U.S. Stocks Rise on Factory Data as Small-Caps Advance

U.S. stocks rose, sending the Standard & Poor’s 500 Index to near a record, and small-cap shares rebounded as data showing strength in manufacturing boosted confidence in the global economy.

Best Buy Co. and Williams-Sonoma (WSM) Inc. added at least 3.4 percent to pace gains among retailers. An index of homebuilders rallied as sales of previously owned U.S. homes rose in April. Hewlett-Packard Co. dropped 2.3 percent as it reported second-quarter sales that fell short of estimates and announced it is cutting more jobs.

The S&P 500 rose 0.2 percent to 1,892.49 at 4 p.m. in New York. The benchmark index came within two points of its all-time high of 1,897.45 reached last week. The Dow Jones Industrial Average climbed 10.02 points, or 0.1 percent, to 16,543.08. The Russell 2000 Index (RTY) of smaller companies rallied 0.9 percent. About 5.3 billion shares changed hands on U.S. exchanges, 19 percent below the three-month average.

“It’s a grindingly slow, gradualistic uptrend of the U.S. economy,” David Young, founder chief executive officer of Newport Beach, California-based Anfield Capital Management LLC, which manages $100 million, said by phone. “We absolutely, positively must factor in the vast amount of liquidity looking for an interesting home. As a result, ‘sell in May and go away’ has been proven wrong, because where else are you going to go?”

The U.S. stock market is trading in the tightest range in eight years, according to data from Bespoke Investment Group LLC. In the last three months, the difference between the S&P 500’s intraday high and low has been less than 5 percent, the Harrison, New York-based research group said in a report today.

Economy Watch

The Markit Economics preliminary index of U.S. manufacturing increased to 56.2 in May from 55.4 a month earlier as output accelerated, the London-based group said today. Readings above 50 for the purchasing managers’ measure indicate expansion and the May figure was the highest in three months. A preliminary purchasing managers’ index in China increased to a five-month high.

Other data showed sales of previously owned U.S. homes rose in April for the first time in four months as the weather warmed, price increases slowed and more properties were put on the market. More Americans than projected filed applications for unemployment benefits last week, showing uneven progress in the labor market.

The S&P 500 (SPX) climbed 0.8 percent yesterday, erasing the previous day’s declines, as Federal Reserve policy makers said continued stimulus doesn’t risk fueling a jump in the inflation rate. Central bank policy makers said last month the economy is showing signs of picking up and the job market is improving.

Fed Watch

The central bank pared its monthly asset buying to $45 billion in April, its fourth straight $10 billion cut, and said further reductions in measured steps are likely.

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, rose 1 percent to 12.03 today. The gauge closed yesterday at the lowest level since August.

Eight out of 10 S&P 500 industry groups rose today, with health-care and utility companies gaining at least 0.5 percent for the biggest advances. Retailers rose 0.5 percent as a group.

Best Buy rallied 3.4 percent to $26.22. The world’s largest consumer-electronics retailer posted first-quarter profit that topped analysts’ estimates as Chief Executive Officer Hubert Joly continued to trim costs.

Williams-Sonoma climbed 8.2 percent to a record $68.93. The seller of cookware and home furnishings raised its full-year earnings forecast to as much as $3.17 a share, after earlier predicting no more than $3.15. The San Francisco-based company also reported first-quarter profit of 48 cents a share, exceeding the 44-cent analyst projection.

Market Movers

Dollar Tree Inc. jumped 6.6 percent to $53.31 for the biggest gain in the S&P 500. The discount retailer reported first-quarter earnings that beat analysts’ estimates. The company said it expects as much as $2.02 billion in second-quarter revenue, exceeding analysts’ estimates of $2.01 billion for the period.

Consumer stocks are the worst-performing among 10 industries this year, down 3.6 percent as a group, after leading the S&P 500’s gain last year with a 41 percent rally.

ETF Flows

Investors have withdrawn $3.9 billion from U.S. exchange-traded funds tracking consumer-discretionary stocks this year, more than any other industry, data compiled by Bloomberg show. The group has slumped 3.6 percent this year, the only one of the 10 main S&P 500 industries that has not advanced.

Hewlett-Packard dropped 2.3 percent to $31.78. The world’s second-biggest personal-computer maker said sales in the second quarter fell 1 percent to $27.3 billion from a year earlier, lower than the $27.4 billion analysts projected for the period. The company said it will eliminate 11,000 to 16,000 positions, on top of 34,000 already announced. Hewlett-Packard had 317,500 employees at the end of October.

Hess Corp. jumped 1.1 percent to $90.29. Marathon Petroleum Corp. agreed to acquire the company’s gasoline stations and retail business for a total of $2.87 billion, expanding its footprint to 23 states from nine.

An S&P index of homebuilders rallied 2.1 percent after the report on existing-home sales. PulteGroup Inc. soared 2.2 percent to $19.22 and D.R. Horton Inc. climbed 2.4 percent to $22.65.

Activision, JD.com

Activision Blizzard Inc. dropped 1.6 percent to $20.53 after saying that Vivendi SA is selling half of its remaining stake in the video-gamer maker in an offering valued at more than $850 million.

JD.com Inc., the Chinese online retailer that handled more than $20 billion of purchases on its website last year, rose in its trading debut. The company gained 10 percent to $20.90 after raising $1.78 billion by selling the shares for $19.

The Russell 2000 has rallied 1.5 percent over two days. The index tumbled as much as 9.3 percent from a record on March 4 amid concern that prices have outrun earnings. Small-caps and Internet shares were among the biggest victims of the market retreat as investors fled last year’s best-performing equities.

The Dow Jones Internet Composite Index increased 0.8 percent today. The gauge is still down 15 percent from a 13-year high reached in March.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

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

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