BLBG: S&P 500 Advances Toward Best Annual Gain Since 2003
Speculation slower growth in hiring will extend Federal Reserve stimulus lifted U.S. stocks and pushed the annual advance in the Standard & Poor’s 500 Index within a percentage point of the best yearly gain in a decade.
Whirlpool Corp. climbed 8.2 percent after the world’s largest appliance maker lifted its forecast. Freeport-McMoRan Copper & Gold Inc. jumped 3.6 percent amid better-than-expected earnings. Apple Inc. slumped 0.5 percent, reversing an earlier gain of 1.4 percent and halting nine-day rally. Netflix Inc. slipped 5.1 percent, erasing an earlier gain, after Chief Executive Officer Reed Hastings attributed the stock’s rally to investor “euphoria.”
The S&P 500 gained 0.3 percent to 1,750.06 at 11:17 a.m. in New York after the gauge closed at a record yesterday. The Dow Jones Industrial Average advanced 62.96 points, or 0.4 percent to 15,455.16, the highest in a month. Trading in S&P 500 stocks was 34 percent above the 30-day average during this time of day.
“This report indicates the Fed is joining us for the holiday season at the current level of quantitative easing,” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $170 billion, said by phone. “And it will probably be ringing in the New Year with us as well as it continues QE through the end of 2013. Right now the data is not suggesting any kind of tapering.”
Payrolls climbed by 148,000 last month, less than the 180,000 projected by economists in a Bloomberg survey, indicating the U.S. economy had little momentum leading up to the federal government shutdown. The jobless rate fell to an almost five-year low.
Taper Delay
Progress in the labor market depends on how quickly the world’s largest economy can bounce back from the loss of business caused by the 16-day government closure. The budget dispute weighed on fourth-quarter growth and will prompt Fed policy makers to wait until March before starting to scale back the $85 billion of monthly bond purchases, a Bloomberg survey showed last week.
A separate report showed construction spending in the U.S. rose in August for a fifth consecutive month, propelled by the strongest outlays on homebuilding in five years. Federal outlays dropped to the lowest level in five years, showing government budget cuts will hold the industry back.
The S&P 500 (SPX) has advanced 23 percent this year, fueled by the unprecedented stimulus and better-than-estimated corporate earnings. Should the gain continue and surpass the 2009 advance of 23.5 percent, it would mark the biggest annual increase since the 26 percent rally in 2003.
Earnings Estimates
Analysts have raised their forecasts for profits in the third quarter, predicting an average increase of 2.5 percent for all companies in the gauge, according to estimates compiled by Bloomberg. That compares with a 1.7 percent projection at the beginning of the month.
Earnings at the 131 companies that have reported so far grew 5.5 percent, while sales gained 2.2 percent, according to data compiled by Bloomberg. Some 73 percent of the companies have topped analysts’ profit estimates, while 53 percent have beaten on sales.
“You’re getting a significant number of beats again and you’re seeing it widespread again,” Sandy Lincoln, the Chicago-based chief market strategist in the U.S. with BMO Global Asset Management, which oversees about $120 billion, said in a telephone interview. “I think those surprise factor continue to cause the market go higher.”
1,800 Mark
The S&P 500 will rise past 1,800 as earnings and the U.S. economy improve, Michael Shaoul, the chairman and chief executive officer of New York-based Marketfield Asset Management LLC, told Bloomberg TV.
“We feel pretty good about equities,” said Shaoul in an interview from New York. “Corporate earnings point to a re-accelerating domestic economy. 1,800 is attainable.” He did not specify a time frame.
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, rose 4.8 percent today to 13.79. The measure has fallen 17 percent this month.
Nine of 10 S&P 500 industry groups gained, with raw-materials, utilities and consumer-staples stocks increasing more than 0.8 percent to lead the advance.
Whirlpool climbed 8.6 percent to $142.29. The world’s largest appliance maker lifted its forecast for earnings this year to as much as $10.10 a share from an earlier estimate of no more than $10. That compared with the analyst estimate of $9.97.
Miner, Airline
Freeport-McMoRan jumped 3.5 percent to $36.25. The largest U.S. miner reported third-quarter profit that beat analysts’ estimates as copper costs were better than expected.
Delta Air Lines Inc., whose stock is the top performer this year among major U.S. carriers, added 4 percent to a record $25.68. The airline’s quarterly profit beat analysts’ estimates as more people flew at higher fares and fuel prices declined.
Transocean Ltd. jumped 4.9 percent to $48.87. The offshore drilling contractor will replace Dell Inc. in the S&P 500, the index provider said in a statement late yesterday. Revisions in the benchmark’s composition prompt some money managers to shift holdings to match the equity index.
VMware Inc. climbed 3.6 percent to $85.60 as the biggest maker of software that lets computers run different operating systems reported third-quarter profit that exceeded analysts’ projections.
Apple Products
Apple lost 0.5 percent to $518.67, declining as much as 2.6 percent after erasing an earlier gain. Chief Executive Officer Tim Cook, facing two straight quarters of declining profit and a stock that’s down by more than a quarter from a September 2012 record, will introduce a high-definition iPad mini and thinner iPad at a San Francisco event today, people with knowledge of the plans have said.
Netflix slipped 5.1 percent to $336.73. Shares of the world’s largest online subscription-streaming service have more than tripled this year for the best performance in the S&P 500. Netflix’s valuation is “difficult to justify,” Bank of America Corp. said in a note. The stock jumped as much as 9.6 percent earlier today, after the comapny’s results beat analyst projections.
Coach Inc. slid 7.9 percent to $49.90. The largest U.S. luxury handbag maker reported first-quarter sales of $1.15 billion, falling short of analysts’ estimates of $1.19 billion.
EMC Corp. slipped 4 percent to $24.23. The world’s biggest maker of storage computers cut its full-year sales and profit forecasts after earnings fell short of estimates after U.S. federal government spending declined.
Forest Oil Corp. lost 6.6 percent to $5.11. Goldman Sachs Group Inc. cut its recommendation on the Denver-based energy company to sell from neutral, citing limited future gains from its holdings in the Eagle Ford region, and its unattractive valuation relative to its peers.
To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net
To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net
