Business Blog Posts

Investors have flocked back to risky assets due to strong U.S. corporate earnings and signs the global economy is chugging along even as the U.S. Federal Reserve stays very cautious about when it will start to unwind its super-loose policy.

Dim prospects of the Fed raising interest rates anytime soon pushed the dollar index .DXY to its lowest level since August 2008 and charts suggesting that the greenback could move toward an all-time low of 70.698 hit earlier that year.

Asian stocks rose to their highest level since January 2008, extending their rebound from a brief tumble earlier in the week. The MSCI Asia ex-Japan .MIAPJ0000PUS rose 1.1 percent with technology stocks leading gains after iPod maker Apple (AAPL.O) crushed forecasts.

Shares in Hynix Semiconductor (000660.KS), the world's No.2 memory chip maker, jumped 5.5 percent, buoyed further by a 4.3 percent spike in the U.S. Philadelphia semiconductor index .SOX. Samsung Electronics (005930.KS), the world's No.1 memory chip maker, climbed 1.2 percent.

"Risk-on mood prevailing in global markets yesterday allowed investors to focus on fundamental strengths of emerging economies, boosting prices of their equities," said Dariusz Kowalczyk, analyst at Credit Agricole in Hong Kong, in a note.

Japan's Nikkei .N225 rose a more modest 0.6 percent.

"The market is looking for clues about the damage from the quake in U.S. earnings, but it's hard to draw any conclusions as both Apple and Intel have very diversified supply chains," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

S&P 500 futures were trading 0.4 percent higher.

DOLLAR ON BACKFOOT, GOLD AT RECORD

The sharply weakening U.S. dollar has suffered the most against commodity-linked currencies such as the Australian and Canadian dollars, as well as emerging markets currencies such as the Singapore dollar as authorities in Asia allow more currency strength to fight inflation.

Brazil's central bank raised its benchmark interest rate on Wednesday to 12 percent from 11.75 percent as it seeks to rein in consumer prices.

Spot gold hit a record high of $1507.15 an ounce and spot silver soared to a 31-year high while the Australian dollar powered to peaks above $1.07 -- a level not seen since the currency became free-floating in the early 1980's.

The euro pushed to 15-month peaks but has lagged the broader move due to the ongoing worries about the euro zone crisis although a solid auction of Spanish debt the previous day helped provide some reassurance.

U.S. Treasury futures were slightly lower, with the June futures on the benchmark 10-year down 4/32 in Asia.

Investors had been set up for a series of disappointments but got an unexpected treat from blue chips Intel Corp (INTC.O) and United Technologies Corp (UTX.N), sparking a broad-based rally that puts equities on the path for more gains in coming weeks.

The S&P 500 broke decidedly above its 20-day moving average, setting a near-term target at 1,340, according to its Bollinger bands chart, a technical indicator that tracks momentum and volatility.

"Until yesterday, earnings were lackluster, not too exciting, even disappointing," said Nick Kalivas, senior equity index analyst at MF Global in Chicago. He said the last round of reports "shifted the psychology quite significantly."

Shares of Intel rose 7.8 percent to $21.41 while United Tech gained 4.3 percent to $85.90.

The trend of positive earnings continued after the market's close, with Apple Inc (AAPL.O) up 2.7 percent at $351.80 after a blowout quarter that surged past expectations. Revenue for the tech giant rose 83 percent year-over-year.

F5 Networks Inc (FFIV.O), considered a momentum favorite for investors, climbed 11 percent to $110.39 after its second-quarter profit topped expectations and the company forecast third-quarter earnings largely above estimates.

Following the results, Nasdaq futures rose 0.7 percent.

On the downside, American Express Co (AXP.N) slid 1.3 percent to $46.40. While the Dow component's profit topped expectations, expenses at the credit card company rose.

During the regular session, companies adding to the positive tone included VMware Inc (VMW.N), Freeport-McMoRan Copper & Gold (FCX.N) and EMC Corp (EMC.N) -- with EMC also raising its profit view.

