Business and Finance

Stocks stormed higher this afternoon after promising signals about the profitability of U.S. companies and a strong debt auction by Spain. The Dow Jones industrial average headed for its biggest gain in a month.

European stocks had their best day in four months after Spain, the latest flashpoint in the European debt crisis, attracted strong investor interest at an auction of two-year debt.

Spain’s borrowing costs fell, as measured by the yields on Spanish bonds being traded in the market. Those yields had risen in recent days closer to levels that might force Spain to seek an international bailout.

“There’s no doubt that gave the market a second wind,” Anthony Chan, chief economist with J.P. Morgan Private Wealth management, said of the debt auction. “The market is reassessing and feeling a little better.”

The Dow Jones industrial average climbed more than 200 points and was up 204 at 13,125 just after 2:30 p.m. EDT. The Dow has had only one 200-point rise this year, a gain of 218 points on March 13.

Doreen Mogavero, a floor broker at the New York Stock Exchange, said people are eager for good news to trade on, and that can lead to sharp reactions in the indexes.

“This earnings season, expectations were low, and it’s going to be easy to beat that,” said Mogavero, the founder and CEO of Mogavero Lee & Co. Inc., a small brokerage of stocks for institutional clients.

They got that good news Tuesday: Coca-Cola said its first-quarter profit was better than Wall Street analysts had forecast. Goldman Sachs and Johnson & Johnson also posted strong results.

After nine straight quarters of growth, earnings for companies in the S&P 500 index were expected to be roughly flat for the first quarter. The slowdown was expected because of global threats from Europe and China and the difficulty of beating double-digit gains in recent quarters.

Markets have been encouraged so far by companies that beat analyst expectations, Chan said. But he warned against judging the quarter based on the small number of companies that have reported at this early stage.

Coke stock leapt 2.6 percent. Traders did not appear as impressed by Goldman Sachs and Johnson & Johnson. J&J was flat, while Goldman fell nearly a percent.

The Standard & Poor’s 500 index added 23 points to 1,392. All 10 of its industry groups were higher, led by information technology stocks.

The Nasdaq composite index soared 63 to 3,051, its best day in three weeks. Apple, the most valuable company in the world, rose 4.4 percent after five straight days of losses that wiped out about $60 billion in market value.

In Spain early Tuesday, the government sold more than €3.2 billion ($4.2 billion) in short-term debt, more than had been expected. The yield on Spain’s 10-year government bond fell to 5.86 percent from 6.10 percent early Monday, a sign of improving confidence in the country’s finances.

The cost of insuring Spanish debt against default pulled back from a record high, another sign that the auction reassured bond investors. The cost of insuring €10 million in Spanish debt for five years had soared to €522,000 per year on Monday. After Tuesday’s auction, it fell to €489,000.

Italy’s benchmark stock index rose 3.7 percent. France’s and Germany’s gained 2.7 percent. The broad STOXX 50 index of European shares rose 2 percent, the most since November.

In the United States, the rally followed a batch of mixed economic news. The number of permits requested by homebuilders for future projects reached a 3½-year high, an indication that the housing market might stop weighing down the economy. But builders broke ground on homes at a slower pace in March.

Factory output fell after four strong months of gains.

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Alcoa may have given a slumping Wall Street just what it needed: a surprise profit.

The largest U.S. aluminum manufacturer said Tuesday that it earned 9 cents share in the first quarter. It surpassed analyst forecasts for a small loss by selling more aluminum to a wide range of customers, including car makers and aircraft manufacturers, and operating its plants more efficiently.

Alcoa is considered a barometer for the economy. It’s also the first of the 30 companies in the Dow Jones industrial average to report results. Its stock rose 5.3 percent in after-hours trading, providing hope that the stock market might halt its longest and deepest slump of the year on Wednesday.

“It looks like they’re going to get the earnings season off on a good note,” said Argus Research analyst Bill Selesky.

Alcoa’s net income of $94 million marks a turnaround from the $191 million loss it reported for the fourth quarter. But it’s 70 percent below net income of $308 million, or 27 cents a share, posted a in the year-earlier quarter.

