Stocks surge after fake tweet scare
Dow briefly plunges 143 points after fake AP tweet about explosions at the White House. But the market recovers and the Dow closes 152 points higher. Strong quarterly earnings boost stocks.
NEW YORK — Companies that do the best when the economy is improving led the market higher Tuesday after several of them reported strong quarterly earnings.
Coach, a maker of luxury handbags, and Netflix, which streams TV shows and movies over the Internet, were winners after announcing profits that impressed investors. Financial stocks rose after Travelers' earnings beat the expectations of financial analysts who follow the company.
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're unsure about the direction of the economy and want to own companies that make products people buy in bad times as well as good. Until now, they've been less enthusiastic about stocks of companies that provide discretionary goods and services and do best in good times.
"For a change we are actually seeing more cyclical parts of the economy lead the market," said Michael Sheldon, chief market strategist at RDM Financial Group.
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 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 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 Los Angeles when he got a call from his Chicago brokerage offices telling him what had happened. Fox watched the market tanking, and its quick bounce back.
"It was a topsy-turvy rollercoaster for a few minutes there," Fox said.
After the brief sell-off, investors turned their focus back to earnings.
Netflix soared $42.62, or 24 percent, to $216.99 after reporting a big gain in subscribers in the first quarter. Coach jumped $4.96, or 11 percent, to $55.55, after it announced higher sales in North America, beat earnings forecasts from financial analysts and raised its dividend. Travelers rose $1.77, or 2.1 percent, to $86.35. The insurer paid out less in claims compared with the premiums it took in
So far, 69 percent of 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.
Still, profits are expected to rise just 2.3 percent, slower than the 7.7 percent growth in the fourth quarter.
There are still plenty of earnings for investors to get through this week.
Consumer goods giant Procter & Gamble, drugmaker Eli Lilly and Boeing are among companies that will release earnings on Wednesday. United Parcel Service — better known as UPS — Exxon Mobil and Amazon are some of the corporations that will give updates on Thursday.
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 highs.
The Nasdaq composite rose 35.78 points, or 1 percent, to 3,269.33.
Tuesday's upturn in stock markets put both indexes back in the black for April and closer to the record highs they reached on April 11. It was a sharp change of tone from last week, when the market had its worst weekly drop since November. That sell-off started after economic growth in China, the world's second-largest economy, slowed.
The yield on the 10-year Treasury note rose to 1.71 percent, from 1.70 percent late Monday.
AP Business Writer Christina Rexrode contributed.