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U.S. Stocks Gain for Week as Dow Hits Record on Earnings

U.S. stocks rose for the week, with the Dow Jones Industrial Average (INDU) reaching a record, as earnings topped forecasts and the Federal Reserve said it would further trim bond purchases as the economy gains momentum.

The Standard & Poor’s 500 Index (SPX) briefly climbed above its highest closing price on the final day, before tensions over Ukraine overshadowed data showing payrolls rose the most since 2012. Pepco Holdings Inc. surged 23 percent amid a pickup in deals activity. Yahoo! Inc. (YHOO) jumped 6.9 percent as Internet stocks rebounded after a selloff.

The S&P 500 rose 1 percent to 1,881.14 for the five days. The Dow added 151.43 points, or 0.9 percent, to 16,512.89. The Nasdaq Composite Index increased 1.2 percent.

“You had positive economic data and evidence the U.S. economy is gaining momentum this week, which should be driving us to higher highs,” said Chad Morganlander, a fund manager at Stifel Nicolaus & Co., in a phone interview from Florham Park, New Jersey. The firm oversees more than $150 billion. “Even the Russian issue should have little effect on global growth. And the jobs number bodes well for future growth in the U.S.”

The Dow climbed to a record 16,580.84 on April 30, capping a three-day rally, after the Fed said the economy is perking up after stalling last quarter and the job market is improving. Data on the final day showed U.S. payrolls rose the most in two years during April and the jobless rate plunged to 6.3 percent, the lowest since 2008.

Fed Stimulus

The Federal Open Market Committee pared its monthly asset-buying to $45 billion, its fourth straight $10 billion cut, and said further reductions in “measured steps” are likely. Gross domestic product rose at a 0.1 percent annualized rate from January through March, compared with a 2.6 percent gain in the prior quarter, the Commerce Department said the same day as the central bank decision.

Other data during the week showed consumers and companies were shaking off winter doldrums. Household purchases, which account for about 70 percent of the economy, climbed 0.9 percent in March, the most since August 2009. Incomes increased by the most in seven months. A report from the Institute for Supply Management showed factories added employees in April at the fastest pace in four months. Manufacturing expanded the most this year.

Ukraine Tensions

The S&P 500 has climbed 1.8 percent this year, while the Dow is down 0.4 percent. Tensions in Ukraine have offset better-than-forecast corporate earnings. President Barack Obama and German Chancellor Angela Merkel set a May 25 trigger for possible economic sanctions against Russia, and the United Nations Security Council held an emergency meeting on Ukraine May 2 after the country dispatched forces to retake a separatist stronghold.

Almost 140 companies reported earnings during the week. About 76 percent of those that have posted results this season have beaten analysts’ estimates, data compiled by Bloomberg show. More than 52 percent of them have topped sales projections, according to the data.

Sprint Corp. (S) jumped 11 percent for the week, the most since December, to $8.70 and Merck & Co. added 1.7 percent to $58.22 as earnings from both companies topped analyst estimates. Sprint boosted its full-year forecast.

Profits for members of the index climbed 4.6 percent in the first quarter, according to analyst estimates compiled by Bloomberg. They had predicted an increase of 0.7 percent as recently as April 17. Revenue probably rose 2.8 percent in the quarter, the projections show.

The Chicago Board Options Exchange Volatility Index dropped 8.2 percent to 12.91, a three-month low. The measure of volatility known as the VIX is down 5.9 percent for the year.

Pepco Deal

Pepco, a power utility operator, soared a record 23 percent to $26.98 after agreeing to sell itself to Exelon Corp. for $6.8 billion in cash, creating the biggest electric and natural gas utility in the Mid-Atlantic region.

U.S. power utilities have announced $14.9 billion of acquisitions in the past year, according to data compiled by Bloomberg, as they seek to reduce costs through greater scale.

Forest Laboratories Inc. increased 1.9 percent to $91.51. The drugmaker being acquired by Actavis Plc agreed to buy Furiex Pharmaceuticals Inc. for $1.1 billion in cash to expand offerings of medicines for digestive disorders.

The $115 billion of pharmaceutical deals that have been announced or reported this quarter through April 29 are about $1 billion shy of the record set in the first quarter of 2009, data compiled by Bloomberg show.

Internet Stocks

Yahoo!, which doubled in 2013, rose 6.9 percent to $36.87 for the week while Netflix Inc. added 5.8 percent to $340.65 as the Dow Jones Internet Composite Index climbed 1.4 percent following a 4.2 percent drop in the previous week.

The Nasdaq Composite rebounded after disappointing results from Amazon.com Inc. on April 24 triggered a selloff in technology shares. The technology-heavy gauge fell in four of the previous five weeks amid concern valuations have outpaced estimates for earnings growth. Nasdaq companies trade at 35 times reported earnings, double the level of S&P 500 members.

Apple Inc. (AAPL) rallied 3.6 percent to $592.58, extending gains from the previous week after reporting surging sales of iPhones and setting plans to increase its share repurchase authorization by $30 billion, boost its dividend and split its stock 7-for-1.

To contact the reporter on this story: Eric Lam in Toronto at elam87@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland, Jeremy Herron

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