The Dow Jones industrial average .DJI gained 186.79 points, or 1.52 percent, to 12,453.54. The Standard & Poor's 500 .SPX rose 17.74 points, or 1.35 percent, to 1,330.36. The Nasdaq Composite .IXIC added 57.54 points, or 2.10 percent, to 2,802.51.

The Nasdaq posted its largest daily percentage gain since October while the Dow hit its highest close since early June 2008. The broad S&P 500 had its best performance in a month.

The PHLX Semiconductor index .SOX jumped 4.3 percent, the largest percentage gain since early July.

About 7.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below last year's estimated daily average of 8.47 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of nearly 5 to 1, while on the Nasdaq, about 10 stocks rose for every three that fell.

Sales of previously owned U.S. homes rose more than expected in March, a trade group said on Wednesday, suggesting the housing market's downward trend may be close to hitting a bottom.

The PHLX housing sector .HGX index rose 1.2 percent with home builder D.R. Horton Inc (DHI.N) up 3 percent at $12.17.

On the downside, International Business Machines Corp (IBM.N) slipped 0.4 percent to $164.75 after reporting a drop in signings of new business at its global services division during the first quarter. However, the Dow component's profit and revenue came in above analysts' projections and it raised its full-year profit view.

(Reporting by Rodrigo Campos and Ryan Vlastelica; Editing by Jan Paschal)

Apple shares rallied about 4 percent.

The world's most valuable technology corporation said a record 18.65 million units of the category-defining iPhone -- its flagship product -- moved in the March quarter, outpacing the 16 million or so expected.

It moved just 4.69 million iPads -- which command an 80 percent share of a burgeoning tablet market in which Motorola Inc and Samsung Electronics also compete -- but investors argued that would not detract from strong long-term demand.

The stellar results Wednesday came as concern is growing over how component supply constraints after Japan's earthquake and tsunami would squeeze margins and restrain iPhone and iPad sales in coming months.

Company executives said they were scrambling to meet "staggering" demand but were backlogged for now.

"Dynamite numbers across the board. The only hiccup is lower than expected iPad numbers," said Capital Advisors Growth Fund portfolio manager Channing Smith.

"We can attribute some of the weakness to stocking issues at some of the retail outlets and obviously the supply chain issue in Japan. Unfortunately, the supply chain issue will likely persist for the coming months but once we get past summer and the supply chain issues are resolved it's all systems go again for Apple."

Apple executives told analysts on a conference call they foresaw a hit to revenue this quarter of about $200 million -- less than 1 percent of projected global quarterly sales -- but expected no cost impact.

The company, known for its tight relationship with Asian suppliers, stands at the head of the queue for electronics components even if the supply crunch continues. Japan accounts for an estimated 6 percent of overall revenue.

IPAD SALES MISS TARGETS

The March quarterly report was Apple's first under the stewardship of Chief Operating Officer Tim Cook after Chief Executive Steve Jobs went on his third medical leave in January.

Cook, who is known as an operations and supply chain maven, said his boss -- who has undergone a liver transplant and survived a rare form of pancreatic cancer -- still played an active role in important decisions.

"He is still on medical leave but we do see him on a regular basis. He continues to be involved in major strategic decisions. I know he wants to be back full time as soon as he can," Cook told analysts.

Apple's iPad sales in the quarter fell well short of Wall Street's expectations: some analysts had projected shipments of closer to or even more than 6 million for the tablet computer launched on March 11.

But the lower-than-expected number could be attributed to the fact that Apple recognizes revenue from its stores when its customers receive the products. The initial wait time for the iPad 2 was four to five weeks.

"We sold every iPad 2 we could make and the demand was stunning," Apple Chief Financial Officer Peter Oppenheimer told Reuters in an interview.

Apple's results come as it prepares to build the next iPhone model with a faster processor, which will begin shipping in September, three people with direct knowledge of the company's supply chain said Wednesday.

