u.s. stocks gain

U.S. Stocks Gain a 2nd Day as Profits Trump Inflation Concern
April 19 (Bloomberg) --

U.S. stocks gained for a second day as enthusiasm about earnings outweighed an inflation report that suggested the Federal Reserve may keep raising interest rates.

Texas Instruments Inc. and Yahoo! Inc. rallied after reporting quarterly sales that exceeded analysts' estimates. United Technologies Corp., the best performer in the Dow Jones Industrial Average, climbed after raising its profit forecast.

Stocks recovered from initial losses after the government said consumer prices, excluding food and energy, rose the most in a year. Record oil prices didn't deter the rebound. Concern about inflation abated yesterday, sparking the market's biggest gain since last April, as minutes from the Fed's latest policy meeting showed rate increases may end soon.

``Earnings have been very strong for companies across the board, so it's a nice environment for the market as long as the Fed is done with their tightening,'' said Gus Sauter, who oversees $450 billion as chief investment officer at Vanguard Group Inc. in Valley Forge, Pennsylvania.

The Standard & Poor's 500 Index added 2.28, or 0.2 percent, to 1309.93, following a 1.7 percent climb yesterday. The Dow average gained 10, or 0.1 percent, to 11,278.77.

The Nasdaq Composite Index, which gets 42 percent of its value from computer-related shares, rose 14.74, or 0.6 percent, to 2370.88 a level not seen since February 2001.

The Russell 2000 Index, a benchmark for smaller companies, added 1.1 percent to 778.42. It has rallied 3.9 percent over the last two days, the biggest such rally since November 2002.

Earnings Reports

Twenty-four S&P 500 members reported quarterly results after U.S. markets closed yesterday and before they reopened today, and 14 of the shares advanced. Motorola Inc. was among the declining shares, falling the most since January after its profit margins narrowed.

Thirteen stocks rose for every six that declined on the New York Stock Exchange. Some 1.75 billion shares changed hands on the Big Board, 6.2 percent more than the three-month daily average.

Texas Instruments Inc., the world's No. 1 maker of chips for mobile phones, climbed 45 cents to $34.45. The company said first-quarter revenue increased to $3.33 billion as sales surged in China and India. Analysts in a Thomson survey expected $3.29 billion. This quarter, profit will be 38 cents to 43 cents a share, which is higher than the 36-cent analyst forecast.

Yahoo

Yahoo, owner of the most-visited U.S. Web site, gained $2.24, or 7.2 percent, to $33.54 for the third-largest advance in the S&P 500 and its biggest rally since April 2004.

Yahoo's first-quarter profit rose 16 percent to $159.9 million. Net sales, which reflect the cost to sell ads on other sites, were $1.09 billion, beating the $1.08 billion estimate of Jefferies & Co.'s Youssef Squali and easing concern Google Inc.'s growth may be crimping Yahoo's revenue. Google, the most- used Internet search engine, rallied $5.40 to $409.64.

United Technologies jumped $3.90, or 6.6 percent, to $62.80 for the top performance in the Dow average. Its first-quarter profit rose 18 percent to $768 million, or 76 cents a share. Analysts expected 73 cents a share, according to Thomson Financial, which doesn't disclose the parameters of its figures to Bloomberg News. The company also raised its 2006 profit forecast.

$72 Oil

Crude for May delivery rose to a record $72.40 a barrel in New York after the U.S. Energy Department said oil and gasoline inventories declined. It closed up 1.2 percent to $72.17.

Energy shares in the S&P 500 advanced 1.5 percent for the top gain among 10 groups in the index. Valero Energy Corp., the largest U.S. oil refiner, climbed $1.54 to $68.99.

Core consumer prices accelerated more than expected in March, led by higher gasoline costs, the Labor Department said. Prices climbed 0.3 percent, more than the 0.2 percent expected by economists and the highest since March 2005. Total consumer prices increased 0.4 percent, matching forecasts.

Minutes from the Fed meeting stated that policy makers considered the end of their rate increases ``likely to be near.'' The central bank has raised the benchmark U.S. lending rate 15 times since June 2004 to 4.75 percent.

Interest-rate futures show traders raised bets on the odds of quarter-point rate increases in May and June to 38 percent, up from 34 percent yesterday. Merrill Lynch & Co. Chief Economist David Rosenberg said he no longer expects the Fed to start reducing rates in the second half of this year.

``What we're seeing today is a greater divergence of opinion as to whether inflation is going to represent a problem or not,'' said Mark Jordahl, who oversees $55 billion as chief investment officer at First American Funds in Minneapolis. ``The Fed is a very, very big deal'' for the market, he said.

The yield on the 10-year U.S. Treasury note rose more than 4 basis points, or 0.04 percentage point, to 5.02 percent, according to Cantor Fitzgerald LP. The yield touched a four-year high of 5.05 percent last week.

Motorola Falls

Motorola slid $1.59, or 6.6 percent, to $22.49 for the third-biggest decline in the S&P 500. The world's No. 2 mobile- telephone maker reported that profit margins shrank to 8.9 percent, the narrowest in two years, from 10.5 percent as the company sold more cheap phones in China.

Amgen Inc. lost $2.67 to $68.30. The world's No. 1 bio- technology company said first-quarter sales were $3.22 billion, less than the analyst estimate of $3.34 billion in a survey by Thomson. The company's Enbrel drug, used to treat arthritis and the skin disease psoriasis, faced more competition.

Coca-Cola

Coca-Cola Co., the world's largest soft-drink maker, added 39 cents to $41.69. The company said first-quarter profit rose 10 percent to $1.11 billion, bolstered by gains in Asia and Latin America. Sales were unchanged at $5.23 billion. Excluding one-time items, earnings were 49 cents a share, 1 cent higher than the average analyst estimate in a Thomson survey.

International Business Machines Corp. lost $1.45 to $81.86 even after the No. 1 computer-services provider said profit last quarter rose 22 percent to $1.71 billion, or $1.08 a share, as it cut jobs and emerging-market sales rose. Analysts expected earnings of $1.05 a share, according to Thomson.

JPMorgan Chase & Co., the No. 3 U.S. bank, added 2 cents to $42.62. First-quarter profit rose to a record $3.08 billion, or 86 cents a share, buoyed by the highest investment-banking fees since 2000 and lower credit-card defaults. Analysts expected 84 cents in earnings in a Thomson survey.

Spiders, QQQQs

S&P 500 shares, called Spiders, rose 25 cents to $130.95. Nasdaq-100 tracking shares, known by their QQQQ symbol, gained 19 cents to $42.65.

S&P 500 futures expiring in June climbed 1.80 to 1315.30 on the Chicago Mercantile Exchange. Nasdaq-100 Index futures advanced 4.75 to 1744.50.

The Dow Jones Wilshire 5000 Total Market Index, the broadest measure of U.S. shares, rose 0.4 percent to 13,278.62. Based on the changes in the Wilshire, the value of stocks increased by $59 billion.