Dow Climbs to Highest Level on Central Bank Optimism
The Dow Jones Industrial Average (INDU) climbed to a record, erasing losses from the financial crisis, as China vowed to maintain its growth target and investors bet central banks will continue stimulus measures.
All 10 groups in the Standard & Poor’s 500 Index and 27 out of 30 stocks in the Dow rose. Apple Inc. rallied 2.6 percent for its first gain in five days. Qualcomm Inc. jumped 2 percent as it increased its dividend by 40 percent and set up a $5 billion share buyback plan. J.C. Penney Co. sank 11 percent after its second-biggest shareholder sold part of its stake.
The Dow rose 125.95 points, or 0.9 percent, to 14,253.77 at 4 p.m. in New York, surpassing its previous closing high of 14,164.53 as well as its intraday peak of 14,198.1 from Oct. 11, 2007. The S&P 500 added 1 percent to 1,539.79 today. The benchmark gauge is less than 2 percent below its record high. About 6.5 billion shares exchanged hands, 2.8 percent above the three-month average.
“People are now starting to realize that it is a bull market,” Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Connecticut, said in an interview on Bloomberg Radio’s “Surveillance” with Tom Keene and Michael McKee. “It’s not going to come back, you’ve missed the train, and the train still has a long way to go. But you better get on it.”
The bull market in U.S. equities enters its fifth year this month. The S&P 500 has surged 128 percent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Federal Reserve embarked on three rounds of bond purchases to stimulate the economy.
Stimulus Measures
U.S. stock indexes advanced this week amid optimism the Fed will maintain stimulus measures to support the economic recovery. Fed Vice Chairman Janet Yellen said yesterday the U.S. central bank should press on with $85 billion in monthly bond buying while tracking possible costs and risks from the unprecedented program.
Global equities also rose today as China pledged to support economic expansion. The nation will keep its growth target at 7.5 percent for this year and plans a 10 percent jump in fiscal spending, the government said during the start of the National People’s Congress today.
The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers about 90 percent of the economy, rose to 56 in February from the prior month’s 55.2, the Tempe, Arizona-based group said today. Readings above 50 signal expansion. The ISM services survey covers industries ranging from utilities and retailing to housing, health care and finance.
‘Risk On’
“This is clearly a day where investors are looking to put risk on,” Andrew Milligan, head of global strategy at Standard Life Investments Ltd., who helps manage over $263.9 billion, said in a phone interview. The Edinburgh, U.K.-based firm manages over $263.9 billion. “Services are a much, much larger part of all economies now than the manufacturing sector.”
Birinyi, who was one of the first money managers to tell clients to buy before the bull market began in March 2009, said technology, materials and energy stocks are the best choices today. Salesforce.com Inc., the largest maker of online customer-management software, is an example of a well-performing cyclical stock, he said.
Cisco Systems Inc., United Technologies Corp., Boeing Co. and Hewlett-Packard Co. had the biggest gains in the Dow, rising at least 2 percent. Technology, industrial and consumer- discretionary stocks added the most among 10 groups in the S&P 500, advancing at least 1 percent.
Cyclical Stocks
Investors bought shares of companies most tied to economic growth, sending the 30-member Morgan Stanley Cyclical Index up 1.4 percent. The Dow Jones Transportation Average, a gauge of 20 shipping companies, climbed to a record, adding 1.5 percent.
The Chicago Board Options Exchange Volatility Index, known as the VIX, fell for the third day, losing 3.8 percent. The gauge has lost 25 percent this year.
Apple rallied $11.09 to $431.14. The company is planning on releasing its iPhone 5S in August, iMore reported, citing unnamed people familiar with the matter. An updated iPad is getting “serious consideration” and may be introduced around April, the technology news website said. Apple shares have tumbled 19 percent in 2013.
Sears Holdings Corp. increased 5.6 percent to $46.63. Chief Executive Officer Eddie Lampert bought 1.24 million shares of the retailer yesterday, while his hedge fund ESL Investments Inc. sold the same amount for the same price, according to a filing yesterday.