It reported a net profit of $5.99 billion, or $6.40 a share, while revenue surged 83 percent to $24.67 billion. That surpassed expectations for $5.37 in earnings and $23.4 billion of revenue.

A large spike in sales of Mac computers, driven by the refreshed MacBook Pro, beefed up March-quarter earnings. Apple said it sold 3.76 million Macs, up 28 percent from a year ago.

It also sold 18.65 million of the high-margin iPhones, which is the technology company's most important product line.

Gross margins in the fiscal second quarter came to 41.4 percent, above Wall Street's average forecast of 39.03 percent.

Apple, which generally provides an ultra-conservative forecast, said it expected June quarter earnings of $5.03 a share on revenue of about $23 billion.

"IPad shipments were significantly lower than my estimates I think because of supply constraints," said Gabelli & Co analyst Hendi Susanto. "What impressed me was the gross margin."

Shares of Apple jumped 4 percent to $355.79 after hours, from a regular session close of $342.41. They had fallen about 3 percent since Japan's quake.

(Additional reporting by Jennifer Saba and Yinka Adegoke in New York, writing by Edwin Chan; Editing by Edwin Chan and Richard Chang)

Leading the broad rally were Intel Corp (INTC.O), the most actively traded stock on the Nasdaq, and United Technologies Corp (UTX.N), Dow components that gave strong outlooks. Chipmaker Intel forecast second-quarter sales well above analyst expectations while United Tech raised its full-year profit view.

Shares of Intel rose 6.5 percent to $21.14 and was the biggest percentage gainer on the Dow, followed by United Tech, up 4.3 percent to $85.94.

The Semiconductor Holders ETF (SMH.P) rose 3.8 percent while the PHLX Semiconductor index .SOX jumped 3.4 percent, the largest percentage move in seven months.

"It isn't just the good reports, but also the encouraging comments about how things look for the remainder of the year," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.

"This is a testament to the strength of earnings we can expect to come out from here, and a marked contrast to what we've seen so far of results that weren't so disproportionately good," added Luschini, who helps oversee $53 billion and owns Intel.

Apple Inc (AAPL.O) is scheduled to report after the market's close. Its stock rose 2.1 percent to $344.93. The tech company is expected to post stronger profit and revenue.

About 78 percent of companies traded on the New York Stock Exchange were in positive territory while 70 percent of the Nasdaq rose. The S&P information technology group .GSPT led the index, rising 2.2 percent.

The Dow Jones industrial average .DJI was up 173.47 points, or 1.41 percent, at 12,440.22. The Standard & Poor's 500 Index .SPX was up 15.90 points, or 1.21 percent, at 1,328.52. The Nasdaq Composite Index .IXIC was up 49.91 points, or 1.82 percent, at 2,794.88.

Sales of previously owned U.S. homes rose more than expected in March, a trade group said on Wednesday, suggesting the housing market's downward trend may be close to hitting a bottom.

"This is obviously an encouraging number, and it suggests that we're beginning to see the sputtering of the uptrend in the housing cycle," said Richard Bernstein, chief executive officer of Richard Bernstein Capital Management in New York.

The PHLX housing sector .HGX index rose 1 percent. Homebuilder D.R. Horton Inc (DHI.N) added 2 percent to $12.05.

Among companies adding to the positive tone were Yahoo Inc (YHOO.O), VMware Inc (VMW.N), Freeport-McMoRan Copper & Gold (FCX.N) and EMC Corp (EMC.N), which also raised its profit view.

On the downside, International Business Machines Corp (IBM.N) slipped 0.4 percent to $164.76 after reporting a drop in signings of new business at its global services division during the first quarter. However, the Dow component's profit and revenue came in above analysts' projections and it raised its full-year profit view.

Textron Inc (TXT.N) reported a first-quarter profit that missed expectations and the stock fell 2.5 percent to $25.13.

(Editing by Kenneth Barry)