U.S. Stocks Rally for 6th Week as Yellen Fuels Fed Bets

Photographer: Scott Eells/Bloomberg

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Photographer: Scott Eells/Bloomberg

Traders work on the floor of the New York Stock Exchange.

U.S. stocks rose for the sixth straight week, sending benchmark indexes to all-time highs, after Janet Yellen signaled she will continue Federal Reserve stimulus efforts as the central bank’s chairman.

Macy’s Inc. jumped 11 percent for the week, leading a rally among retailers, as better-than-estimated earnings boosted optimism about the holiday shopping season. PulteGroup Inc. and D.R. Horton Inc. climbed more than 7.4 percent as homebuilders advanced. Exxon Mobil Corp. gained 2.7 percent as Warren Buffett’s Berkshire Hathaway Inc. disclosed a stake. Cisco Systems Inc. tumbled 8.4 percent after forecasting its first quarterly sales decline in four years.

The Standard & Poor’s 500 Index rose 1.6 percent to 1,798.18 over the five days, extending the index’s longest weekly advance since February. The Dow Jones Industrial Average added 199.92 points, or 1.3 percent, to 15,961.70. Both gauges reached records on each of the last three days of the week.

“Janet Yellen induced euphoria for the market,” Kristina Hooper, a U.S. investment strategist at Allianz Global Investors in New York, said in a phone interview. The firm oversees $436 billion. “We certainly have seen more excitement about the stock market than we’ve seen in a long time.”

Equities rallied as Yellen, nominated to be the next chairman of the Fed, said the economy and labor market are performing “far short of their potential” and must improve before the central bank can begin reducing monetary stimulus.

Yellen Commitment

The remarks show Yellen is committed to the Fed’s strategy of attempting to boost the economy and lower 7.3 percent unemployment, more than four years after the U.S. began to recover from the longest and deepest recession since the Great Depression.

Economic data during the five days showed more Americans than forecast filed applications for unemployment benefits during the week ended Nov. 9, while factory production picked up in October. A separate report showed manufacturing in the New York area unexpectedly contracted this month.

Fed policy makers will probably scale back the pace of $85 billion in monthly bond buying at their March 18-19 meeting, according to the median of 32 estimates in a Bloomberg survey of economists on Nov. 8. Fed Bank of Atlanta President Dennis Lockhart said reducing bond purchases “ought to be on the table at upcoming meetings” by the Federal Open Market Committee, scheduled Dec. 17-18.

Central bank support has helped propel the S&P 500 higher by 166 percent from its March 2009 low. The gauge has rallied 26 percent so far in 2013, heading for its best year in a decade, and is trading at 16.3 times projected earnings, above the five-year average of 14 times profit, according to data compiled by Bloomberg.

Maximum Cash

Bargains are hard to find nowadays, according to Sandy Villere III, a New Orleans-based fund manager at Villere & Co. The firm’s $1.1 billion Villere Balanced Fund, which beat 99 percent of its peers over the past five years, is holding a maximum 15 percent in cash, he said.

“We’re finding many companies that are now getting a little bit over-extended, so we’re selling,” Villere said in an interview. His firm oversees $2.8 billion. “We can’t find good opportunities to buy.”

The Chicago Board Options Exchange Volatility Index, which measures future market swings implied by S&P 500 options, slipped 5.5 percent for the week to 12.19, a three-month low. The gauge has retreated 32 percent this year.

Consumer-discretionary companies had the largest advance among groups in the S&P 500, climbing 2.5 percent, as all 10 industries increased. Health-care and consumer-staples shares added more than 1.6 percent. Utilities and telephone stocks had the worst performance, each with a 0.8 percent gain.

Holiday Demand

Macy’s jumped 11 percent to a record $51.09. The second-largest U.S. department-store company posted fiscal third-quarter profit that beat analysts’ estimates as better local selections boosted sales, signaling stronger demand headed into the holidays.

Of the 463 S&P 500 companies that have announced earnings so far, 75 percent topped analysts’ income forecasts while 54 percent beat revenue estimates, data compiled by Bloomberg show. Profits for the gauge increased 4.9 percent in the third quarter and will gain 5.8 percent in the final three months of the year, estimates compiled by Bloomberg show.

J.C. Penney (JCP) Co. surged 9.7 percent to $9.03. Jana Partners LLC, the $7 billion hedge-fund firm run by Barry Rosenstein, took a stake in the struggling retailer last quarter, according to a filing with the Securities and Exchange Commission. Gilford Securities analyst Bernard Sosnick said J.C. Penney likely achieved sales goals and “perhaps more” for Veterans Day weekend.

Homebuilders Rally

An S&P index of homebuilders rose 5 percent as all 11 members advanced. D.R. Horton rallied 8 percent to $19.59. The largest U.S. homebuilder by revenue reported a higher quarterly profit as it increased prices amid a nationwide housing recovery. PulteGroup rose 7.4 percent to $18.10.

Exxon, the world’s biggest oil company by market value, advanced 2.7 percent to $95.27. Berkshire Hathaway reported a stake valued at about $3.7 billion as of Sept. 30. Exxon has advanced 10 percent this year, trailing the S&P 500’s gain.

FedEx (FDX) Corp. climbed 4.6 percent to $138.65. Billionaire investors George Soros and John Paulson joined Daniel Loeb in taking stakes last quarter in the operator of the world’s largest cargo airline. Soros Fund Management LLC owned a $173 million stake and Paulson & Co. held $73.8 million in the shares at the end of the third quarter. Loeb’s Third Point LLC acquired a stake valued at $228.2 million.

Office Depot

Office Depot Inc. climbed 9.7 percent to $5.53. Bank of America Corp. raised its rating on the stock to buy from underperform, citing potential cost savings following its merger with OfficeMax Inc. and the appointment of Roland Smith as chief executive officer.

Twitter Inc. added 5.6 percent to $43.98 in its second week of trading. Shares of the unprofitable microblogging service have soared 69 percent since being priced at $26 on Nov. 6 amid speculation profits will surge as the company expands in markets like mobile advertising.

Cisco (CSCO) tumbled 8.4 percent, the most since May 2012, to $21.54. The world’s largest maker of computer-networking equipment gave quarterly profit and sales forecasts that missed analysts’ estimates on sluggish emerging-market demand and weak corporate spending.

The outlook dragged down other technology shares. Hewlett-Packard Co. lost 2.8 percent to $25.21 while Xilinx Inc. and Jabil Circuit Inc. retreated at least 2.2 percent.

Kohl’s (KSS) Corp. slid 5.4 percent to $53.95. The retailer reported third-quarter earnings that missed analyst estimates and trimmed its full-year outlook.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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

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