US: Stocks shrug off mixed earnings and data, Nasdaq tops record

[NEW YORK] The Nasdaq Composite climbed to the highest level in 15 years, topping its dot-com-era high, as US stocks shrugged off mixed earnings and disappointing manufacturing data from across the globe. Oil rose to a four-month high.

The Nasdaq Composite climbed 0.4 per cent at 4 pM in New York, to close at a record for the first time in 15 years. The Standard & Poor's 500 Index climbed 0.2 per cent, briefly passing its March 2 closing high. The Stoxx Europe 600 Index dropped 0.4 per cent. The euro rose on speculation that Greece and its creditors will reach a deal to receive aid payments. Oil jumped 2.8 per cent to settle at $57.74 in New York.

Gains Thursday in Microsoft Inc and EBay Inc pushed the Nasdaq past its record, while the S&P 500 climbed to an intraday high as earnings from large companies surpassed estimates even as the strong dollar weighed on overseas sales. Slower expansion in euro-area manufacturing and a decline in Chinese factory data signalled Asian stimulus measures and European Central Bank bond purchases have yet to take hold.

"The Nasdaq is seeing strength because a lot of these technology companies are doing better," Randy Warren, who manages more than US$100 million at Exton, Pennsylvania-based Warren Financial Service & Associates Inc, said by phone. "Sentiment seems to be really positive. The market seems to be giving Fortune 500 companies a free pass, assuming that the first quarter was bad but we're going to have an acceleration. If we get that, all is well and everyone is happy."

Almost two months after surpassing 5,000 on March 2 for the first time in 15 years, the gauge finally exceeded the 5,048.62, a level that was reached on March 10, 2000, and stood for a decade and a half as the dot-com era's high-water mark. Even with today's advance, the Nasdaq remains below its intraday high of 5,132.52 and the second-highest intraday level, 5,078.86, both reached in March 15 years ago.

While the advance has brought the Nasdaq to new highs, valuations are only slightly elevated from the five-year average. The Nasdaq Composite trades at 30 times earnings, versus an average of 27.8 during the past five years. The gauge had a multiple of 190 in March 2000.

Among the biggest companies tracked by the Nasdaq 100 Index, the top 10 best performers since 2013, including Netflix Inc and Facebook Inc, are valued at an average 66 times profit. The Nasdaq 100 rose 0.4 per cent Thursday, yet remains almost 5 per cent below its March 27, 2000 record.

"It's been 15 years, so it's not your father's Nasdaq anymore," John Manley, who helps oversee about $233 billion as chief equity strategist for Wells Fargo Funds Management in New York, said by telephone. "It's not nearly as expensive as it was back then."

The Composite's record fell on a day that provided a mixed picture for investors looking to earnings for clues on the strength of corporate America. Of the S&P 500 members that have released results this earnings season, 76 per cent beat profit projections, while just 50 per cent topped sales estimates.

Microsoft reported results that trumped estimates as cloud revenue soared, sending its shares higher by 3.2 per cent in late trading. Google Inc, Amazon.com Inc and Starbucks Corp rose at least 3.4 per cent as of 4:55 pm in New York after disclosing financial results.

Facebook Inc slid 2.6 per cent in the regular session after missing revenue estimates for the first time since 2012. Caterpillar Inc gained 0.1 per cent as its 2015 forecast topped analysts' estimates. Freeport-McMoRan Inc. slid 2.4 per cent after reporting its first loss since the global financial crisis. 3M Co., the maker of Post-it notes and Scotch tape, fell 3 per cent after earnings trailed projections. EBay jumped 3.8 per cent after saying profit growth was recovering amid cost cuts.

"Underlying revenues remain disappointing as they're not helped by the ever stronger US dollar," said Lex Van Dam, a fund manager at Hampstead Capital LLP in London. "The rest of the world is doing its best to provide liquidity but consumer demand remains disappointing. The stock market is reflecting a lack of investment alternatives as opposed to a booming economy."

Data showed purchases of new US homes slumped more than forecast in March from a seven-year high, a sign progress in the industry will be halting. Applications for unemployment benefits held below 300,000 for the seventh straight week, pointing to a rebound in payrolls after hiring eased last month.

PulteGroup Inc sank 7.9 per cent to lead an S&P index of homebuilders lower by 4.3 per cent, the most since January. The third-largest US homebuilder slid the most in almost two years after reporting profit that missed analyst estimates.

Treasuries halted a three-day decline as signs economic growth is slowing in China and Europe boosted demand for the safest assets. The benchmark US 10-year yield fell two basis points to 1.95 per cent.

A Purchasing Managers Index for manufacturing and services in the euro area fell to 53.5 from 54 in March, London-based Markit Economics said Thursday. While the reading remains well above the 50-point mark that divides expansion from contraction, it is below the 54.4 forecast by economists in a Bloomberg survey.

"This serves as a gentle reminder that although Draghi is pumping money into the economy, it will take a bit of time to feed through," said Ben Kumar, who helps oversee about US$12 billion at Seven Investment Management in London. "Earnings expectations had gone a bit far - consumers have not had enough time to feel the recovery and drive corporate profits."

Germany's DAX Index and France's CAC 40 Index slid more than 0.6 per cent as similar data from those countries also disappointed. They were some of the biggest decliners among western-European markets on Thursday.

A gauge of technology stocks fell the most among 19 industry groups, with Ericsson sliding 10 per cent after reporting worse-than-forecast profitability. The index had closed at its highest level since 2002 on Wednesday.

China Data Developing-market stocks rose for a third day as Taiwan's shares surged the most since 2013 amid speculation officials will broaden access to China's capital markets. The MSCI Emerging Markets Index advanced 0.8 per cent, as the Taiex Index rallied 1.9 per cent.

The Hang Seng China Enterprises Index, a gauge of mainland shares listed in Hong Kong, fell 1.3 per cent while the Shanghai Composite Index closed 0.4 per cent higher.

China's so-called flash purchasing managers index from HSBC Holdings Plc and Markit Economics dropped to 49.2 for April, the lowest since April last year, underscoring a slowdown that prompted China's central bank to cut banks' reserve requirements by the most since 2008.

Economists had predicted the manufacturing purchasing managers' index would come in at 49.6 for April, matching March's reading. Levels below 50 signal contraction.

"The fundamental economy is not improving" in China, said Helen Lau, a metals and mining analyst at Argonaut Securities Ltd in Hong Kong. "It is a little worrying. We're close to the bottom. Before that happens, the government should continue with stimulus until there is a rebound."

Brazil's real ended a two-day gain after the country's state-run oil producer Petroleo Brasileiro SA said a corruption scandal cost US$2.1 billion.

Aluminum fell as much as 1.7 per cent, the most in two months, on concern more exports from China of products made from the metal will exacerbate a global glut.

Crude climbed to a four-month high in New York after Saudi Arabia renewed its aerial assault on Shiite rebels in Yemen, bolstering concerns that Middle Eastern oil shipments may be disrupted.

BLOOMBERG