S&P 500 Gains as Retailers Surge to Record on Earnings

The Standard & Poor’s 500 Index (SPX) capped the best week in a month, as retailers (S5RETL) surged to a record, after improving corporate earnings and consumer confidence tempered lower-than-forecast economic growth.

Retailers in the S&P 500 climbed 3.5 percent for the biggest gain among 24 groups. Amazon.com Inc. (AMZN), the largest Internet retailer, and Expedia Inc., an online-travel company, surged at least 15 percent as earnings beat estimates. A gauge of homebuilders in S&P indexes rallied 3 percent to the highest level since October 2008. Starbucks Corp. (SBUX) tumbled 5.3 percent as same-store sales trailed analysts’ projections.

The S&P 500 added 0.2 percent to 1,403.36 at 4 p.m. New York time. The benchmark gauge for U.S. equities rallied 1.8 percent since April 20 for a back-to-back weekly gain. The Dow Jones Industrial Average gained 23.69 points, or 0.2 percent, to 13,228.31. About 6.2 billion shares changed hands on U.S. exchanges, or 7 percent below the three-month average.

“It all tells me that the economy continues to grow at a slow, steady pace,” said Jeffrey Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri. His firm has $1.9 billion under management. “Consumers are feeling more confident and it’s a good thing. We’re pleased with the overall improvement in earnings.”

About 75 percent of the companies in the S&P 500 that reported results since April 10 have topped analysts’ estimates, according to data compiled by Bloomberg. Per-share profits are forecast to have grown 5.3 percent in the first-quarter, Bloomberg data show. That’s up from the 0.8 percent growth projection before the earnings season started.

Economic Data

Equities rose even after data showed the U.S. economy expanded at a 2.2 percent annual rate in the first quarter, less than the 2.5 percent increase forecast by economists. Confidence among U.S. consumers climbed in April to the highest level in a year, according to a separate report.

Pacific Investment Management Co.’s Mohamed El-Erian said lower-than-forecast U.S. growth suggests additional monetary stimulus remains on option for the Federal Reserve even though there is no immediate need for action.

“If we continue this weakening trend, the Fed will come back in and try to sustain this market and this economy,” El- Erian, the chief executive officer of the world’s largest manager of bond funds, said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “I don’t think there is an immediate need now.”

Today’s rally trimmed this month’s decline in the S&P 500 to 0.4 percent. If the index erases its April drop, it will cap the fifth straight month of gains, the longest winning streak since 2009. The gauge has gained 12 percent so far this year.

Biggest Gains

Six out of 10 groups in the S&P 500 rose today as companies that rely on consumer discretionary spending and industrial shares had the biggest gains. Ten of 11 stocks in a measure of homebuilders in S&P indexes advanced.

Amazon surged 16 percent, the biggest advance since October 2009, to $226.85. The company posted earnings-per-share that quadrupled the average analyst estimate. Chief Executive Officer Jeff Bezos is looking to add customers by pouring money into new versions of the Kindle and warehouses that are equipped to send out products faster.

Expedia (EXPE) soared 24 percent, the most in the S&P 500, to $40.31. “Gross bookings and revenue growth were again driven by strength in our hotel business with global room-nights growing 24 percent, a nice acceleration from the 19 percent we saw for the fourth quarter,” Dara Khosrowshahi, the company’s chief executive officer, said on a conference call yesterday.

Highest Since 1997

Vivus Inc. (VVUS) jumped 3 percent to $25.15, the highest since 1997. A Vivus pill that is supposed to provide erections within 15 minutes, about half the time or less than Pfizer Inc.’s Viagra, won U.S. regulatory approval.

Starbucks retreated 5.3 percent, the most since Aug. 18, to $57.43. Sales at stores open at least 13 months rose 7 percent globally in the quarter. Analysts projected a gain of 8.2 percent, the average of 17 estimates compiled by Consensus Metrix. Such sales fell 1 percent in Europe, the Middle East and Africa amid “slight decreases” in transactions and average check, Starbucks said.

Customers in Europe “are just cautious, as you would expect, not unlike what they were like in the U.S. three and four years ago,” Chief Financial Officer Troy Alstead said in an interview. Starbucks “is not immune from that,” he said.

Procter & Gamble Co. (PG) slumped 3.6 percent to $64.44 for the biggest loss in the Dow. The world’s largest consumer-products company reduced its full-year earnings forecast amid higher costs for raw materials.

Overseas Losses

Ford Motor Co. (F) dropped 2.3 percent to $11.60. The company seeking a second investment-grade credit rating said first- quarter profit fell 45 percent on a higher tax rate and as overseas losses ate into growing income from North America.

Allscripts Healthcare Solutions Inc. (MDRX) plunged 36 percent, the most in the Russell 1000 Index (RIY), to $10.30. The maker of clinical software slashed its earnings forecast for 2012. Chief Financial Officer Bill Davis will leave the company effective May 18, and three board directors resigned after disagreeing with a decision to terminate Chairman Phil Pead.

Utilities are poised to become the only one of the S&P 500’s 10 main industry groups whose investors receive dividends on every stock. AES (AES) Corp. and NRG Energy Inc. (NRG), two independent power producers, plan to introduce payouts during the second half. They are the only utilities in the S&P 500 that don’t already provide dividend income.

Dividend Ranking

The industry currently has the fourth-highest percentage of dividend-paying shares. Raw-material (S5MATR) producers, makers of food, beverages and other consumer staples, and industrial companies are the top three, in that order.

More than 80 percent of S&P 500 companies pay dividends, said Howard Silverblatt, a New York-based senior index analyst at S&P. The figure is the highest since January 2000. Nasdaq OMX Group Inc. sent the percentage above that threshold two days ago by declaring a quarterly payout of 13 cents a share.

AES plans to distribute $120 million a year, starting in the fourth quarter. That’s equivalent to an annual dividend of about 16 cents a share. The Arlington, Virginia-based company’s most recent payout was in 1994, four years before joining the S&P 500, according to data compiled by Bloomberg.

NRG, a component of the index since 2010, plans to begin paying dividends in the third quarter. Investors would receive 36 cents a share annually. The company, based in Princeton, New Jersey, made a similar proposal in 2007 that was scrapped after a bid to refinance debt failed.

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

To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net

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