Stocks gain on earnings; fake tweet rattles market

Stocks gain on earnings; fake tweet rattles market

Caption
(AP file)
In this Tuesday, April 16, 2013, photo, Glenn Kessler, right, works on the floor of the New York Stock Exchange.

NEW YORK – Companies that do well when the economy is improving led the market higher Tuesday after several of them notched strong earnings.

Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet, were big winners after reporting profits that impressed investors.

Financial stocks rose after Travelers’ earnings beat analysts’ expectations.

That’s a change from earlier this year. The stock market’s surge in 2013 has been led by so-called defensive industries such as health care, consumer staples and utilities.

Investors buy those stocks when they want reliable earnings and regular dividends. Until now, they have been unsure about the strength of the economic recovery and been less enthusiastic about stocks whose fortunes are more closely tied to swings in the U.S. economy.

The markets closed higher even after stocks and other markets were shaken in the early afternoon when a fake tweet on the AP’s Twitter account prompted a sudden sell-off.

A posting saying that there had been explosions at the White House and that President Barack Obama had been injured was sent at 1:08 p.m. The Dow immediately plunged about 143 points, from 14,697 to 14,554. The AP said its Twitter account had been hacked and the posting was fake.

Within five minutes the Dow had snapped back.

AP spokesman Paul Colford said the news cooperative is working with Twitter to investigate the issue. The AP has disabled its other Twitter accounts following the attack, Colford added.

Joe Fox, chairman and co-founder of online brokerage Ditto Trade, was at work in L.A. when he got a call from the Chicago brokerage offices telling him what had happened. Fox watched the market tanking, and its quick bounce back.

“It was a tipsy-turvy rollercoaster for a few minutes there,” Fox said.

Fox said the news didn’t sound right to him when he first heard it. He thinks that traders are being more cautious in the wake of the 2010 “flash crash,” which sent the Dow spiraling 600 points in a matter of minutes.

After the brief sell-off investors turned their focus back to earnings.

A resurgence in corporate profits after the Great Recession has been one of the drivers that pushed the Dow up 12 percent and the S&P 500 up 11 percent this year. However investors remain unsure how much further earnings can improve without the outlook for growth in the global economy improving as well.

Tuesday’s upturn in stocks put both indexes back in the black for April and closer to the record high closes they reached on April 11. It was a sharp change of tone from last week, when the market had its worst drop since November. That sell-off started after economic growth in China, the world’s second-largest economy, slowed.

So far, 69 percent of the companies that have reported earnings for the first quarter have beaten analysts’ expectations, better than the 10-year average of 62 percent, according to data from S&P Capital IQ.

Analysts expect earnings to rise by 2.3 percent in the first quarter, slower than the 7.7 percent growth in the previous three-month period.

Netflix soared $42.62, or 24 percent, to $216.99 after reporting a big gain in subscribers. Coach, which makes Luxury handbags and other accessories, soared $4.96, or 11 percent, to $55.55. Travelers rose $1.77, or 2.1 percent, to $86.35.

The Dow closed up 152.29 points at 14,719.46. The S&P 500 ended 16.28 points higher at 1,578.78. Both indexes are about 1 percent below their record high closes from nearly two weeks ago.

The Nasdaq composite rose 35.78 points, or 1 percent, to 3,269.33.

The yield on the 10-year Treasury note rose to 1.71 percent, from 1.70 percent late Monday.

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