U.S. Stocks Rise as Global Markets Rally on Fed Program

U.S. stocks rose, after the Standard & Poor’s 500 Index climbed to its highest level since 2007, as markets rallied around the world on the Federal Reserve’s bond-purchase program.

Alcoa Inc. (AA) and Exxon Mobil Corp. (XOM) jumped at least 1.2 percent, as commodity producers rallied. Apple Inc. (AAPL) jumped 1.2 percent as the Nasdaq Composite Index rose to its highest level in 12 years. Staples (SPLS) Inc. climbed 2.1 percent amid a report private-equity firms are considering buying the largest U.S. office-supplies chain. Analogic Corp. (ALOG) surged 16 percent after profit topped estimates.

The S&P 500 advanced 0.4 percent to 1,465.77 at 4 p.m. in New York. The gauge is at the highest level since Dec. 31, 2007, after Fed Chairman Ben S. Bernanke announced asset purchases to boost growth. The Dow Jones Industrial Average added 53.51 points, or 0.4 percent, to 13,593.37. About 8.5 billion shares traded hands on U.S. exchanges today, 40 percent above the three-month average.

“Though the Fed has created a little short-term excitement, I think this is more fundamental than people appreciate,” James Paulsen, the chief investment strategist at Minneapolis-based Wells Capital Management, said in a telephone interview. His firm oversees about $320 billion. “When the dust settles away from this, you’re going to be left with an economy still showing increasing momentum from where we were.”

All 10 groups in the S&P 500 rallied yesterday after the Federal Open Market Committee committed to buying bonds until the U.S. labor market recovers “substantially.” The central bank said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month. Asian and European equities extended the rally today, led by gains in basic-resource companies and automakers.

Record Close

The S&P 500 is about 7 percent from reaching its record closing high after rallying 17 percent this year amid expectations central banks will take steps to stimulate the economy. Equities received a boost last week as the European Central Bank agreed to an unlimited bond-buying program to help reduce borrowing costs in the euro region.

Bank of America Corp. (BAC)’s Savita Subramanian forecast the S&P 500 will rise to 1,600 at the end of 2013, 2.2 percent higher than the previous all-time high of 1,565.15. The equity index will continue to climb amid earnings growth, Subramanian, the New York-based head of U.S. equity strategy, said in a note.

Stocks rose today as data showed retail sales in the U.S. increased in August by the most in six months. The cost of living in the U.S. climbed in August by the most in more than three years, reflecting a surge in fuel costs. Industrial production shrank in August by the most since March 2009, while confidence among U.S. consumers unexpectedly improved in September.

UnitedHealth Group Inc. (UNH) will replace Kraft Foods Inc. (KFT) in the Dow, the first change to the 116-year-old U.S. stock benchmark in three years, according to S&P Dow Jones Indices.

Kraft, the world’s second-largest food company, will be removed from the Dow average after deciding to spin off its North American grocery business on Oct. 1. The change goes into effect at the opening of trading on Sept. 24, S&P Dow Jones Indices said. UnitedHealth rose 0.7 percent to $54.25 today. Kraft slipped 0.5 percent to $39.93.

Oil Surges

Commodity companies posted the biggest advances out of 10 groups in the S&P 500 (SPX), rising at least 1.2 percent as oil climbed to the highest level in more than four months. Investors bought shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index up 1.3 percent, for its fourth straight day of gains.

Alcoa, the largest U.S. aluminum producer, gained 2.2 percent to $9.84. Exxon, the world’s biggest oil company, added 1.2 percent to $92.30, the highest since May 2008.

Financial companies rose 0.8 percent as a group. Bank of America, the second-largest U.S. bank by assets, advanced 1.6 percent to $9.55.

Apple, the iPhone and iPad maker, climbed 1.2 percent to a record $691.28. The shares have soared 4.7 percent over three days after the world’s most valuable company announced on Sept. 12 a new version of the iPhone that boasts a bigger screen, faster chip and access to speedier wireless networks. The Nasdaq Composite Index (CCMP) jumped 0.9 percent to 3,183.95, the highest since November 2000.

Staples Jumps

Staples rose 2.1 percent to $12.21. Fortune reported yesterday that private-equity firms including Bain Capital LLC are considering buying the retailer. Discussions to take over Staples are preliminary and an offer wouldn’t be made until late this year, Fortune reported, citing people it didn’t name.

Analogic jumped 16 percent to $80.44. The medical and airport-security device maker reported adjusted earnings in the fourth quarter of $1.32 a share, exceeding the average analyst estimate of 84 cents. Sales were $151 million compared with the average projection of $141 million.

Western Digital Corp. (WDC) slid 3.6 percent to $41.06. The largest maker of hard-disk drives cut its forecasts for sales and market size in the current quarter, citing muted demand for personal computers. Revenue will be no more than $4 billion in the three months that end Sept. 28. That’s down from an earlier projection at least $4.2 billion and compares with an average analyst estimate of $4.28 billion.

Werner Enterprises Inc. (WERN) lost 7.4 percent to $21.93. The trucking and logistics company forecast third-quarter earnings will be no more than 36 cents a share, below the 44 cents estimated by analysts on average.

To contact the reporter on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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