BLBG: U.S. Stocks Advance as Fed Overshadows Jobless Claims
U.S. stocks rose amid policy makers’ indications that interest rates will remain low, overshadowing government data showing that initial jobless claims unexpectedly increased last week.
The S&P 500 (SPX) climbed 0.1 percent to 1,370.30 at 9:32 a.m. New York time, adding to a 0.7 percent rise yesterday.
“There’s a mix here,” said Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co. “The jobless claims figures were not quite what we were looking for. Meantime, while some of the Fed’s comments have reinforced the idea that interest rates will stay low, they are not jumping out and saying that they will do more.”
Federal Reserve Vice Chairman Janet Yellen and Fed Bank of New York President William C. Dudley endorsed the central bank’s view that borrowing costs are likely to stay low through 2014. Equity futures trimmed gains as jobless claims increased to 380,000, the highest since Jan. 28. The median forecast in a Bloomberg News survey called for 355,000 claims.
Stocks rose yesterday, snapping a five-day drop, after Alcoa Inc. (AA) reported an unexpected first-quarter profit. While S&P 500 per-share profit growth slowed to 0.8 percent during the first three months of the year from 4.9 percent in the fourth quarter, it will accelerate to 8.3 percent during all of 2012, according to analyst estimates compiled by Bloomberg.
Bullish Levels
The retreat in the S&P 500 may not be over, as a gauge of bullishness reached levels that coincided with the market’s peak in 2007 and preceded the biggest pullback in both of the last two years.
The Consensus Bullish Sentiment index on stocks, based on a weekly survey of brokerage strategists and newsletter writers, exceeded 75 percent for seven weeks through April 3, the longest streak since Kansas City, Missouri-based Consensus Inc. began compiling the data in 1983. The index fell to 69 percent this week as the S&P 500 had the worst five-day drop since November amid concern the recovery in the American labor market is slowing and Europe’s debt crisis is worsening.
Optimism has grown as the S&P 500 finished its best first- quarter rally since 1998, bolstered by better-than-expected economic data and corporate earnings. Increasing bullishness is considered a contrarian indicator by some analysts who follow price charts to make market predictions, because investors who have bought shares now have less money to purchase stocks.
“We’re concerned at what we view as very complacent bullish sentiment, almost frothy, and it needs to be unwound,” John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion, said in a telephone interview. “We should see some fear creeping back into the market, but we’re a long way from that happening yet.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
