Energy and materials lead US stocks higher

Energy and materials led US stocks to gains across the board as US equity indices ended a three-session slide.

US stocks initially climbed as traders were cheered by Federal Reserve chairman Ben Bernanke discussing future policy options before Congress and saying that the US Federal Reserve was “ready to respond” if a further stimulus was needed to revamp the sluggish US economy. Yet they came off their session highs after a top Fed official opposed Mr Bernanke’s comments saying he was against providing a stimulus even if the economy worsens.

Stocks lost further ground after John Boehner, house speaker, said there would be no guarantee that the debt limit would be raised if an agreement was not inked by early August.

The benchmark S&P 500 was up 0.31 per cent at 1,317.6 and the Nasdaq Composite was also in positive territory, up 0.54 per cent at 2,796.92.

Most of the S&P sectors were up, with the materials sector 0.8 per cent higher with Titanium Metals at the helm, up 7 per cent at $18.9. The energy sector was up 0.7 per cent – spurred on in part by a decline in oil inventories, led by Alpha Natural , the coal producer, up 3.7 per cent at $45.

The Dow Jones Industrial average climbed 0.4 per cent to 12,491.61, led by Caterpillar , which was up 1.6 per cent at $108.60.

Financials weakened, but JPMorgan Chase closed 0.6 per cent up at $39.62, ending a three-session losing streak. However, poised for a lacklustre report of earnings before the bell on Thursday, it may say second-quarter revenue declined 0.8 per cent to $24.9bn according to average estimates by analysts.

“The next big thing coming is JPMorgan releasing results, and that will fuel the fire,” said Sam Ginzburg, head of capital markets at First New York Securities.

Investment Technology Group , an agency brokerage that serves large institutions, was down 13.73 per cent to $11.80, after the announcement of a large write-off for the second quarter alongside layoffs. As one of the lowest performing sectors, financials are under pressure to show that they can increase revenue within the sluggish US economy.

Capital One slid 2.6 per cent to $50.87 despite reporting better than expected quarterly profits. It also said it would raise $2bn through a stock offering to finance the acquisition of ING’s US online bank.

“Credit cards seem set for another quarter of beat and raise. Estimates are likely to move higher for Capital One. We continue to recommend Capital One and would note over the past year or so the card improvement cycle has survived several rounds of macro issues including the first round of Europe, the first GDP slowdown, and an oil price shock,” said Brian Foran, an analyst with Nomura.

Other financial companies on the S&P 500 will announce earnings this week, including Citigroup on Friday.

Marriott , the hotel chain, saw gains of 0.9 per cent at $37.10 while Yum! Brands , the US fast food restaurant group, which owns KFC, Pizza Hut and Taco Bell, closed up 1.09 per cent at $55.60. Yum reported a 10 per cent gain in profits or $0.65 per share in the second quarter, beating analysts’ expectations. Marriott’s diluted earnings per share totalled $0.37, a 19 per cent increase over the same period last year. Both companies announced results after the closing bell on Wednesday.

“Yum! Brands has cash flow, strong, predictable and sustainable earnings. It has global reach with 40 per cent of its profits coming from China, which contributed to great earnings over time,” said Tucker Brown, research principal with SGA.

On the media front, Netflix , the DVD subscription and streaming video company, hit an all-time high of $304.80 in early trading, though it pared its gains to $298.70, up 2.6 per cent. The company signed a multi-year deal renewing and broadening its rights to films and television shows from NBC Universal. This Tuesday’s move to overhaul its pricing policy to reflect the relative costs of distributing movies via the net and the post, was imed at pushing users toward its growing streaming service.

News Corp was still in focus after dropping its $12.5bn bid to take full control of BSkyB, though it said it would remain as a long-term shareholder. Also on Wednesday, Senator Jay Rockefeller called for an inquiry into the media group, the first indication that the phone-hacking scandal that sparked outrage in the UK could spill over to the US. Its shares closed up 3.8 per cent to $15.93 in New York, paring back some losses after experiencing a 12.1 per cent drop since last week.