Optimistic Investors Help Markets Make Up Ground

The stock market advanced on Tuesday as earnings season got under way, with the Dow Jones industrial average closing at another nominal record high on a rally in cyclical shares.

With the day’s advance, the Standard & Poor’s 500-stock index ended less than two points shy of its nominal record, recovering from steep losses last week.

The strength in the indexes indicates that investors are again using market declines as buying opportunities. The top sectors of the day, technology and energy, are groups that are closely tied to the pace of economic growth.

“It’s encouraging that we’re seeing cyclical sectors lead the rally,” said Joseph Tanious, global market strategist at J. P. Morgan Funds. “It’s a healthy sign — investors believe the market can continue to run higher.”

Among blue-chip technology stocks, Microsoft jumped $1.02, or 3.6 percent, to $29.61 as the Dow’s top percentage gainer. Intel shares shot up 66 cents, or 3.1 percent, to $21.75, and Hewlett-Packard rose 29 cents, or 1.3 percent, to $22.22.

The Dow industrials rose 59.98 points, or 0.41 percent, to close at 14,673.46. The S.& P. 500 gained 5.54 points, or 0.35 percent, to 1,568.61. The Nasdaq composite index added 15.61 points, or 0.48 percent, to 3,237.86.

While only 5 percent of S.& P. 500 companies have reported results so far, almost three-quarters of those have topped expectations, according to Thomson Reuters data. Still, profits are seen rising just 1.5 percent from the year-ago quarter, down from estimates in January for growth of 4.3 percent.

“Expectations have gotten managed down to the point where we could more easily see companies beat expectations, making it easier for us to pop,” said Kristen Scarpa, an investment strategist at Barclays.

Late Monday, Alcoa reported earnings that beat expectations, though revenue was below forecasts. Shares of Alcoa, which as part of the Dow is unofficially seen as setting the tone for the earnings season, closed flat on the day at $8.39.

First Solar, which surged $12.31, or 45.5 percent, to $39.35, was the S.& P. 500’s top gainer by far after forecasting 2013 earnings and revenue well above expectations.

The news lifted the solar sector, with Yingli Green Energy climbing 39 cents, or 21.1 percent, to $2.24, and Trina Solar up 56 cents, or 14.6 percent, at $4.40.

Recent reports have shown that the American economy is growing at a slow pace. The March employment report on Friday showed job creation was less than half of what economists had expected. Analysts said, however, that the market has the momentum to push indexes higher, even with the Dow industrials up 12 percent so far this year and the S.& P. 500 up 10 percent.

J. C. Penney was the S.& P. 500’s largest percentage loser, tumbling $1.94, or 12.2 percent, to $13.93 after the department store’s board ousted Ron Johnson as chief executive and replaced him with his predecessor, Myron E. Ullman.

Shares of Herbalife fell 3.8 percent to $36.95 after it said that KPMG had resigned as its independent accountant. One of KPMG’s senior partners in the firm’s Los Angeles office was accused of leaking secret information to a stock trader about Herbalife and the footwear company Skechers USA. The accounting firm said Monday night that it had fired the partner.

In the bond market, interest rates showed little change. The price of the Treasury’s 10-year note slipped 2/32, to 102 8/32, while its yield held steady at 1.75 percent.

You're the Boss Blog: Can I Afford to Be Optimistic?

An owner’s dispatches from the front lines.

It is time to complete the budget for 2013. I now have the final numbers from 2012 to help in the planning/forecasting/guessing game that I have been playing for 35 years. My comptroller reminds me that every year, for as long as she can remember, she has had to reduce my projections by midyear. Great. Is it a shortcoming to be optimistic if you own a company? The answer is yes, and no. At the moment, more yes.

This year did not turn out as I had planned, or perhaps as I had hoped. There was no big recovery in either the economy or in my industry (home furnishings). We did make some progress, but I had budgeted and spent money as if we were going to be in a recovery or growth mode: more people, more inventory, more advertising.

I have lived and navigated through many recessions, and I can tell you that this has not been a normal one. In the good, old recessions, you would have a down year and then recuperate slowly over the next one or two. We are now in year five, and while things have clearly gotten better, we are hardly back to where we were in 2008. The unemployment rate is still high, and most small-business owners I know are still struggling.

And it’s not just the economy. The whole business environment is constantly changing, and it can be especially difficult for a small business to keep up. It is harder to borrow money, Web sites demand attention and dollars to keep them up, inexpensive imports continue to change the dynamics of the marketplace, and the government sideshow of perpetual crises – election, fiscal cliff, debt ceiling — continues to make people nervous. And none of it helps the unemployment rate, which should be of concern to everyone.

Still, it is hard to get anywhere as an entrepreneur without being optimistic. If you’re like me, you eventually begin to develop something of a split personality. When I am playing sales manager, I have to encourage my employees to shoot for ambitious but realistic numbers. I told one of my managers that I feel good about our prospects for next year, and she reminded me that I say that every year. Oops. Another colleague has seen through my rosy glasses. But what am I supposed to do? Ask people to strive mightily for mediocre results? On the other hand, it is also my responsibility to sign off on budgets and then make sure that the numbers are reached. That job is not nearly as much fun, and that’s where the split personality comes in.

So here is my conclusion. We need to make two budgets: one that is reasonably optimistic and another that is reasonably pessimistic. The optimistic one is for sales meetings. But, human nature being what it is, it is important not to surround yourself with yes-men who will sign off on whatever you say when you are feeling good. Send in the accountants! The second budget is the one to use for financial planning and spending.

This year, in my reality-based budget, I’m not factoring in any big turnaround in the economy, and I have reduced expenses in an attempt to ensure an acceptable profit. To me, this represents one of the most important things I have learned from the many ups and downs of building small businesses: the difference between setting goals and making a plan. Goals mean nothing without a plan.

I have also learned that whining and pity parties have no place in entrepreneurship. Misery might like company, but it does nothing to help build a company. Yes, the business environment has gotten more difficult for many small businesses, but that just means that we all need to pay more attention. In sports, when you finish a disappointing season and go home, you have six months or so to ruminate about what went wrong.

When you run a small business, you don’t get time off to think, but you also don’t go home a loser. Instead, you get to hit a reset button on Jan. 1. You get to start the new year with new wisdom, a clean slate, a new plan, perhaps even a new sense of optimism (but mostly a new plan!).

So, my fellow entrepreneurs, I encourage you to do a 360-degree analysis of what you could and should be doing better — and then make a plan to do it. No goals. A plan.

Jay Goltz owns five small businesses in Chicago.