses posted in the wake of weak
earnings from International Business Machines Corp.
Also giving stocks a lift was a bounce in energy prices.
Crude-oil futures added 3% to $47.88 a barrel. Energy stocks rose
the most on the S&P 500, up 1.8%.
The Dow Jones Industrial Average rose 64 points, or 0.4%, to
17579.
The S&P 500 added 13 points, or 0.6%, to 2036 and the Nasdaq
Composite Index gained 31 points, or 0.7%, to 4686.
Stocks turned higher because the ECB now appears on track to
take action to revive its economy, said Bob Landry, who helps
manage about $22.8 billion as a portfolio manager at USAA
Investments. "If they didn't go forward with this, that would be
looked at pretty negatively in the market," he said.
In the long run, the currency move in the wake of the ECB's
Thursday decision will be most important for U.S. stocks, Mr.
Landry said.
"If we continue to see the dollar strengthen against the euro,
it could continue to act as a headwind to U.S. multinational
companies," he said, adding that it could weigh on their
earnings.
IBM reported further declines in quarterly profit and revenue,
and issued a profit forecast that fell below Wall Street's
expectations. Shares fell 2.9%, weighing on the Dow
industrials.
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.
The Stoxx Europe 600 gave up earlier losses, trading near the
flat line.
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
last month and building permits to hit a rate of 1.06 million. The
housing-starts report tends to be volatile and is often
revised.
Gold futures fell 0.4% to $1289.70 an ounce. The yield on the
10-year Treasury note fell to 1.787% from 1.806% on Tuesday. Yields
fall as prices rise.
Among individual stocks, Netflix shares surged 18%. 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 2.8%.
Write to Saumya Vaishampayan at saumya.vaishampayan@wsj.com
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