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U.S. Stocks Gain in Week on Economy as S&P 500 Nears High

U.S. stocks climbed for the week, sending the Standard & Poor’s 500 Index within five points of a record high, as better-than-estimated retail sales and jobless claims data boosted optimism in the world’s largest economy.

Benchmark indexes retreated on the last trading day as a gauge of consumer confidence declined. Boeing (BA) Co. led advances in the Dow (INDU) Jones Industrial Average during the week, jumping 6.4 percent after saying safety upgrades to the 787 Dreamliner’s battery systems may allow commercial flights to restart within weeks. Bank of America Corp. (BAC) rallied 4.1 percent after winning Federal Reserve support to buy back stock.

The S&P 500 advanced 0.6 percent to 1,560.70, for its third straight weekly gain. The Dow climbed for a fourth week, adding 117.04 points, or 0.8 percent, to 14,514.11. The 30-stock index posted 10 straight days of gains through March 14, the longest winning streak since 1996.

The consumer and the labor market are “in a word, healing,” Matthew Peron, head of active equity investing at Northern Trust Corp. in Chicago, said by telephone. His firm manages about $750 billion. “We’re more resilient than we have been. We’re able to weather punches. People are seeing that and getting comfortable that major potholes aren’t right around the corner.”

Equities advanced as economic reports showed sales at U.S. retailers climbed twice as much as forecast in February, indicating that improving job prospects are helping consumers. First-time jobless claims unexpectedly fell in the week ended March 9 to the lowest level since mid-January. Stocks slumped on the last day as confidence among American consumers unexpectedly slumped in March.

Two Points

The S&P 500 (SPX) climbed on March 14 to within two points of its record closing level of 1,565.15 set in October 2007, before retreating on the final day of trading. The gauge has more than doubled from its bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Fed. The 116-year-old Dow surpassed its record on March 5, and climbed higher each day through March 14.

“Even though it’s a lot of days, the magnitude of the rally hasn’t been huge,” Andrew Slimmon, Chicago-based managing director of global investment solutions at Morgan Stanley Smith Barney, said by phone. His firm has $1.7 trillion in client assets. “It’s been small, incremental moves. The reason for that is that there’s still a relatively high level of skepticism towards equities and that leaves me to believe the capitulation is still out there. It hasn’t still run its course.”

Volatility Index

The CBOE Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, dropped 10 percent to 11.30 during the week, the lowest level since February 2007. The gauge, known as the VIX (VIX), is down 37 percent this year.

Financial, utility and energy stocks advanced at least 1.1 percent, leading gains among 10 S&P 500 groups. Investors bought shares of companies most tied to economic growth, sending the Morgan Stanley Cyclical Index (CYC) up 1.4 percent and the Dow Jones Transportation Index higher 2.1 percent. Both indexes touched all-time highs during the week.

Boeing jumped 6.4 percent to $86.43, the highest level in almost five years. The safety improvements to the 787 Dreamliner’s battery systems will allow the resumption of service once the U.S. Federal Aviation Administration and other regulators sign off, and Air India may fly its five 787s as soon as April.

Banks Climb

Lenders rose as the KBW Bank Index added 1.6 percent in the wake of Fed stress tests. Bank of America gained 4.1 percent to $12.57 after the second-largest U.S. lender won federal approval for a $5 billion share buyback, the firm’s first repurchases since the financial crisis. Morgan Stanley added 2.4 percent to $23.59 after it got permission to buy the remaining stake in its wealth-management venture.

JPMorgan Chase & Co. slid 0.4 percent to $50.02 while Goldman Sachs Group Inc. advanced 1.2 percent to $154.84. The world’s biggest trading firms must submit new capital plans to regulators to address weaknesses the Fed found in their planning processes. Separately, a Senate investigation found that JPMorgan Chief Executive Officer Jamie Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet last year.

DirecTV surged 9.8 percent to $54.99. The largest U.S. satellite-TV provider pulled out of bidding for Vivendi SA’s Brazilian phone and Internet unit, GTV, forgoing an option to add more services in South America.

Apple’s Cash

Apple Inc. rose 2.8 percent to $443.66 for the biggest weekly rally in over a month. The iPhone maker will outline what it plans to do with a growing pile of cash by next month, said Howard Ward, chief investment officer at Gamco Investors Inc. Legg Mason Inc.’s Bill Miller said on CNBC, “We just went overweight on Apple again.”

Dick’s Sporting Goods Inc. (DKS) sank 7.1 percent to $47 for the biggest weekly decline of the year after forecasting annual profit that was less than analysts estimated on costs to remodel stores and improve its Web operations.

Carnival Corp. declined 2 percent to $34.95. The cruise operator beset by mishaps at sea this year cut its annual earnings forecast to reflect costs from an engine fire that crippled the Carnival Triumph last month.

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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