Qualcomm (QCOM) jumped $1.34 to $67.97. The largest seller of semiconductors for mobile phones will increase its quarterly cash dividend to 35 cents from 25 cents, rewarding investors after rising demand for smartphones that run on its technology spurred sales growth. The new share repurchase plan replaces an older $4 billion plan that had $2.5 billion remaining.
Genworth Gains
Genworth Financial Inc. surged 3.3 percent to $9.39. The seller of life insurance and mortgage guaranties has climbed 10 percent in two days and is up 25 percent this year. Barclays Plc analyst Mark C. DeVries raised his rating on mortgage insurers MGIC Investment Corp. and Radian Group Inc. to overweight from underweight in a note today.
Apollo Group Inc. (APOL) jumped 3.1 percent to $16.70 after six days of losses. The for-profit educator was raised to hold from sell by Deutsche Bank AG analyst Paul Ginocchio, who cited the stock’s valuation in a note dated today.
American Apparel Inc. surged 19 percent to $1.53 as the retailer projected sales of $654 million to $660 million in 2013. That beat the $650.2 million average of two analyst estimates in a Bloomberg survey.
BMC Software
BMC Software Inc. climbed 3.7 percent to $42.32. The maker of programs to manage corporate computer networks has attracted renewed buyout interest from private-equity funds, people with knowledge of the situation said.
KKR & Co. and TPG Capital have separately expressed interest, said the people, who declined to be identified because the talks are private. BMC held similar talks last year amid pressure from activist investor Elliott Associates LP before deciding to buy back $1 billion in shares.
J.C. Penney declined $1.78 to $14.96, its lowest level since March 2009, after people familiar with the matter said Vornado Realty Trust sold 10 million shares in the department- store company at $16.40 apiece through Deutsche Bank AG.
“There are more tailwinds than headwinds,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said by phone. On the ISM number, he said, “This is all coming on the back of better- than-expected economic data partly from around the world but also from Europe. There’s some very dovish sentiment from central bankers and policy makers around the world as well.”
To contact the reporters on this story: Inyoung Hwang in New York at ihwang7@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net
To contact the editor responsible for this story: Michael P. Regan at mregan12@bloomberg.net
Dow Climbs Above Record Close on Central Bank Stimulus Optimism
Jin Lee/Bloomberg
A trader reacts after the closing bell on the floor of the New York Stock Exchange (NYSE).
A trader reacts after the closing bell on the floor of the New York Stock Exchange (NYSE). Photographer: Jin Lee/Bloomberg
March 5 (Bloomberg) -- Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., talks about the U.S. stock market, Federal Reserve monetary policy and the economy. He speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
March 5 (Bloomberg) -- Jeremy Siegel, professor of finance at the University of Pennsylvania's Wharton School, talks about the outlook for the U.S. stock market. Stocks jumped, sending the Dow Jones Industrial Average to a record today. Siegel speaks with Trish Regan and Adam Johnson on Bloomberg Television's "Street Smart." (Source: Bloomberg)
March 5 (Bloomberg) -- Byron Wien, vice chairman of Blackstone Group LP's advisory services unit, talks about the outlook for U.S. stocks and commodities. Wien, speaking with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance," also discusses investment strategy, corporate earnings and the U.S. labor market. Donald Baer, worldwide chief executive officer of Burson-Marsteller LLC, also speaks. (Source: Bloomberg)
March 5 (Bloomberg) -- Jason Trennert, chief investment strategist at Strategas Research Partners, talks about the performance of and outlook for the U.S. stock market. Trennert, speaking with Tom Keene, Sara Eisen and Scarlet Fu on Bloomberg Television's "Surveillance," also talks about Europe's debt crisis and corporate earnings. (Source: Bloomberg)
March 5 (Bloomberg) -- John Brynjolfsson, chief investment officer at Armored Wolf LLC, and Mark Luschini, chief investment strategist at Janney Montgomery Scott LLC, talk about the U.S. stock market, Federal Reserve monetary policy and investment strategy. They speak with Pimm Fox on Bloomberg Television's "Taking Stock." (Source: Bloomberg)
Rate this Page
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.