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S&P 500 Caps Longest Advance Since December Amid Energy Rally

Dow Average Rallies to Highest Level Since May
Traders work on the floor of the New York Stock Exchange. Photographer: Jin Lee/Bloomberg

The Standard & Poor’s 500 Index rose for a fifth day, capping its longest rally since December, as energy and bank shares advanced and investors weighed developments in Europe’s efforts to tame its debt crisis.

Chesapeake Energy Corp. surged 6.3 percent, pacing gains in energy companies, as the second-largest U.S. natural-gas producer said it will cut production and reduce spending. Bank of America Corp. added 2.6 percent as Chief Executive Officer Brian T. Moynihan said the lender may reduce annual costs by as much as an additional $3 billion. Procter & Gamble Co. slumped 1.9 percent after Stifel Nicolaus & Co. cut its recommendation for the largest consumer-products company.

The S&P 500 added 0.1 percent to 1,316 at 4 p.m. New York time, gaining 2.1 percent in five days. The Dow Jones Industrial Average declined 11.66 points, or 0.1 percent, to 12,708.82, after earlier rising above the highest closing level since May.

“The bulls were able to flex their muscles a bit and the bears can’t really point to a whole lot of tangible news that’s really going to change matters much,” Hayes Miller, who helps oversee about $43 billion as the Boston-based head of asset allocation in North America at Baring Asset Management Inc., said in a telephone interview. “There’s a general relief about U.S. growth and Europe’s ability to solve its debt crisis. I don’t really buy into the overbought argument that much.”

The S&P 500 rose all four days U.S. exchanges were open last week as data bolstered confidence in the economy and companies from Goldman Sachs Group Inc. to Union Pacific Corp. topped analysts’ income projections. Of the 52 companies in the S&P 500 that reported results since Jan. 9, 34 posted per-share earnings that beat projections, Bloomberg data show.

Record High

Equities turned lower early today after the S&P 500 reached 1,322.28, a level close to a downward trendline connecting the index’s all-time high in 2007 with its peak last year in April and its May and July highs, according to Ari Wald, a New York-based technical strategist at Brown Brothers Harriman & Co.

The index’s 14-day relative strength index, which measures the degree that gains and losses outpace each other, has stayed above 65 since Jan. 17, matching the longest streak since February, according to Bloomberg data. Some technical analysts consider RSI readings above 70 a sign that stocks have risen too far, too fast.

Germany and France said talks between Greece and bondholders on negotiations for a debt swap were making progress, while an official in Berlin said Germany may be open to combining Europe’s two bailout mechanisms and boosting their funding limit. Finance ministers meeting in Brussels today agreed on all aspects of the European Stability Mechanism in a deal to be signed on Jan. 30, Martti Salmi, an aide at Finland’s Finance Ministry in Helsinki, said by telephone.

Energy Shares

A gauge of energy shares had the biggest gain in the S&P 500 among 10 groups, rising 0.7 percent. Chesapeake plans to cut output, idle drilling rigs and reduce spending in gas fields by 70 percent after prices for the fuel hit a 10-year low. Natural gas soared today, while Chesapeake surged 6.3 percent to $22.28.

Cabot Oil & Gas Corp. increased 6.5 percent to $65.08. Range Resources Corp. added 9.2 percent to $59. Southwestern Energy Co. jumped 10 percent to $32.46. The oil and gas company was raised to “outperform” from “market perform” at BMO Capital Markets.

Financial stocks in the S&P 500 swung between gains and losses today before closing 0.3 percent higher.

Bank of America jumped 2.6 percent, the biggest gain in the Dow, to $7.25. The lender, which already targeted $5 billion in expense cuts from retail and back-office operations, may reach total savings of $6 billion to $8 billion a year, Moynihan said during a Jan. 19 employee meeting.

P&G Slumps

Procter & Gamble fell 1.9 percent, the second-most in the Dow, to $65. The company was lowered to “hold” from “buy” at Stifel Nicolaus.

Netflix Inc. sank 6.3 percent to $93.96. The owner of the streaming and DVD-by-mail service is likely to provide a first-quarter forecast that’s “well below” analysts’ estimates, according to Wedbush Securities.

Research In Motion Ltd. tumbled 8.5 percent to $15.56. The BlackBerry maker shook up its top management, replacing co-Chief Executive Officers Jim Balsillie and Mike Lazaridis, who guided the company for two decades and struggled to compete against Apple Inc. Thorsten Heins, a chief operating officer who joined RIM four years ago from Siemens AG, will replace the pair in the CEO post effective immediately.

Fund Withdrawals

Trading in U.S. stocks fell to the lowest level since at least 2008 amid mutual fund withdrawals and Wall Street job cuts.

An average of 6.69 billion shares changed hands on U.S. exchanges in the 50 days ended Jan. 18, the fewest on record in Bloomberg data starting three years ago that excludes over-the-counter venues. On the New York Stock Exchange, volume has tumbled to the lowest level since 1999, the data show.

The slowdown in trading shows that investors remain skittish after five years of withdrawals from mutual funds that buy U.S. equities and one of the most volatile years on record for the Standard & Poor’s 500 Index. While the benchmark index is having its best January rally since 1997, securities firms around the world cut more than 200,000 jobs last year.

“Investor confidence is shaky at the very least,” Mark Turner, head of U.S. sales trading at Instinet Inc. in New York, said in a telephone interview on Jan. 20. His firm handles about 4 percent of the total daily U.S. equity volume. “We need to see the U.S. economy improve. We need to see some sort of a plan in place to deal with Europe’s debt crisis before the market gains some confidence. At that point, we’ll start to see an increase in volume.”

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