Stocks Rally After 3M, Caterpillar Profits Beat Estimates

By Callie Bost and Lu Wang

Oct. 23 (Bloomberg) -- Russ Koesterich, chief investment strategist at BlackRock, explains why the return of volatility is just the markets going back to normal operation, looks at how hedge funds managed the market selloff, and offers his outlook for high-yield credit. He speaks on “Bloomberg Surveillance.”

U.S. stocks jumped, recovering from yesterday’s retreat, as earnings from Caterpillar (CAT) Inc. to 3M Co. exceeded analysts’ estimates and data signaled stronger growth in the European economy.
Caterpillar, the largest construction equipment maker, added 4.4 percent after raising its full-year earnings forecast amid higher sales of construction machinery in North America. 3M Co. climbed 5.5 percent as the maker of Post-it notes boosted sales in all of its businesses. Tractor Supply Co. surged 15 percent, the most in the Standard & Poor’s 500 Index, after increasing its profit forecast.
The S&P 500 gained 1.2 percent to 1,949.85 at 10:13 a.m. in
New York. The index recouped losses from yesterday, when it slid 0.7 percent. The Dow Jones Industrial Average increased 230.07 points, or 1.4 percent, to 16,691.39 today. The Nasdaq Composite Index advanced 1.4 percent.
“The Caterpillar earnings were really good,” Joe “JJ” Kinahan, chief strategist at TD Ameritrade Holding Corp., which oversees $666 billion in client assets, said in a phone interview. “It’s hard not to be optimistic on this market if we close above 1,950. If we get above 1,950, we’re in general striking distance of all-time highs again.”

Photographer: Richard Drew/AP Photo

Specialist Glenn Carell, left, directs trading at his post on the floor of the New York... Read More

Related: Why the Stock Market Rally Is Bad News

The S&P 500 has risen five times in the past six days, pushing the gauge up 4.5 percent since Oct. 15 and recouping about half the losses from a selloff that began in mid-September. The equity benchmark is still down about 3 percent from a record.

Manufacturing, Jobs

Economic data today suggested the euro-area economy may have moved one step away from another recession. A Purchasing Managers’ Index showed manufacturing in the region unexpectedly grew this month, while Spain’s economy showed signs of a further recovery, with third-quarter unemployment dropping to the lowest level since 2011. In Germany, factories rebounded from a slump in September.
Fewer Americans filed applications for unemployment benefits over the past month than at any time in 14 years as an improving economy prompted employers to hold on to staff. The four-week average of jobless claims, a less-volatile measure than the weekly figure, dropped to 281,000, the lowest since May 2000, from 284,000 the week before, a Labor Department report showed.
Caterpillar rallied 4.4 percent to $98.72. The improvement in office and commercial construction in North America, and the gradual pickup in residential activity, is boosting demand for the company’s excavators and bulldozers.

Earnings Focus

“The fundamental focus is on earnings,” Leo Grohowski, chief investment officer at New York-based BNY Mellon Wealth Management, which oversees about $187 billion, said in a phone interview. “Caterpillar earnings are giving the market a boost. The bigger picture fear of global growth slowdown is going to remain with us. That’s going to prevent any meaningful market appreciation. Investors should be prepared for a choppy ride.”
3M increased 5.5 percent to $146.63. Since taking over in 2012, Chief Executive Officer Inge Thulin has emphasized international growth that now accounts for about two-thirds of sales. Revenue rose in all units, led by a 4.7 percent gain in the health-care business.
Tractor Supply jumped 15 percent to $70.62. The farm supplies retailer reported higher-than-estimated earnings and analysts at Raymond James Financial Inc. told clients to buy the shares.