Revenue rose to $6 billion from $5.95 billion. Analysts predicted revenue of $5.77 billion.

Alcoa said sales rose from the fourth quarter across most of its markets, including automobiles, aerospace and other transportation, to packaging and industrial products. That offset lower realized prices for aluminum and alumina, a material used in processing aluminum.

Investors were anxiously waiting to see Alcoa’s results, scheduled for after the market closed. Fears of a bad earnings season contributed to a recent losing streak that wiped out more than half the first-quarter gain for the Dow, and more than a third for the Standard & Poor’s 500.

On Tuesday, the Dow lost more than 213 points as renewed concerns over Europe’s debt crisis, now focusing on Spain, were added to the earnings jitters.

During the first quarter, analyst expectations for earnings for companies in the Standard & Poor’s 500 index went from an increase of about 3 percent to a decline of 0.1 percent, according to FactSet.

Investors were also watching for Alcoa’s forecast for 2012 global aluminum demand cash advance america. It reaffirmed its expectation for a 7 percent increase. The company expects strong demand for aluminum used in autos, heavy trucks and trailers to remain strong in North America, which accounts for nearly 50 percent of Alcoa’s business.

In the U.S., auto sales rose 13 percent to 3.5 million cars and trucks in the first quarter, and car companies and suppliers were scrambling to meet demand. Many analysts expect the auto industry to have its best sales year since 2007. A trade group for the aluminum industry said that car and trucks made in the U.S. contain an average of 343 pounds of aluminum. That’s about 9 percent of the weight of a vehicle.

The company also expects China’s automotive market to grow as much as 7 percent this year. Demand for aluminum remains weak in Europe, which is struggling to resolve a sovereign debt crisis.

Alcoa’s upbeat earnings could be a good sign for other materials companies. The materials sector _ including metals and mining, diversified chemicals and construction materials _ was expected to show the biggest decline.

“When you look at all the cost cuts (materials) companies did during the recession, they’re a lot leaner now than they were a couple of years ago,” Selesky said. “I think it points to companies doing a bit better than originally expected just based on running a more efficient, leaner company.”

Alcoa cut some smelting and refining operations earlier this year after demand fell late in 2011 as customers became concerned about a slowing global economy. And, faced with high costs for raw materials and energy, Alcoa boosted productivity.

“It’s just a significant effort from all of our businesses and, obviously, the key factor in our earnings improvement,” Chief Financial Officer Chuck McLane told analysts during a conference call.

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Some Asian airlines plan to change flight paths for several routes to avoid a rocket North Korea is expected to launch in the next week.

Philippine Airlines said Monday that a dozen of its flights from the United States, Japan and South Korea will fly safely away from the rocket’s possible path.

Japan Airlines and All Nippon Airways are changing flight paths on routes connecting Tokyo to Manila, Jakarta and Singapore. Domestic flights will not be affected.

JAL has four flights a day on the expected rocket launch dates, and airline official Norio Higashimine said each flight will carry more fuel in case of an unexpected route change.

ANA is making similar route changes on five flights pay day loans.

North Korea says it is launching a satellite between Thursday and April 16, depending on weather. It says the satellite will observe crops and natural resources and denies suspicions that the launch is intended to test long-range missile technology.

Philippine officials have declared a no-fly zone and urged ships and fishing boats to avoid northeastern territorial waters where rocket debris may fall.

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The British government’s intention to tax the humble Cornish pasty, a cheap pastry savory snack much beloved by workers and students, has opened a new front in the country’s never-ending class war.

In his U.K. budget last week, Finance Minister George Osborne announced he would close a loophole which allowed some fresh-baked takeaway items _ including pies, sausage rolls and pasties (PASS-tees) _ to escape a 20 percent sales tax.

The move, however, has caused a media storm, with tabloid headlines portraying the new tax as an attack by the Conservative-led government on working class life.

