U.S. stocks gained this week, pushing the Dow Jones Industrial Average to its first close above 12,000 since June 2008, as corporate earnings, an expansion of American and Chinese manufacturing and an unexpected decrease in the unemployment rate overshadowed unrest in Egypt.
Alcoa Inc. surged 6.3 percent and Cisco Systems Inc. rose 5.4 percent to help lead gains in the Dow after data from the U.S. and China reinforced forecasts the economic recovery will strengthen in 2011. Pfizer Inc. and Exxon Mobil Corp. posted weekly gains exceeding 5.4 percent after reporting profit that beat analyst estimates. Massey Energy Co. jumped 9 percent after Alpha Natural Resources Inc. agreed to buy the coal producer.
The Dow gained 268.45 points, or 2.3 percent, to 12,092.15 this week, rallying for five straight days in its longest streak since November. The Standard & Poor’s 500 Index increased 2.7 percent to 1,310.87, passing 1,300 for the first time since August 2008.
“The economic data and the corporate profit data has been strong, and has been pushing the market higher,” said Jeremy Zirin, who helps manage about $461 billion as chief equity strategist at UBS Wealth Management in New York. “The focus really shifted from the known problems in Egypt to the economic data, and the good set of reports that supported the notion that we are moving from a recovery to an expansion.”
Most Since 1936
The S&P 500 has risen 94 percent from its March 2009 low, the biggest rally over equivalent time periods since 1936, according to Howard Silverblatt, a New York-based index analyst at S&P. The index erased its Jan. 28 slump driven by Egyptian riots after company earnings and positive economic data from the U.S. and China. More than 73 percent of the 287 companies in the S&P 500 that have reported results since Jan. 10 topped earnings-per-share projections, according to Bloomberg data.
The gauge has risen 4.2 percent this year, extending a 13 percent advance in 2010, following government stimulus measures, higher-than-estimated corporate profits and increased confidence that growth in the U.S. and Europe will underpin the global expansion.
Commodity producers rose the most among 10 S&P 500 groups this week, rallying 4.6 percent. Copper rose to a record on mounting concern that the global economic recovery will boost consumption of the metal used in cars, homes and appliances while mining companies struggle to increase output.
China’s manufacturing expanded last month, according to data from the country’s logistics federation, while the Institute for Supply Management’s index for U.S. factory output rose to 60.8, exceeding the most optimistic forecast in a Bloomberg News survey of economists and the highest since 2004.
Alcoa, the largest U.S. aluminum producer, increased 6.3 percent to $17.14.
Cisco, which reports second-quarter earnings next week, climbed 5.4 percent to $22.05. Goldman Sachs Group Inc. telecom equipment analyst Simona Jankowski said the largest provider of computer networking gear will give a better-than-projected forecast for its third quarter, citing strong business spending.
The Institute for Supply Management-Chicago Inc. said its business barometer rose to 68.8 this month. Figures greater than 50 signal expansion. Economists forecast the gauge would slip to 64.5, based on the median projection in a Bloomberg News survey. The U.S. jobless rate unexpectedly fell to 9 percent in January, the lowest level since April 2009, while payrolls rose less than forecast, depressed by winter storms.
Pfizer climbed 6.3 percent, the biggest gain in the Dow, to $19.30. Profit excluding one-time items was 47 cents a share, beating the 46-cent average estimate of 16 analysts surveyed by Bloomberg.
“Companies continue to do a good job at growing their revenues and their earnings,” said Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, which manages about $500 million. “All of this, the continued rise in profits and the continued strength in manufacturing, indicates to us that we’re on track in terms of the recovery.”
An index of energy shares had the second-biggest gain in the S&P 500, rising 4.2 percent as Brent crude, the benchmark grade for two-thirds of the world oil market, exceeded $100 a barrel for the first time since 2008.
Exxon, the world’s largest company by market value, climbed 5.4 percent to $83.28 after posting its fourth consecutive quarterly profit increase as burgeoning energy demand boosted oil and fuel prices. Fourth-quarter earnings of $1.85 a share excluding some items beat the average analyst projection by 13 percent, according to data compiled by Bloomberg.
Massey jumped 9 percent to $62.40 after Alpha Natural Resources agreed to buy the coal producer for $7.1 billion in a takeover that will create the world’s third-largest producer of coal used to make steel at a time when prices are surging.
Barton Biggs, who recommended buying U.S. stocks when the S&P 500 started rallying in 2009, said riots in Egypt are no reason to sell.
“I’m not selling, and I’m not panicked by these events in Egypt and the Middle East,” Biggs, 78, who runs New York-based hedge fund Traxis Partners LP, said in a Jan. 31 Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “The ongoing economic data is very encouraging.”
The Market Vectors Egypt Index ETF, an exchange-traded fund that holds Egyptian shares, climbed 10 percent for its biggest weekly gain since inception a year ago. The ETF fell 0.3 percent yesterday as Egyptians poured out of prayer services and filled Cairo’s Tahrir Square on what demonstrators called the “day of departure” for President Hosni Mubarak. Other Arab countries gripped by instability include Yemen, Jordan and Tunisia.
JDS Uniphase, Homebuilders
JDS Uniphase Corp. rose the most in the S&P 500, surging 35 to $22.76. The computer-networking company beat analysts’ projections for per-share second-quarter earnings excluding some items by 49 percent. Third-quarter revenue will be $440 million to $460 million, compared with the average analyst estimate of $420.9 million.
Homebuilders declined after Goldman Sachs Group Inc. said investors should avoid the shares because expectations for housing growth in 2012 are too high. D.R. Horton Inc. slumped 6.2 percent to $11.73, while Toll Brothers Inc. declined 2.2 percent to $20. PulteGroup Inc., the largest U.S. homebuilder by revenue, plunged 6.7 percent to $7.54 after reporting a fourth- quarter loss that was four times bigger than analysts estimated as sales fell.
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