U.S. stocks rise on inflation, home data amid corporate earnings

U.S. stocks rose, with benchmark gauges rebounding from yesterday's slide, as data showed inflation has failed to gain a toehold and investors assessed earnings from Travelers Cos. to Comcast Corp.

Chipotle Mexican Grill Inc. jumped 12 percent after reporting earnings and sales that beat projections. Comcast added 1.8 percent after profit topped estimates on higher revenue from Internet customers. McDonald's Corp. fell 2.4 percent after profit fell short of analysts' estimates. Travelers dropped 4.3 percent as earnings slid 26 percent.

The S&P 500 rose 0.5 percent to 1,982.82 at 10:02 a.m. in New York. The Dow Jones Industrial Average increased 55.06 points, or 0.3 percent, to 17,106.79. Trading in S&P 500 stocks was 7.1 percent above the 30-day average at this time of day.

"The equity market seems destined to trend higher," Terry Sandven, chief equity strategist at Minneapolis-based U.S. Bank Wealth Management, which oversees $120 billion, said by phone. "We think there is still some modest upside if you continue to see earnings rise. The inflation numbers are supportive of higher stock prices. It reflects U.S. economic growth that is neither too slow nor too fast."

The S&P 500 advanced almost 6.8 percent this year through yesterday amid better-than-estimated corporate earnings and central bank stimulus, as the U.S. economy shows signs of recovering from a 2.9 percent contraction in the first quarter.

Data today showed the consumer price index increased 0.3 percent in June, paced by a jump in gasoline that is now reversing, bolstering Federal Reserve Chair Janet Yellen's view that recent increases were temporary.

Inflation Data

Investors have been scrutinizing inflation data to determine when the Fed will begin raising its benchmark interest rate. Last week Yellen told lawmakers the central bank plans to press on with record easing to combat persistent weakness in the job market.

Inflation has failed to get a toehold as slowing global demand has prevented companies from exercising pricing power. If prices remain in check, Fed policy makers can keep interest rates low well into 2015.

A separate report showed sales of previously owned U.S. homes climbed in June to an eight-month high, a sign the housing market is making more headway.

The S&P 500 fell 0.2 percent yesterday on concern that the crisis in Ukraine could lead to deeper sanctions against Russia. European Union governments labored to identify more Russian businesspeople and companies to sanction and pressed President Vladimir Putin to speed a probe into the downing of Malaysian Air flight MH17 or face isolation.

Day-By-Day

"It's a day-by-day encounter for markets, with every speech and communication from politicians giving us the direction for the day," Lorne Baring, who helps oversee about $500 million as managing director at B Capital SA in Geneva, said by telephone, referring to Russia.

The S&P 500 closed at a record 1,985.44 on July 3 and trades at 18.3 times reported earnings, near the highest level in four years. The index has not had a drop of more than 10 percent since 2011.

Earnings at the gauge's members probably rose 6.2 percent in the second quarter, while sales gained 3.3 percent, according to analyst estimates compiled by Bloomberg.

Some 36 companies listed on the S&P 500 report earnings today, including Coca-Cola Co., McDonald's, Microsoft Inc. and Apple Inc. About 77 percent of S&P 500 companies that have posted results this season have beaten analysts' estimates for profit, while 71 percent exceeded sales projections, according to data compiled by Bloomberg.

Corporate Earnings

Eight of the 10 main S&P 500 groups advanced today, as energy producers gained 0.9 percent to pace gains. Producers of consumer staples slid 0.4 percent for the biggest decline.

Chipotle jumped 12 percent to $659.80. The restaurant chain said second-quarter net income rose 25 percent and revenue jumped to $1.05 billion, buoyed by an increase in traffic at existing outlets and by sales in new stores.

Comcast rose 1.8 percent to $54.77. The largest cable company in the U.S. said second-quarter revenue increased 3.5 percent to 16.8 billion, while analysts estimated almost $17 billion. The company is in the process of buying Time Warner Cable Inc.

DuPont Co. slid 1 percent to $64.89. The U.S. chemicals producer posted lower-than-estimated revenue after some farmers switched to genetically modified soybeans from corn.

Travelers declined 4.3 percent to $91.18. The only property-casualty insurer in the Dow average said second-quarter profit missed estimates on catastrophe costs.

Coca-Cola dropped 3 percent to $41.15. The world's largest beverage company, reported second-quarter sales that missed analysts' estimates amid sluggish demand for drinks such as juice and Diet Coke in North America.

McDonald's fell 2.4 percent to $95.24. The largest restaurant chain by sales posted second-quarter profit that trailed analysts' estimates after a U.S. slump lingered. The company's business faces a crowded field and last year it added many new items, slowing down its kitchens.

Harley-Davidson Inc. dropped 4.8 percent to $63.85 after lowering its forecast for new motorcycle shipments in 2014 to no more than 275,000, after previously predicting at least 279,000.

To contact the reporters on this story: Inyoung Hwang in London at ihwang7bloomberg.net; Oliver Renick in New York at orenick2bloomberg.net To contact the editors responsible for this story: Cecile Vannucci at cvannucci1bloomberg.net; Lynn Thomasson at lthomassonbloomberg.net Jeremy Herron