This Tuesday, Osborne faced questions from a parliamentary committee on aspects of his budget _ which included such macroeconomic measures as a cut in the top rate of income tax, a lowering in the personal tax allowance for retired people and reduction in corporation tax. But is was the levy on the lowly pasty _ a mixture of meat and vegetables encased in pastry that was first baked for tin miners of 17th century southwest England _ that generated all the headlines.

“I can’t remember the last time I bought a pasty in Greggs,” Osborne told a parliamentary committee on Tuesday, referring to a low-price snack shop chain.

“That kind of sums it up,” responded Labour Party lawmaker John Mann, a former union official.

The storm rolled into Wednesday when, at a press conference to discuss London’s readiness for the Olympics with International Olympic Committee chairman Jacques Rogge, Prime Minister David Cameron was compelled to pledge allegiance to the pasty.

“I am a pasty eater myself,” he declared to reporters.

Cameron said he last ate one in Leeds, though not at a Greggs. “I have a feeling I opted for the large one, and very good it was, too,” the Oxford-educated prime minister said.

Greggs bakeries, a purveyor of fast-food, including 140 million sausage rolls per year, saw its shares slump 5.5 percent last week on news of the new tax.

Greggs chief executive Ken McMeikan met Treasury officials on Tuesday to plead his case and afterward said the government had “lost touch” on the issue.

“For ordinary, hardworking families, putting 20 percent on to a product that is freshly baked actually is going to make a severe dent in their pockets,” he said in a BBC interview.

The opposition Labour Party has often charged Cameron’s government with being “out of touch” with the average Briton, a message party leader Ed Miliband repeated while standing outside a Greggs shop.

Even a Conservative legislator, Nadine Dorries, has said Cameron and Osborne “don’t know what it’s like to go to the supermarket and have to put things back on the shelves because they can’t afford it for their children’s lunchboxes. What’s worse, they don’t care either.”

The National Federation of Fish Fryers jumped into the debate, calling the present tax provision “an utter mess” and wondering why their hot food taxed when the bakery next door was exempt.

The government expects the levy on sausage rolls and pasties, effective Oct. 1, to raise 105 million pounds ($167 million) in the first full year. A Treasury consultation paper drily noted that the change would only hit “individuals and households that purchase products that are affected by this change.”

Under current law, shops like Greggs’ have to charge sales tax _ called Value Added Tax _ on hot takeaways including soup and hot sandwiches. Pasties and sausage rolls are exempt because after baking they are left to cool in unheated cases.

Extending the tax to rolls and pasties is no simple change. According to the finance ministry, the tax now applies to food “heated for the purposes of enabling it to be consumed at a temperature above the ambient air temperature and which is above that temperature” when purchased.

The proposed change would tax any food hotter than the ambient temperature, but could pose difficult issues: do you check the temperature of the inside of the sausage roll or pasty, or the cooler crust? Might the buyer ask to have it cooled to get it tax-free?

Osborne denied that the government would be poking a thermometer into every pie and roll. Tax officials and bakers would simply agree on the portion of total sales which would be affected, he said.

“There are perfectly sensible ways of working this out,” Osborne said.

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Less than two years after tightening some financial regulations in the Dodd-Frank Act, Congress appears ready to loosen others in the name of job creation.

The Jumpstart Our Business Startups bill – known as JOBS, of course – would reduce the red tape involved in making an initial public stock offering, and make it legal for businesses to solicit investors over social media, a process known as crowdfunding.

The bill also would roll back some longstanding investor protections. The Securities and Exchange Commission, AARP, the AFL-CIO and the Consumer Federation of America have all expressed concerns that the bill will lead to a surge in investment fraud.

The North American Securities Administrators Association, a group of state regulators, calls the bill “an investor protection disaster waiting to happen.” The group’s president, Nebraska official Jack Herstein, said in a statement that the JOBS bill creates “new jobs for promoters of Internet investment scams.”

“Investors won’t return to the IPO market if they don’t believe they can trust it,” SEC Commissioner Luis Aguilar says in a statement on the agency’s website. He also calls the legislation “a boon to boiler room operators, Ponzi schemers, bucket shops, and garden variety fraudsters.”

