BLBG: U.S. Stocks Rise as Home Prices Climb Most in Six Years
U.S. stocks gained, following the biggest slump since November for benchmark indexes, as data showed that home prices in 20 cities rose the most since 2006.
Home Depot Inc. (HD) rallied 4.3 percent as the company raised its dividend and approved a $17 billion share buyback after profit beat analysts’ estimates. JPMorgan Chase & Co. (JPM) advanced 0.6 percent as the biggest U.S. bank expects headcount to decline by about 4,000 in 2013. Macy’s Inc. (M), the second-largest U.S. department-store chain, gained 3.7 percent after forecasting earnings that surpassed analysts’ projections.
The Standard & Poor’s 500 Index rose 0.5 percent to 1,495.18 at 9:40 a.m. New York time. The Dow Jones Industrial Average added 80.67 points, or 0.6 percent, to 13,864.84. Trading in S&P 500 companies was in line with the 30-day average at this time of day, according to data compiled by Bloomberg.
“The economic data suggests that there’s further healing going on in the housing market,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. “This would certainly be a factor to drive U.S. stocks higher. On a global basis, I don’t understand what’s going on in Italy. I think we’ll get beyond that and move forward.”
The S&P/Case-Shiller index of property values increased 6.8 percent from December 2011, the biggest year-to-year gain since July 2006, after advancing 5.4 percent in November, a report showed today in New York. The median projection of 30 economists surveyed by Bloomberg called for a 6.6 percent advance.
Home Sales
U.S. Commerce Department figures due at 10 a.m. in Washington may show new-home sales climbed in January, according to a Bloomberg survey. U.S. Federal Reserve Chairman Ben S. Bernanke is due to testify before lawmakers about monetary policy today and tomorrow.
President Barack Obama’s administration released a report yesterday on how $85 billion in automatic spending cuts scheduled to begin next month will degrade programs from defense to education to public health. Even so, there isn’t a measure of money in the U.S. that is forecasting worse times ahead as lawmakers voice alarm that the cuts may damage the economy.
Global stocks fell as Italy’s election deadlock reignited concern Europe’s debt crisis will deepen. As results pointed to a hung parliament, Italy was headed toward a political stalemate that threatens to derail 15 months of austerity under Prime Minister Mario Monti’s government. Former Italian Prime Minister Silvio Berlusconi acknowledged rival Pier Luigi Bersani’s narrow victory in the lower house of Parliament and said he’s open to a broad alliance to avoid a second election.
Earnings Season
The S&P 500 has gained 4.9 percent this year as U.S. lawmakers agreed on a compromise on taxes in January and amid better-than-estimated corporate earnings. About 75 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.8 times reported earnings, below the average since 1954 of 16.4.
Home Depot added 4.3 percent to $66.66. Rising home values are encouraging consumers to spend more on remodeling while the repairs after Hurricane Sandy spurred demand in the U.S. Northeast. The average purchase at Home Depot, the largest U.S. home-improvement retailer, rose 5.6 percent to $55.46 while the number of customer transactions increased 8.6 percent to 329.1 million, helped by an extra week in the quarter.
Expense Reductions
JPMorgan advanced 0.6 percent to $48. Chief Executive Officer Jamie Dimon is seeking expense reductions after the bank posted three straight years of record net income. Mortgage profits that have driven earnings at JPMorgan and Wells Fargo & Co. may fade this year as increased competition keeps the rates banks offer on new loans near all-time lows.
Macy’s gained 3.7 percent to $39.96. The company will earn as much as $3.95 a share this year, the Cincinnati-based retailer said in a statement today. The analysts surveyed by Bloomberg estimated $3.84 on average.
SanDisk Corp. gained 2.6 percent to $50.58. The maker of flash memory for mobile devices was raised to outperform, which is the equivalent of buy, at RBC Capital Markets by equity analyst Doug Freedman. The 12-month share-price estimate is $65.
Retail sales are rising fast enough to indicate the effects of tax-law changes and gasoline-price increases on consumer spending will be fleeting, according to Jonathan Golub, UBS AG’s chief U.S. equity strategist. Last month’s 4.4 percent sales increase from a year earlier almost matched the average 4.6 percent pace for the previous 20 years. The comparison is based on figures compiled by the Commerce Department.
‘Quite Healthy’
“The general trend appears to be quite healthy” even though the end of a payroll-tax break, a delay in income-tax refunds and higher gas prices are weighing on consumers, Golub wrote yesterday in a report with a similar chart.
Golub favors makers of food, beverages and other staples, as well as companies most dependent on consumers’ discretionary spending. His view ran counter to a recommendation yesterday by David Bianco, a strategist at Deutsche Bank AG. Both strategists are based in New York.
Bianco reaffirmed “underweight” ratings on staples companies and retailers in a report, citing a “continuing struggle of low- to middle-income households to make ends meet.” His call means the two groups ought to be a smaller percentage of investors’ holdings than their weight in the Standard & Poor’s 500 Index would suggest.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
