By Jonathan Cheng
Encouraging data from the housing sector pushed investors
broadly into stocks for another day, though a disappointing
earnings report from International Business Machines Corp. (IBM)
weighed heavily on the blue chips.
The Dow Jones Industrial Average pared early declines to lose
eight points, or 0.1%, at 13544. The modest decline came in spite
of IBM, whose large presence on the price-weighted index accounted
for about 75 points on the downside.
The Standard & Poor's 500-stock index tacked on five points,
or 0.4%, to 1460, while the technology-heavy Nasdaq Composite rose
eight points, or 0.3%, to 3109.
Intel Corp. (INTC) and IBM both issued disappointing earnings
reports after the closing bell on Tuesday. IBM slumped 4.7% because
the technology company's third-quarter revenue fell short of
analysts' estimates, due to weakness in hardware sales.
Intel dropped 2.8% after missing forecasts for earnings and
revenue, hurt by declining sales of personal computers. The
semiconductor maker provided a somewhat downbeat outlook on revenue
and gross margin percentages for the current quarter.
As a result, technology was the weakest among the 10 S&P 500
sectors. Elsewhere, energy, financials and telecommunications
stocks led the gains. Home Depot Inc. (HD) rose 1.8% and Alcoa Inc.
(AA) advanced 1.8%, leading the Dow components.
Helping to limit the downside Wednesday was news underscoring
the recent strength of the U.S. housing market. Construction of
homes surged in September to the highest level in more than four
years, rising 15.0% from August to a seasonally adjusted annual
rate of 872,000, well above expectations for a rate of 768,000.
Meantime, new building permits, an indication of future
construction, rose by 11.6% to an annualized level of 894,000 in
September, above estimates for a rate of 810,000.
The strong data helped boost already buoyant housing stocks.
PulteGroup Inc. (PHM) and Hovnanian Enterprises Inc. (HOV) soared
7% and 5.1%, respectively and are now up 181% and 185% this year.
D.R. Horton Inc. (DHI) rose 5.9% and Lennar Corp. (LEN) gained
3.8%, while regional banks Hudson City Bancorp (HCBK)and M&T
Bank Corp. (MTB) were also strong.
M&T Bank, which topped earnings and revenue expectations
amid strong mortgage growth, rallied 5.1% to trade above $100 a
share for the first time in five years.
"It's surprising to see that the market is up--it shows you how
quickly the market can change. People thought the S&P 500 could
fall to 1400, and now we're back up testing the all-time highs,"
said Dave Rovelli, managing director of U.S. equity trading at
Canaccord Genuity.
Mr. Rovelli also pointed to the jump in Treasury yields, which
he said would push people further into stocks. The drop in Treasury
prices pushed the yield on the benchmark 10-year note up to
1.79%.
"There's no place to put your money, and once the 10-year yield
goes above 1.90%, even more money will flood into stocks," Mr.
Rovelli said. "As long as we don't get the fiscal cliff, I wouldn't
be surprised if we don't just go higher between now and the end of
the year."
The U.S. stock moves came on the heels of strength in overseas
markets. In Europe, Spanish stocks surged after Moody's Investors
Service affirmed Spain's government-bond rating at Baa3, which is
one notch above junk status.
The Stoxx Europe 600 rose 0.5%, while Spain's IBEX-35 stock
index surged 2.4% to a three-week high. In addition, the yield on
Spain's benchmark 10-year government bond hit the lowest level
since early April, trading recently at 5.483%.
Asian markets were also broadly higher. Japan led the way after
Prime Minister Yoshihiko Noda told his cabinet to draft an
economic-stimulus package. Japan's Nikkei Stock Average ran up
1.2%, China's Shanghai Composite added 0.3% and Australia's
S&P/ASX 200 gained 0.8% to close at a 15-month high.
Crude-oil futures traded roughly flat at about $92 a barrel
after a weekly report on oil inventories showed
higher-than-expected stockpiles of crude oil. Gold futures edged up
to about $1,750 an ounce. The dollar slipped against the euro and
the yen.
In corporate headlines, Bank of America gained 0.7% after the
banking giant said it broke even on a per-share basis in the third
quarter, compared with expectations of a slight loss. That helped
offset a shortfall in revenue.
Cymer Inc. (CYMI) soared 54% after the maker of semiconductor
equipment agreed to be acquired by Dutch chip maker ASML Holding NV
(ASML.AE, ASML) in a cash-and-stock deal currently valued at 1.95
billion euros ($2.56 billion). U.S.-listed shares of ASML fell
5.1%.
Knight Capital Group Inc. (KCG)slipped 0.4% after the company
reported third-quarter revenue figures that were less poor than
analysts had expected. Still, the net loss was wider than
anticipated due to writedowns of trading losses.
Halliburton Co. (HAL) declined 1.2% after the oil-services
company reported third-quarter earnings that were down from
year-earlier levels, citing reduced activity by some customers.
Apollo Group Inc. (APOL) slid 19%, making it the worst performer
on the S&P 500, after the for-profit education company's
quarterly revenue numbers fell short of expectations. Its outlook
on revenue in fiscal 2013 was also below projections.
CSX Corp. (CSX) declined 1.8% after the railroad company
reported third-quarter revenue that fell shy of forecasts. Earnings
were higher than forecast, and the company affirmed its full-year
earnings outlook.
Fortinet Inc. (FTNT) slumped 19% after the network security
company reported its first year-to-year profit decline in more than
a year.
Cree Inc. (CREE) jumped 12% after the maker of energy-efficient
lights boosted quarterly profits by 26%, on the high end of
estimates, on improved revenue and margins.
Dean Foods Co. (DF) soared 14% to lead the S&P 500 advancers
after its WhiteWave Foods unit said it expects its initial public
offering of 20 million shares will be priced at between $14 and $16
a share.
Write to Jonathan Cheng at jonathan.cheng@wsj.com