U.S. Stocks Gain on Earnings

U.S. Stocks Gain on Earnings; Texas Instruments, Travelers Rise

Jan. 27 (Bloomberg) -- U.S. stocks gained for a third day as companies from Texas Instruments Inc. to Travelers Cos. and Netflix Inc. posted better-than-estimated earnings, overshadowing declines in consumer confidence and home prices.

Texas Instruments and Travelers added more than 3.4 percent, while Netflix rallied 15 percent. American Express Co., the biggest U.S. credit-card company by purchases, gained 7 percent after profit topped the most pessimistic estimates. Benchmark indexes pared an early rally after the Conference Board’s confidence index unexpectedly slid to a record low, while the S&P/Case-Shiller index of home prices in 20 U.S. cities plunged 18.2 percent in November.

The Standard & Poor’s 500 Index rose 1.1 percent to 845.93 as of 11:18 a.m. in New York. The Dow Jones Industrial Average added 57.59 points, or 0.7 percent, to 8,173.62. The Russell 2000 Index increased 1.1 percent.

“Earnings are not coming in good, but they are not as horrible as people had been expecting,” said Doug Sandler, chief equity officer at Riverfront Investment Group LLC, which manages $370 million, in Richmond, Virginia. “When you don’t have complete Armageddon with earnings, the days start looking a little better.”

The S&P 500, which has dropped for three straight weeks, is still 12 percent above an 11-year low reached on Nov. 20 amid optimism that President Barack Obama’s stimulus package will revive the economy.

The MSCI Asia Pacific Index rallied 3.6 percent. European stocks declined, led by raw-material producers as metals prices dropped. Europe’s benchmark Dow Jones Stoxx 600 Index fell 0.6 percent.

Earnings Watch

Texas Instruments rose 53 cents to $15.30. The second- largest U.S. chipmaker said fourth-quarter net income fell to $107 million, or 8 cents a share. Excluding reorganization costs, earnings were 21 cents a share, topping the average estimate of 12 cents in a Bloomberg survey of analysts. The company announced plans to cut headcount by 12 percent.

Travelers, the second-biggest U.S. commercial insurer, climbed $2.46 to $40.04. Fourth-quarter operating income of $1.58 a share, beating the $1.46 average estimate of 15 analysts surveyed by Bloomberg. Net income fell 25 percent to $801 million, or $1.35 a share.

American Express, Netflix

American Express gained 84 cents to $16.04 after saying it sold $6.2 billion in certificates of deposit in the fourth quarter and profit beat the most pessimistic forecasts.

Netflix Inc. jumped $4.40 to $34.55. The largest U.S. mail- order movie service’s fourth-quarter earnings and sales topped estimates and it forecast more 2009 revenue than analysts estimated and announced a plan to buy back as much as $175 million in stock.

Amgen Inc. slipped 2.2 percent to $53.19. The world’s largest biotechnology company reported fourth-quarter sales of its core products to treat anemia that were lower than analysts expected.

Profits decreased 42 percent for the 115 companies in the S&P 500 that have released fourth-quarter results since Jan. 12. Analysts now forecast a 32 percent drop in earnings for the fourth quarter after saying in March 2008 that net income would rise as much as 55 percent, according to Bloomberg data.

Federal Reserve officials are considering an overhaul of their economic forecasting, aiming to make clear their objectives for growth and inflation in the aftermath of the recession. Members of the Fed’s Open Market Committee, who start a two day meeting today, may need to extend their predictions beyond the current three-year period in favor of a longer horizon that would be of more help to investors, officials and Fed-watchers said.

Pressure for a new anchor for policy is building after the Fed cut its benchmark interest rate to as low as zero percent last month, removing the traditional target.