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S&P 500 Rises to Highest Level Since 2008 on Economy

The Standard & Poor’s 500 Index advanced to the highest level since June 2008 amid better-than-estimated consumer sentiment and home sales reports. Inc., the largest seller of online customer-management software, climbed 9 percent as billings growth beat analysts’ forecasts. American International Group Inc. added 1.5 percent after profit jumped 77 percent. Bank of America Corp. and Morgan Stanley dropped at least 1.7 percent. FedEx Corp. retreated 1.9 percent, pacing losses in transportation shares, as oil capped its longest increase since January 2010.

The S&P 500 rose 0.2 percent to 1,365.74 at 4 p.m. New York time, paring a gain of as much as 0.4 percent. The Dow Jones Industrial Average decreased 1.74 points, or less than 0.1 percent, to 12,982.95, after rising above 13,000 earlier today.

“We like U.S. equities,” said James McDonald, chief investment strategist at Northern Trust Corp. in Chicago. His firm manages about $665 billion. “That’s a more defensive way to participate in the global economic recovery. The stock market is still attractive. Yet the Dow is flirting with 13,000. While it makes no difference from a valuation standpoint, it can cause some people to say: we’ve had a pretty a big run and I’ll take a bit off the table.”

The S&P 500 gained as data showed that purchases of new homes in the U.S. exceeded forecasts in January after climbing a month earlier to a one-year high. The Thomson Reuters/University of Michigan final index of consumer sentiment for February rose to 75.3. Economists projected a reading of 73.

Dow’s Attempts

Before today, the S&P 500 twice this week advanced above its highest close since 2008, only to retreat by the end of the day. The Dow traded near 13,000 during the week, failing to close above that level. The 30-stock gauge hasn’t closed above 13,000 since May 2008.

Better-than-estimated economic and earnings data put the S&P 500 on pace for a third month of gains, the longest streak in a year. The index rose 4.1 percent in February. Earnings topped analysts’ estimates at 68 percent of the 441 companies in the index that released results since Jan. 9. The S&P 500 trades at 14 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

Technology shares, which comprise 20 percent of the S&P 500, had the biggest gain among 10 industries. surged 9 percent to $143.64. The amount Salesforce invoiced its customers grew 57 percent in the fourth quarter from a year earlier, topping the 31 percent predicted by Brent Thill, an analyst at UBS AG in San Francisco. Billings rose 29 percent in the third quarter.

AIG Rallies

AIG gained 1.5 percent to $28.41. The insurer climbed after citing a return to “sustainable operating profit” as it booked a tax benefit that fueled record earnings. AIG now projects that it will generate enough profit to use tax assets, tied to prior losses, that can limit future payments to the government.

Sears Holdings Corp. jumped 11 percent, the most in the S&P 500, to $68.31. The shares surged 34 percent in three days. The company yesterday announced plans to raise as much as $770 million by selling 11 store sites and separating some smaller-format businesses.

Interpublic Group of Cos. rose 6.5 percent to $11.62. The New York-based advertising company announced a $300 million share buyback program.

A gauge of banks had the biggest decline in the S&P 500 among 24 industries, slumping 1.2 percent. Regions Financial Corp. lost 1.9 percent to $5.80. Bank of America fell the most in the Dow, dropping 1.8 percent to $7.88. Morgan Stanley dropped 2.5 percent to $18.49.

Transportation Shares

The Dow Jones Transportation Average slid 0.4 percent, reversing an earlier gain of 0.8 percent amid concern about higher oil prices. Crude for April delivery rose for a seventh day to almost $110 a barrel. FedEx lost 1.9 percent to $90.24.

“Investors should make no mistake that while we’ve had good trends in the marketplace and a decent reward coming for stock investors, markets are going to remain volatile,” Keith Wirtz, who oversees $14.6 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a telephone interview. “Higher oil prices will act as a headwind on this economy. I worry that we haven’t seen the peak yet.”

Gap Inc. retreated 4 percent to $22.57. The largest U.S. apparel chain forecast profit this year that was less than some analysts estimated as sales declined at its Old Navy stores.

Sprint Nextel Corp. dropped 2 percent to $2.47. Comcast Corp., the largest U.S. cable company, sued a unit of Sprint alleging infringement of four telecommunications patents.

‘Hope Phase’

Stocks are in the midst of a “hope phase” that may be as short-lived as one that occurred a year earlier, according to Albert Edwards, a global strategist at Societe Generale SA.

He compares the S&P 500’s performance since October with its year-ago swings. Last year, the index dropped during the second half of February, rebounded to reach its 2011 high in April, and tumbled in a second-half bout of volatility.

This year’s gains reflect anticipation of sustained U.S. economic growth and a so-called soft landing for the Chinese economy, according to Edwards, based in London. He also cited optimism that Greece’s second bailout and the European Central Bank’s moves to ease bank financing will help the euro region.

“Hope still beats in the breast of equity investors,” he wrote. “The market will rip out that hope and consume it in front of investors’ eyes.”

Corporate earnings may be a catalyst for the abandonment of hope, the report said. Edwards noted that estimates for S&P 500 companies as a group are dropping for the first time since late 2007, when the U.S. economy was sliding into a recession.

Edwards reiterated in September that the index will fall to 400, a plunge of about 70 percent from yesterday’s close, before the next bull market begins. He saw the yield on 10-year Treasury notes falling to 1.5 percent. Last year’s low was 1.67 percent.

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