S&P 500 Rises to Highest Since ’08 on Corporate Earnings
U.S. stocks rose, sending the Standard & Poor’s 500 Index to the highest level since 2008, as earnings from Home Depot Inc. to Macy’s Inc. (M) tempered concern that Greece’s debt crisis will persist even after a bailout.
Home Depot, the world’s largest home-improvement retailer, and Macy’s, the second-biggest U.S. department-store chain, added more than 1.7 percent as profit beat estimates. Alcoa Inc. (AA) and Schlumberger Ltd. (SLB) rose at least 1.9 percent to pace gains in commodity producers. Wal-Mart Stores Inc. (WMT), the biggest retailer, fell 3.9 percent as low prices hurt margins.
The S&P 500 added 0.4 percent to 1,366.51 at 10:41 a.m. New York time. The benchmark index is at the highest level on a closing basis since June 2008. The Dow Jones Industrial Average rose 39.28 points, or 0.3 percent, to 12,989.15.
“The Greek bailout keeps the wheels on the bus,” James Dunigan, who helps oversee $107 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a phone interview. “The ride is a little smoother, but it doesn’t solve the longer-term issues,” he said. “In addition, the U.S. market got a bit extended. After the run-up we’ve had this year, a little pause wouldn’t surprise me.”
European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.
The S&P 500 (SPX) advanced 8.6 percent this year amid optimism policy makers would save Greece from default and reports on U.S. manufacturing, housing and jobless claims that bolstered confidence.
“We’re in a topping phase,” Barry James, who helps oversee $3 billion as president of James Investment Research in Xenia, Ohio, said in a telephone interview. “Our indicators are getting less positive. The news is out about the Greece bailout. Yet we see a rolling recession throughout Europe. It’s not a buy and hold market in our opinion. We’re on edge.”
Energy and raw material producers had the biggest gains in the S&P 500 among 10 industries. The S&P GSCI gauge of 24 commodities added 1 percent. Schlumberger advanced 1.9 percent to $79.24. Alcoa increased 2.5 percent to $10.40.
Home Depot (HD) gained 1.7 percent to $47.49. The company attracted customers who spent more as U.S. unemployment sank to a three-year low in January and builders began work on more houses. Warmer weather helped sales at stores open at least a year advance 5.7 percent, the biggest gain since a 7.7 percent increase in the first quarter of 2004. That topped the average estimate for a 3 percent gain by five analysts.
Lowe’s Cos. (LOW), the second-largest U.S. home-improvement retailer, rose 1.1 percent to $27.99.
Macy’s added 2.9 percent to $37.29. Its profitability shrank less than analysts projected as it was able to sell women’s handbags and accessories with its planned promotions rather than by slashing prices during the holiday season. Planned promotions can be profitable while last-minute efforts to clear excess inventories erode margins.
Wynn Resorts Ltd. (WYNN) jumped 6.5 percent, the most in the S&P 500, to $120.02. The company bought out its largest shareholder stake at a 31 percent discount and asked him to quit the board after a probe by the casino operator uncovered allegedly improper payments to Philippine gambling officials.
Wal-Mart lost 3.9 percent to $60.06. Chief Executive Officer Mike Duke is working to contain Wal-Mart’s costs and last quarter started pulling the company’s greeters from store lobbies to help with customer-service tasks. The retailer is seeking to keep prices low as its low-income shoppers suffer from persistent unemployment.
Weatherford International Ltd. (WFT) tumbled 12 percent to $15.73. The oilfield-services and equipment provider said it hasn’t repaired material weakness in internal controls related to taxes and may restate results for 2008 through 2011.
Profits that doubled since 2009 pushed the index’s so- called earnings yield to 7.1 percent, close to the highest on record when compared with the 10-year Treasury rate, according to data compiled by Bloomberg since 1962. American companies have boosted capital spending 35 percent over six quarters, the most since 2006.
“Conditions are almost ideal for equity investors relative to all other investments,” Keith Wirtz, who oversees $14.6 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a Feb. 14 telephone interview. “The Fed’s keeping rates low for the foreseeable future to try to stimulate the environment for employee hiring and business activity. What does that mean for capital markets? Savers are not being rewarded.”
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