BLBG: S&P 500 Poised for Best Week Since June Amid Black Friday
U.S. stocks advanced, sending the Standard & Poor’s 500 Index toward its biggest weekly rally since June, after German business confidence unexpectedly climbed and the American holiday shopping season got under way.
Research In Motion Ltd. (RIMM), the maker of the BlackBerry smartphone, surged 12 percent in U.S. trading after jumping 18 percent in Toronto yesterday, when the American market was closed for the Thanksgiving holiday. Best Buy Co. (BBY) increased 2.1 percent as retailers hold Black Friday sales.
The S&P 500 rose 0.9 percent to 1,403.06 at 10:25 a.m. New York time. The benchmark index has gained 3.2 percent this week, the most since June 8. The Dow Jones Industrial Average advanced 112.79 points, or 0.9 percent, to 12,949.68. U.S. stock trading will close at 1 p.m. New York time today. Trading in S&P 500 companies was 47 percent below the 30-day average at this time of day, according to data compiled by Bloomberg.
“It’s a quiet day,” said James Dunigan, who helps oversee $112 billion as chief investment officer in Philadelphia for PNC Wealth Management. “It’s good news that business confidence is picking up in Germany. People are also trying to get a sense of what the holiday shopping season will be in the U.S. Other than that, there’s not much driving the market today in this shortened session. Obviously, we’ll all be waiting for the fiscal cliff negotiations when Congress comes back next week.”
The Munich-based Ifo institute said its business climate index, based on a survey of 7,000 executives, climbed to 101.4 from 100 in October, the first gain in eight months. Economists predicted a drop to 99.5, according to the median of 48 forecasts in a Bloomberg News survey. French business confidence increased from the lowest in more than three years this month, a separate report showed today.
Europe’s Deadlock
European Union leaders deadlocked over the next seven-year budget, adding to the quarrels between rich and poor countries that have stymied the response to the euro debt crisis. The positions are still “quite far apart,” German Chancellor Angela Merkel told reporters as the meeting resumed today.
The S&P 500 has rallied for a fifth day in the longest winning streak since August amid better-than-forecast housing data and as President Barack Obama expressed confidence on a budget agreement with Congress. Obama met with senior Democrats and Republicans on Nov. 16 for talks to avoid $607 billion of automatic tax increases and spending cuts that, if allowed to come into force, might push the country into a recession next year. Congress is in recess for Thanksgiving until Nov. 26.
‘More Confidence’
“People are going to need a little bit more confidence about the political class being able to work out a deal,” Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc. said in a Bloomberg Radio interview. “I think both sides prefer to get this done before the end of the year.”
RIM surged 12 percent to $11.51 in U.S. trading today. The shares had the biggest gain since April 2009 in Toronto yesterday after National Bank Financial said new BlackBerry 10 phone sales should be better than estimated.
Today is Black Friday, traditionally the beginning of the holiday shopping season in the U.S., when retailers lure customers with deep discounts. The name recalls a time when U.S. retailers would use the day to make a big part of their annual profit, and income statements would go to black from red.
Best Buy, the world’s largest consumer-electronics retailer, added 2.1 percent to $11.81. Sears Holdings Corp. (SHLD), the retailer controlled by hedge-fund manager Edward Lampert, rose 1.2 percent to $48.07.
Shopping Season
Higher-income Americans may refrain from spending cuts in the holiday shopping season even though their taxes are poised to rise, said Jack A. Ablin, chief investment officer at BMO Harris Private Bank. He studied a ratio that compares the stock performance of three retailers catering to wealthier consumers and three other chains focusing on lower-income shoppers.
Shares of the high-end stores have done better in this year’s second half as the federal government approaches what’s known as a fiscal cliff. Income-tax cuts under President George W. Bush are due to expire at year-end, and a new levy to help finance expanded health-care coverage will be imposed.
“Investors believe that high-income households will fund their higher tax burden from savings, rather than by cutting spending,” wrote Ablin, who is based in Chicago.
Ablin cited Nordstrom Inc., Coach Inc. (COH) and Ralph Lauren Corp. as high-end retailers and Wal-Mart Stores Inc. (WMT), Family Dollar Stores Inc. and Dollar Tree Inc. as low-end merchants.
Since falling to this year’s low on June 26, the ratio between these indexes has climbed 21 percent. Nordstrom’s and Ralph Lauren’s shares have gained as much as 20 percent during this period. Dollar Tree’s stock, on the other hand, has lost as much as 32 percent.
To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Tom Stoukas in Athens at astoukas@bloomberg.net
To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net; Andrew Rummer at arummer@bloomberg.net