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The Federal Reserve paid $75.4 billion to the U.S. Treasury as an expanded bond portfolio generated $83.6 billion in interest income from its open-market operations last year.

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The price of oil is lower Wednesday, after the government reported that supplies rose last week, as analysts expected.

Gasoline pump prices continued to climb, rising to a national average of $3.811 per gallon.

Benchmark crude fell by 61 cents to $106.10 per barrel in New York. Brent crude, used to price oil imported by U.S. refineries, fell 6 cents to $126.16 per barrel in London.

The Energy Department said that supplies increased by 1.8 million barrels last week payday advance lenders. Gasoline supplies fell by 1.4 million barrels as refineries sold off remaining stockpiles of winter gasoline blends. Supply levels were near analysts’ estimates.

The government also says energy demand remains weak. Demand dropped 5.4 percent for oil and 7.2 percent for gasoline compared with the same week last year.

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Federal Reserve Chairman Ben S. Bernanke spent six years pushing for an inflation goal. Now that he has it, some investors are betting he

WASHINGTON • U.S. service companies expanded in February at the fastest pace in a year, helped by a rise in new orders and job growth.

The Institute for Supply Management said Monday that its index of nonmanufacturing activity rose to 57.3, up from January’s 56.8 and the third straight increase. Any reading above 50 indicates expansion.

Expansion in the service sector coincides with the lowest unemployment in three years, five straight months of solid to strong job growth and rising consumer confidence.

The trade group of purchasing managers surveys roughly 90 percent of U.S. companies in all sectors outside of manufacturing. That includes retail, construction, financial services, health care and hotels.

Fourteen of the 18 industries that the survey tracks expanded in February. Real estate, rental and leasing, transportation and warehousing, construction, hotels and restaurants, and information technology firms were among those that reported growth.

Anthony Nieves, chairman of the ISM’s survey committee, said that most of the comments from the group’s members “reflect a growing level of optimism about business conditions and the overall economy.”

Companies expressed concerns about inflation and rising gas prices, Nieves said. A measure of prices paid by service firms jumped to the highest level in 11 months.

Still, the overall reading for the sector was the best since February 2011.

“February seems to be off to a strong start for the economy,” John Ryding, an economist at RDQ Economics, said in a note to clients. “The pickup in order growth was particularly encouraging,” he added, because it indicates that growth will likely continue.

A separate report showed factory orders fell 1 percent in January, the biggest decline in 15 months. Businesses sharply reduced orders for machinery, equipment and other so-called core capital goods, the Commerce Department said.

The decrease was largely expected after a tax cut expired at the end of last year. Even with the decline, orders have gradually been climbing back to near pre-recession levels.

Demand for services should continue to rise, according to the ISM report. A measure of new orders reached its highest point in a year.

The group’s employment index declined from its highest reading in six years. Still, it stayed at a level that suggests many service companies are adding workers.

That confirms other data that show service companies have stepped up hiring. The government said last month that service firms added 176,000 jobs in January, the most in four months.

On Friday the government issues its February jobs report. Economists expect another big month of job gains; the latest forecast predicts 210,000 total net jobs were added last month, according to a survey by FactSet.

Big job gains at service firms are necessary to reduce unemployment. Factories are creating a lot of new jobs, but the sector isn’t large enough to employ that many people.

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Higher oil prices are affecting U.S. growth but are currently not a reason to think the economy will stall, a top Federal Reserve official said on Thursday.

“It pushes people not to spend. This is one of the factors affecting consumer confidence and consumer spending,” John Williams, president of the San Francisco Federal Reserve Bank, said in a question-and-answer session after a speech in Honolulu.

“Given where oil prices have gone, it’s part of the story for (expectations of) modest growth.”

However, a severe supply shock in the Middle East would have a more negative impact if it sent prices sharply higher, he said.

Williams, a voting member this year on the Fed’s policy-setting panel, has supported recent moves by the U.S. central bank to bolster what he has termed as a “lackluster” economic recovery.

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