Dow, S&P rise on earnings, Apple jumps late

  
Traders work on the floor of the New York Stock Exchange, April 23, 2012.
Credit: Reuters/Brendan McDermid
By Caroline Valetkevitch
NEW YORK | Tue Apr 24, 2012 5:07pm EDT
NEW YORK (Reuters) - The Dow and the S&P 500 rose on Tuesday after strong earnings and upbeat outlooks from big manufacturers like 3M Co (MMM.N), but Apple's slide ahead of its results drove the Nasdaq down.
Shares of Apple Inc (AAPL.O), however, reversed course after the bell when the iPad maker reported quarterly revenue that handily beat Wall Street's estimates. Apple's stock jumped 6.9 percent to $599 in extended trading after closing at $560.28, down 2 percent.
The stock of the world's most valuable company has fallen in recent weeks after its huge run higher. At the close on Tuesday, Apple's stock was up 38 percent for the year - in contrast with earlier this month, when it was up nearly 60 percent for the year to date.
During the regular session, 3M reported an increase in quarterly profit and slightly lifted its full-year outlook, helping the Dow, along with AT&T Inc (T.N).
The earnings season so far has been stronger than analysts expected. With results in from 153 S&P 500 companies, more than three-fourths have topped analysts' estimates, according to Thomson Reuters Proprietary Research.
"U.S. corporate earnings are actually coming in pretty strong," said Natalie Trunow, chief investment officer of equities at Calvert Investment Management in Bethesda, Maryland, whose firm manages about $13 billion in assets.
"Negatives are being paid attention to more at the moment than the positives, but the positive earnings reports are providing some support here."
The Dow Jones industrial average .DJI gained 74.39 points, or 0.58 percent, to close at 13,001.56. The Standard & Poor's 500 Index .SPX rose 5.03 points, or 0.37 percent, to 1,371.97. But the Nasdaq Composite Index .IXIC slipped 8.85 points, or 0.30 percent, to 2,961.60.
Adding to weakness in tech, Netflix Inc (NFLX.O) shares sank 13.9 percent to $87.68, a day after it forecast slower subscriber growth this quarter.
Texas Instruments Inc (TXN.O) forecast second-quarter revenue growth above estimates, signaling the end of a prolonged inventory-related decline in demand, but the results weren't enough to counter the broader weakness in tech. Its stock slid 1.7 percent to $31.36.
Many analysts have cautioned that a correction is near, given the stock market's sharp rally since October. The S&P 500 is up 9.1 percent so far for the year.
"When you see the big spread between the Dow and the Nasdaq, you know that there's a bit of a flight to safety there, so people are leaving the over-the-counter stocks and buying the higher quality securities. So New York didn't look as strong as it might have appeared," said Douglas Davis, chief executive officer of Davis-Rea in Toronto.
But the S&P 500 should hold near-term support at 1,340 in the current retreat before rallying again, according to Brown Brothers Harriman analysts. The index held at 1,340 during a pullback in early March, which coincides with a 23.6 percent retracement of the rally from October.
AT&T advanced 3.6 percent to $31.72, while 3M gained 1.6 percent to $88.49. Shares of United Technologies (UTX.N), which also reported results that beat forecasts, edged up 0.1 percent to close at $79.85.
Economic data took a backseat to earnings news.
U.S. single-family home prices rose for the first time in 10 months in an encouraging sign the battered sector was starting to stabilize, according to the latest S&P/Case-Shiller report.
Separately, the government said single-family home sales sagged to their lowest level in four months, but sales in the previous three months were revised higher than initially thought. U.S. consumer confidence edged slightly lower in April, according to a report from the Conference Board, a private research group.
About 6.2 billion shares changed hands on the New York Stock Exchange, the Nasdaq and NYSE Amex, below the 6.8 billion average daily volume so far this year.
Almost two issues rose for every one that fell on the NYSE. And despite the Nasdaq's decline, advancers also outpaced decliners by a ratio of about 2 to 1.
(Additional reporting by Claire Sibonney; Editing by Jan Paschal)

