Stocks rebound as Google jumps while Ukraine concerns ease

NEW YORK – U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding from its biggest drop since April, as Google Inc. advanced and concerns eased over crises in the Ukraine and Middle East.

Google jumped 3.4 percent as second-quarter revenue exceeded analysts’ projections as the company sold more advertising alongside Web-search results. International Business Machines Corp. fell 0.3 percent after revenue dropped for a ninth straight quarter. Advanced Micro Devices Inc. tumbled 18 percent as it forecast sales below estimates.

The S&P 500 gained 0.9 percent to 1,974.68 at 12:34 p.m. in New York, erasing most of Thursday’s decline and sending it toward a gain of 0.4 percent for the week. The Dow Jones Industrial Average climbed 106.95 points, or 0.6 percent, to 17,083.76. Trading in S&P 500 companies was 16 percent above the 30-day average for this time of day.

“I think when all these things hit the headlines, there’s a knee-jerk reaction,” Jim Paulsen, who helps oversee $357 billion in assets as chief investment strategist at San Francisco-based Wells Capital Management Inc., said in a phone interview. “Traders reacted yesterday and it’s bringing in investors today. Maybe they’re thinking of buying and all of a sudden stocks got a lot cheaper.”

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The S&P 500 fell 1.2 percent on Thursday on rising concern over tension in Ukraine and the Middle East. The benchmark gauge ended a string of 62 straight days without a gain or decline of more than 1 percent.

Jet crash

A Malaysian Airlines jet went down over eastern Ukraine, killing all 298 people on board, just a day after the U.S. and the European Union imposed further sanctions on Russia over the conflict. Russia and Ukraine blamed each other for the downing of the jet as moves to investigate the crash got under way. President Barack Obama said the violence in Ukraine is facilitated by Russia’s support for separatists and called for an immediate cease-fire.

Stocks extended losses late Thursday after Israel began a ground operation in the Gaza Strip.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, rallied 32 percent on Thursday, the most since April 2013, closing at 14.54, a three-month high. The VIX dropped 17 percent on Friday to 12.06.

Equities have rallied this year 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. The S&P 500 closed at a record on July 3 while the Dow reached an all-time high on July 16.

Economic data

The index of U.S. leading indicators rose in June for the fifth straight month, showing the economy continues to gain momentum following a slowdown at the start of 2014. A gauge of consumer sentiment declined this month. The Thomson Reuters/University of Michigan preliminary July index of sentiment decreased to 81.3 from 82.5 the prior month.

More than 140 companies are scheduled to report earnings next week, including Netflix Inc., McDonald’s Corp., Boeing Co., Apple Inc. and Microsoft Corp.

About 77 percent of the 82 companies in the S&P 500 that have posted results this earnings season beat analysts’ profit projections, and 70 percent exceeded sales estimates, data compiled by Bloomberg show. Profit by the gauge’s members increased 4.5 percent in the second quarter, and revenue rose 3.1 percent, according to analysts’ estimates compiled by Bloomberg.

Low expectations

“We had a bit of a low expectation going into the second quarter, given the first quarter,” Jim Russell, who helps oversee $120 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati, said by phone. “We do feel the second quarter finished much stronger than it began. We think the economic drumbeat is growing louder and more constructive for the markets moving forward.”

Google rose 3.4 percent on Friday. CEO Larry Page is adding new features in mobile, video and Web services to boost user traffic and attract marketers as he seeks to bolster Google’s main ad business. The number of clicks on ads on YouTube, search and other Google sites increased 33 percent in the latest quarter, making up for a decline in ad prices.

All 10 main industries in the S&P 500 advanced. Health care, financial and technology stocks climbed more than 1 percent for the best performances.

GE, IBM

General Electric Co. slipped 1 percent as it reported profits that matched estimates. The company said it will hold an initial public offering for the Synchrony Financial unit, its Capital’s North American consumer operations, this month.

IBM lost 0.3 percent. The maker of personal computers said second-quarter sales fell 2 percent as demand declined for hardware and computer services, underscoring the urgency of its plan to get more revenue from newer businesses like cloud computing.

AMD tumbled 18 percent, the biggest drop since 2008. The third-quarter sales projection may indicate the chipmaker isn’t benefiting from a rebound in corporate spending on computers that has buoyed other companies in the personal-computer industry.

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