Dow Average Closes Above 12,000 for First Time Since June 2008; UPS Surges
U.S. stocks rose, pushing the Dow Jones Industrial Average to its first close above 12,000 since June 2008, after American and Chinese manufacturing expanded and United Parcel Service Inc. beat analysts’ earnings estimates.
UPS, the package-delivery company considered a proxy for economic growth, advanced 4.2 percent. Freeport-McMoRan Copper & Gold Inc. and Alcoa Inc. increased at least 4.5 percent as copper rose to a record. Pfizer Inc. climbed 5.5 percent after profit topped estimates. Bank of America Corp. jumped 4.2 percent, leading a rally in financial shares, after its Merrill Lynch & Co. units won dismissal of a lawsuit by MBIA Inc. for breach of contract in a New York state appeals court.
The S&P 500 rose 1.7 percent, the most since Dec. 1, to 1,307.59 as of 4 p.m. in New York. The benchmark gauge for U.S. equities has rallied 2.5 percent in the past two days, erasing the Jan. 28 slump that was driven by Egyptian riots. The Dow added 148.23 points, or 1.3 percent, to 12,040.16 today.
“We have a lot of cards falling together indicating that we are in a period of sustained growth,” said Matthew DiFilippo, director of research at Stewart Capital Advisors LLC in Indiana, Pennsylvania, which manages $1 billion. “Corporate earnings have been great. The Chinese economy is still strong even as authorities struggle to control inflation. Equities look cheap on an absolute basis and compared to cash and bonds.”
The S&P 500 has risen 4 percent this year, extending a 13 percent advance in 2010, on government stimulus measures and higher-than-estimated corporate profits. About 74 percent of the 204 companies that reported earnings since Jan. 10 topped analysts’ projections, according to data compiled by Bloomberg.
First of Month
The first trading day of the month is historically better than average for the U.S. stock market and it has been profitable in recent months. The three biggest gains in the past six months -- and 5 of the 25 biggest rallies in 2010 --occurred on the first trading day of the month and followed higher-than- estimated readings from the Institute for Supply Management’s monthly manufacturing gauge.
Shares extended gains today after the ISM’s factory index rose to 60.8 in January, beating the median economist projection of 58. U.S. gross domestic product growth accelerated to 3.2 percent in the fourth quarter from 2.6 percent during the prior three months, the Commerce Department said Jan. 28. Yesterday, reports showed American businesses expanded at the fastest pace since 1988 and consumer spending beat economist estimates.
S&P 500 at 1,300
The last time the S&P 500 closed above 1,300 was in August 2008. The benchmark gauge for U.S. stocks has rallied 25 percent since the Aug. 27, when Federal Reserve Chairman Ben S. Bernanke suggested he was prepared to act to spur economic growth. It dropped 1.8 percent on Jan. 28.
“The momentum and underlying factors are so strong right now, psychological levels aren’t going to stop this market,” said Richard Ross, the New York-based global technical strategist at Auerbach Grayson & Co. “When you have the market react positively in the face of bad news, it speaks to this bullish undercurrent.”
The Dow Jones Transportation Average of 20 stocks had the biggest gain in two months, rallying 2 percent.
UPS advanced 4.2 percent to $74.59, its highest price since April 2008, after posting fourth-quarter earnings that topped estimates as holiday demand boosted volumes. Adjusted profit of $1.08 a share exceeded the average $1.05 projection of analysts surveyed by Bloomberg. Revenue rose 8.4 percent to $13.42 billion, outpacing projections.
The world’s largest package-delivery company forecast 2011 profit of as much as $4.35 per share, compared with the $4.17- per-share average estimate of 25 analysts. The company said it would repurchase about $2 billion of shares in 2011.
U.S. stocks followed gains in global equities as China’s manufacturing expanded last month, according to data from the country’s logistics federation and a purchasing managers’ index from HSBC Holdings Plc and Markit Economics. Copper rose to records while aluminum and nickel climbed to two-year highs.
An index of raw-materials producers in the S&P 500 added 2.8 percent, the biggest gain among 10 industries. Freeport- McMoRan, the world’s largest publicly traded copper producer, advanced 4.9 percent to $114.07. Alcoa, the largest U.S. aluminum producer, increased 4.5 percent to $17.32.
Commodities Beat Stocks
Commodities beat stocks for three months, the longest stretch since June 2008. The S&P GSCI Total Return Index of 24 raw materials gained 3.1 percent in January and rose for a fifth month, the longest streak since 2004, according to data compiled by Bloomberg. The MSCI All-Country World Index of equities climbed 1.6 percent including dividends. The Global Broad Market Index for corporate and government bonds lost 0.3 percent, Bank of America Merrill Lynch data show.
“The risk bid will continue to move up while the conservative stance moves down,” said Robert Lutts, president of Cabot Money Management in Salem, Massachusetts, whose growth portfolio returned 9.72 percent annually over the last 15 years, more than double the gain of the Russell 3000 Growth Index, through Sept. 30. “We are making steady progress and you can see that with copper making new highs and the stock market reflecting a stronger economy and earnings potential.”
Bank of America led an index of financial shares in the S&P 500 up 2.2 percent, the second-biggest advance among 10 industries. The lender rallied 4.2 percent to $14.31, the third- biggest jump in the Dow.
The decision today by the Manhattan-based court ended the case against Merrill Lynch, Pierce, Fenner & Smith Inc. and Merrill Lynch International over protection sold against mortgage-debt defaults. MBIA said it will request an appeal. MBIA, the largest bond insurer, sought to unwind or recover payouts for $5.7 billion of credit-default swaps and related insurance sold against collateralized debt obligations.
Archer Daniels Midland Co. advanced 6.2 percent to $34.70. Profit excluding a $71 million gain related to an acquisition was $1.07 a share, topping the 78-cent average estimate of 12 analysts surveyed by Bloomberg. Operating profit increased 40 percent to a record of $1.36 billion. Total sales in the quarter increased 31 percent to $20.9 billion from $15.9 billion a year earlier. Eight analysts in the Bloomberg survey estimated sales on average of $17.5 billion.
Manitowoc Co. jumped 27 percent, the most since November 2008, to $17.11 after the maker of cranes produced more than twice as much profit as analysts estimated. The company reported fourth-quarter earnings excluding some items of 11 cents a share, beating the average forecast by 162 percent, according to data compiled by Bloomberg.
Pfizer climbed 5.5 percent, the biggest gain in the Dow average, to $19.22. Profit excluding one-time items was 47 cents a share, beating the 46-cent average estimate of 16 analysts surveyed by Bloomberg. Net income rose to $2.89 billion, or 36 cents, from $767 million, or 10 cents, a year earlier, the New York-based company said.
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