S&P 500 Posts Biggest First-Quarter Gain Since 1998

March 30 (Bloomberg) -- Bloomberg’s Trish Regan, Adam Johnson and Matt Miller report on today’s ten most important stocks including Sino Forest, Disney and Sears. (Source: Bloomberg)

U.S. stocks rose, extending the biggest first-quarter advance since 1998 for the Standard & Poor’s 500 Index, as stronger-than-forecast growth in consumer sentiment and spending bolstered optimism in the economy.

Halliburton Co. (HAL) and Dow Chemical Co. advanced more than 1.2 percent to pace gains in commodity producers. Walt Disney Co. (DIS), the largest U.S. entertainment company by market value, climbed 1.8 percent after Lazard Ltd. raised its recommendation for the shares. Apple Inc. (AAPL), which has surged 48 percent in the first three months of 2012, retreated 1.7 percent today.

The S&P 500 advanced 0.4 percent to 1,408.47 at 4 p.m. New York time, extending its quarterly rally to 12 percent. The Dow Jones Industrial Average increased 66.22 points, or 0.5 percent, to 13,212.04. The Nasdaq Composite Index declined 0.1 percent to 3,091.57. The measure still posted the biggest first-quarter gain since 1991 (CCMP), surging 19 percent. The Russell 2000 Index of small companies declined 0.2 percent to 830.30 today.

“There’s no reason to avoid equities just because they’ve gone up a lot,” said David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York. “People are less fearful of a global financial meltdown emanating from Europe. If you look at valuations and the potential for economic growth, those things tell me the market should have room to move higher over the next few years.”

Photographer: Scott Eells/Bloomberg

Traders work at the New York Stock Exchange (NYSE) in New York. Close

Traders work at the New York Stock Exchange (NYSE) in New York.

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Photographer: Scott Eells/Bloomberg

Traders work at the New York Stock Exchange (NYSE) in New York.

More than $3.6 trillion was restored to U.S. equity values since the S&P 500 reached last year’s low in October as the index surged 28 percent amid better-than-estimated economic data. It trades at 14.6 times reported earnings, the highest valuation since July while below the average since 1954 of 16.4.

Monthly Gains

The S&P 500 rose 3.1 percent in March (SPX), rallying for a fourth straight month. The Dow added 2 percent since the end of February, posting a sixth month of gains. Both capped the longest stretches of monthly rallies since 2009.

Over the last 100 years, the Dow advanced 1.3 percent on average in April (INDU) and gained 57 percent of the time, according to data compiled by Bespoke Investment Group. The index rose an average 2.1 percent in April over the last 50 years and 2.9 percent in the past 20 years, the data showed, marking the best month for the Dow in both time frames.

Stocks rose today as Americans increased their spending by the most in seven months, Commerce Department data showed. Another report showed that the Thomson Reuters/University of Michigan’s final index of consumer sentiment climbed to 76.2, the highest since February 2011, from 75.3 last month. European (SXXP) governments capped fresh rescue lending at 500 billion euros ($666 billion), after a Germany-led coalition opposed a further expansion of the firewall.

Biggest Gains

Nine out of 10 groups in the S&P 500 rose today as energy, health-care and consumer-staple companies had the biggest gains. Twenty-seven out of 30 companies in the Dow advanced.

Commodity shares gained as the S&P GSCI index of raw materials added 0.7 percent. Halliburton, the world’s largest provider of hydraulic-fracturing services, rose 1.3 percent to $33.19. Dow Chemical, the biggest U.S. chemical maker, increased 1.4 percent to $34.64.

Cabot Oil & Gas Corp. (COG) climbed 3 percent to $31.17. The 4.8 percent drop in the oil and gas company’s shares yesterday after the occurrence of a flash fire at the Williams Partners LP- operated Lathrop compressor station in Pennsylvania was “overblown,” JPMorgan Chase & Co. said in a note.

Disney added 1.8 percent, the biggest advance in the Dow, to $43.78 after Lazard raised its recommendation for the shares to buy from neutral.

Research In Motion Ltd. (RIM) jumped 7.1 percent to $14.70. The maker of BlackBerry smartphones said it plans to refocus on the business market and review strategic options after struggling to compete against Android devices and Apple Inc.’s iPhone.

Heart Risk

Vivus Inc. (VVUS) gained 5.1 percent to $22.36 and Arena Pharmaceuticals Inc. (ARNA) rose 1.2 percent to $3.08. The biopharmaceutical companies, which are competing to win U.S. regulatory approval for weight-loss treatments, probably won’t be affected by an advisory panel’s recommendation for heart-risk studies, a Food and Drug Administration spokeswoman said.

Financial shares, which had the biggest gain in the S&P 500 among 10 groups this quarter, swung between gains and losses today before closing 0.5 percent high. The KBW Bank Index rose 0.3 percent today, after falling as much as 0.8 percent earlier.

Technology shares, which comprise 21 percent of the S&P 500, had the only decline among 10 industries today. The group had the second-biggest advance in the S&P 500 this quarter, surging 21 percent.

Apple, the most valuable technology (S5INFT) company, lost 1.7 percent to $599.55. An audit of Foxconn Technology Group, the biggest maker of Apple devices, found “serious and pressing” violations of Chinese labor laws, prompting the company to pledge to cut working hours and give employees more oversight.

Exceeding Estimates

The S&P 500 ended the first quarter 3.4 percent above the 1,362 mean year-end projection of strategists surveyed by Bloomberg. The index slumped 0.9 percent over the previous three days on concern this year’s rally has outpaced prospects for economic growth.

“The best of 2012 is probably behind us,” Alan Brown, chief investment officer at Schroders Plc, said in a telephone interview from London. His firm oversees $291 billion. “We’ve had a very substantial rally. I’m not sure where the fresh round of good news comes from that we haven’t already discounted in today’s prices. I’m rather more cautious at the present time.”

Shrinking Margins

Profit margins are poised to start falling in the U.S. as they have worldwide, according to Pierre Lapointe, Brockhouse & Cooper Inc.’s global macro strategist. Shrinking margins may weigh on earnings in the next few quarters and hurt stocks, the report said.

S&P 500 margins have narrowed by 0.2 percentage point this year, to 13.8 percent. The comparable declines for companies in in the European (SXXP) and Japanese benchmarks are 2 points and 0.9 point, respectively.

“Corporate America can no longer rely on cost-cutting,” Lapointe wrote in a report with colleagues Alex Bellefleur and Frances Donald. “The only way to grow the bottom line will be to grow the top line” by increasing sales, the Montreal-based strategist wrote.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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