Apple crushes Street targets, dispels iPhone fears

The company's logo is seen on the Apple store in Washington October 6, 2011.
Credit: Reuters/Yuri Gripas
By Poornima Gupta
SAN FRANCISCO | Tue Apr 24, 2012 7:27pm EDT
SAN FRANCISCO (Reuters) - Apple Inc's quarterly results beat Wall Street estimates on stronger-than-expected demand for the iPhone, especially in the greater China region where sales jumped five-fold.
While iPad sales were a little lighter than expected, the overall results sent the stock up 7 percent, recouping some losses from the past two weeks that had stemmed from concerns about weakening sales growth for iPhones.
Apple sold 35.1 million iPhones - which accounts for about half its revenue - in the March quarter, outpacing the 30 million or so expected by Wall Street analysts.
Margins blew past forecasts - helped by lower-than-expected commodity costs - while a five-fold iPhone sales surge in China, Taiwan and Hong Kong bolstered revenue in the region to $7.9 billion.
Some investors had feared intensifying competition from Google Inc's Android phones - made by the likes of Motorola Mobility and Samsung Electronics - might pressure margins and eat into its market share.
"That shows they are able to maintain their pricing without compromising on growth," said Morningstar analyst Michael Holt.
"There are lower-priced alternatives from the Android world that are becoming more compelling. The concern was that Apple might sell more older models to be more competitive. That would have shown up in the gross margin. But aggregate gross margin and average revenue per device show that this hasn't happened."
Apple sold 11.8 million iPads, the latest version of which hit store shelves in mid-March. That compared with the average forecast of up to 13 million.
"There's no doubt looking in the last quarter and the Christmas season, Apple has executed very well. But you are starting to see the iPad ... reach some sort of saturation with the current product," said Patrick Becker, a principal at Becker Capital Management, which does not own Apple shares.
"These are the transitions you start to have without coming out with a brand new device. They have been extremely successful at bringing out new categories and it is new products that will drive up the stock price."
RETURN TO FORM?
But it was Apple's flagship iPhone, which has helped revolutionize the smartphone industry, that hogged the spotlight on Tuesday.
"International iPhone sales were on fire," Apple Chief Financial Officer Peter Oppenheimer told Reuters in an interview, adding that sales of the smartphone in the Greater China region jumped five-fold from the previous year.
Responding to concerns that wireless carriers may reduce subsidies for the iPhone, thereby lowering Apple's profit margin, Chief Executive Tim Cook said the subsidies aren't large anyway, compared with what carriers can recoup from consumers over a 24-month contract period.
The so-called churn, or rate that customers switch from the iPhone to other models, is the lowest of any phone they sell, which has a "significant, direct financial benefit to the carrier," Cook added.
As for patent litigation battles with rivals, Cook said he preferred to settle if Apple could get a fair settlement. The company is fighting court battles with several Android phone makers, including Samsung, HTC Corp and Motorola in the United States and other countries.
Apple's strong results came after a 13 percent decline in its shares - long considered a must-have in most U.S. equity portfolios - over the past couple of weeks in unusually volatile trading, as investors fretted over potential competitive and pricing pressures.
Gross margins in the fiscal second quarter climbed to 47.4 percent from 41.4 percent a year earlier, surpassing Wall Street's average forecast of 42.8 percent.
The consumer electronics giant said its fiscal second-quarter revenue rose 59 percent to $39.2 billion, better than the average analyst estimate of $36.8 billion, according to Thomson Reuters I/B/E/S.
Net income rose to $11.6 billion, or $12.30 a share, from $6 billion, or $6.40 per share, a year earlier. That also outpaced Wall Street's target of $10.04 a share.
Apple's stock gained more than 7 percent to $601, from a close of $560.28 on Nasdaq. That is still far below its intraday high of $644 reached this month.
"When you have a strong rally in a stock it often sells off for no better reason than uncertainty. I think you're going to see the naysayers go away," said Michael Yoshikami, chief executive of Destination Wealth Management.
(Additional reporting by Liana Baker, Noel Randewich and Alistair Barr; Editing by Edwin Chan and Richard Chang)