U.S. Stocks Rise as Investors Monitor Greek Bailout Discussions
U.S. stocks advanced, pushing the Standard & Poor’s 500 Index to a seven-month high, as Greek Prime Minister Lucas Papademos began talks with political leaders on terms required for a bailout.
Financial and technology shares gained the most in the S&P 500 among 10 groups. Bank of America Corp. rallied 3.6 percent to the highest price since Aug. 31. Hartford Financial Services Group Inc. rose 7.6 percent as billionaire investor John Paulson said the insurer needs to take “drastic” action to reverse its decline. Cisco Systems Inc. (CSCO) jumped 3.2 percent at 4:09 p.m. New York time, extending its gain in regular trading, after reporting profit and sales that beat analyst estimates.
The S&P 500 added 0.2 percent to 1,349.96 at 4 p.m. New York time, after dropping as much as 0.4 percent. The Dow Jones Industrial Average increased 5.75 points, or less than 0.1 percent, to 12,883.95, the highest level since May 2008. The Nasdaq Composite Index (CCMP) rose 0.4 percent to 2,915.86, the highest since December 2000.
“There’s just a news vacuum,” James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a telephone interview. “If you just get Greece to come out with anything, you can actually maybe have people move on. I do think they are going to come out with some sort of agreement. That would be a big step forward in dealing with Europe’s debt crisis.”
Global stocks entered a bull market as the MSCI All-Country World Index extended its gain from last year’s low to 20 percent. Papademos began talks with political parties supporting his government as he works to secure a second aid package. Greece will pledge permanent spending cuts, including lower pensions and a 20 percent reduction in minimum wages, according to the draft of the financing deal.
The S&P 500 closed 1 percent away from its peak nine months ago of 1,363.61, which was the highest level since June 2008. The index has risen 7.3 percent this year amid better-than- expected economic data and corporate profits. Earnings (SPX) beat projections at 68 percent of the 304 companies in the S&P 500 that reported quarterly results since Jan. 9, according to data compiled by Bloomberg.
“Be 100 percent in equities,” Laurence D. Fink, chief executive officer of BlackRock Inc., the world’s largest money manager, said in a Bloomberg Television interview from Hong Kong today. “I don’t have a view that the world is going to fall apart, so you need to take on more risk. You need to overcome all this noise, and there are great values in equities.”
The S&P 500 trades for about 14 times its companies’ earnings and has been stuck below its five-decade average multiple of 16.4 since May 2010, the longest stretch since a 13- year period beginning in 1973.
Companies most-tied to economic growth led the gains in the S&P 500 as measures of financial and technology shares added more than 0.6 percent. Bank of America climbed 3.6 percent, the most in the Dow, to $8.13.
Hartford (HIG) jumped 7.6 percent to $20.58. Paulson, a hedge fund manager who controls the largest stake in Hartford, told Chief Executive Officer Liam McGee he needs to reverse the insurer’s stock slide. It declined 39 percent last year and trades at less than half of the company’s book value, a measure of assets minus liabilities.
“Hartford needs to do something drastic because the stock is the lowest valuation relative to book value of any major insurance company,” Paulson said today at a conference call for analysts and investors held by Hartford. The company hired advisers to evaluate splitting the life insurance and property- casualty businesses, Hartford said today.
Cisco added 3.2 percent to $21.08 after the close of regular trading. Fiscal second-quarter net income rose to $2.18 billion, or 40 cents a share, from $1.52 billion, or 27 cents, a year earlier. Excluding certain items, earnings were 47 cents. Sales rose 11 percent to $11.5 billion in the period, which ended Jan. 28. Analysts had estimated 43 cents in profit and $11.2 billion in revenue, according to a Bloomberg survey.
Chief Executive Officer John Chambers began a turnaround plan last year, when he cut jobs, eliminated businesses and refocused on more profitable products. Cisco also boosted its dividend and got a lift from so-called enterprise customers, which use its gear in their internal networks. The shares rose 1.1 percent to $20.43 in regular trading before the earnings report.
Ralph Lauren Corp. rallied 9.2 percent to $171.49. The retailer of its namesake brand clothing said revenue in the current fiscal year may gain more than it previously expected.
Computer Sciences Corp. (CSC) surged 19 percent, the most since at least 1980, to $31.39. The technology contractor for governments and companies named Mike Lawrie as its next chief executive officer as it renegotiates a contract with the U.K.’s National Health Service.
Sprint Nextel Corp. (S) slumped 1.6 percent to $2.41 after reporting widening losses for the first quarter it offered the Apple Inc. iPhone, signaling the best-selling device may not be helping Chief Executive Officer Dan Hesse turn around the carrier’s business.
Moody’s Corp. (MCO) lost 1.7 percent to $38.31. The owner of the world’s second-largest provider of credit ratings said fourth- quarter profit fell 30 percent as Europe’s sovereign-debt crisis slowed bond sales around the world, reducing demand for its services.
Western Union Co. (WU) tumbled 10 percent, the biggest decline in the S&P 500, to $17.73. The world’s largest money-transfer business forecast earnings in 2012 will be no more than $1.75 a share, less than the average analyst estimate of $1.81.
The Nasdaq Composite Index has entered a bull market and stocks may continue to rally through the end of March, according to Louise Yamada, who said in December that equity charts were signaling further losses.
“The Nasdaq has initiated a new structural bull market,” Yamada, managing director of Louise Yamada Technical Research Advisors LLC in New York, said in a radio interview today on “Bloomberg on the Economy” with Sara Eisen. “We’ve entered the year with short-term positive signals with the possibility that we could see a rally through the first quarter.”
Yamada, who worked as a technical analyst at Salomon Smith Barney, said in a December report that investors may be better off selling “weaker stocks into strength” after a 14 percent gain in the S&P 500 since October. She said in November that evidence the market’s advance will continue hadn’t materialized and the year-end rally may falter.
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