U.S. Stocks Post Biggest Two-Day Advance in 2012 on Fed

U.S. stocks rose, giving the Standard & Poor’s 500 Index its biggest two-day rally in 2012, on policymakers’ signals that interest rates will remain low.

Commodity shares gained the most among 10 S&P 500 groups. The Dow Jones Transportation Average, a proxy for the economy, added 2.2 percent. Hewlett-Packard Co. surged 7.2 percent, the biggest advance since 2009, after Gartner Inc. said the global personal-computer industry grew in the first quarter as the company remained a market leader. Google Inc. added 1.8 percent at 4:54 p.m. New York time as profit beat estimates.

The S&P 500 advanced 1.4 percent to 1,387.57 at 4 p.m. New York time, rising 2.1 percent in two days. The Dow Jones Industrial Average climbed 181.19 points, or 1.4 percent, to 12,986.58. About 6.3 billion shares changed hands on U.S. exchanges today, or 8 percent below the three-month average.

“We have the ingredients for a better tone to the market,” said Keith Wirtz, who oversees $15 billion as chief investment officer for Fifth Third Asset Management in Cincinnati. “The bar was set low, we might have a good earnings season and a couple of Fed officials are providing some rhetoric. If there’s an erosion of economic conditions, it’s likely that we’re going to see action by the Fed.”

Equities rose today as Federal Reserve Vice Chairman Janet Yellen and New York Fed President William C. Dudley endorsed the central bank’s view that borrowing costs are likely to stay low through 2014. Those comments overshadowed investors’ disappointment after a report showed that more Americans than forecast filed claims for jobless benefits last week.

Chinese Data

American stocks also joined a global rally as investors awaited a report at 10 p.m. New York time that’s forecast to show China’s economy expanded 8.4 percent last quarter. The Bloomberg China-U.S. Equity Index of the most-traded Chinese stocks in the U.S. added 2.5 percent.

Today’s gain extended this year’s advance in the S&P 500 to 10 percent as investors piled into stocks amid better-than-estimated economic and corporate data. While S&P 500 per-share profit growth slowed to 0.8 percent during the first three months of the year from 4.9 percent in the fourth quarter, it will accelerate to 8.3 percent during all of 2012, according to analyst estimates compiled by Bloomberg.

“It’s very difficult to kill a rally that we’ve seen over the last few months in one shot,” said Michael Shaoul, chairman of Marketfield Asset Management in New York, which oversees more than $1.6 billion. “Without ‘new’ news it will be very difficult to send this market lower. Ultimately, earnings are going to be important. I would expect good domestic earnings.”

Biggest Gains

All 10 groups in the S&P 500 rose today as companies most-dependent on economic growth had the biggest gains. The Morgan Stanley Cyclical Index added 2.6 percent. Caterpillar Inc. advanced 4.6 percent to $106.44. Alcoa Inc., which this week reported an unexpected profit, rallied 2.7 percent to $10.17. JPMorgan Chase & Co. climbed 1.9 percent to $44.84.

Hewlett-Packard jumped 7.2 percent, the most in the Dow, to $25.10. The company accounted for 17.2 percent of worldwide PC shipments, Stamford, Connecticut-based Gartner said yesterday. Total global PC shipments climbed 1.9 percent to 89 million units, after predictions of a 1.2 percent drop, according to Gartner. Another research firm, IDC, also reported a surprise increase for the quarter.

Google rallied 2.4 percent to $651.01. After the close of regular trading, the shares rose 1.8 percent to $662.60. First-quarter profit before certain costs was $10.08 a share. Analysts had projected $9.64 on average, according to data compiled by Bloomberg.

Stock Split

The company announced plans for what it calls an effective stock split, introducing a new class of nonvoting capital stock. The shares will be distributed through a stock dividend to existing shareholders.

“The viability of Google is still very, very strong,” said Ron Josey, an analyst at ThinkEquity LLC in New York. He recommends buying the stock, which he doesn’t own himself. “There’s still a lot of room for growth across its multiple businesses.”

Tomorrow, investors will get a first look at bank results when JPMorgan and Wells Fargo & Co. kick off earnings, about an hour apart. Citigroup Inc. is set to announce results April 16, followed by Goldman Sachs Group Inc., Bank of America and Morgan Stanley.

AT&T Inc. gained 1.3 percent to $30.84 after the company’s shares were raised to the equivalent of buy at JPMorgan. The 9-month share-price estimate is $33.

$31.6 Billion

McKesson Corp. jumped 3.9 percent to $91.34. The largest U.S. drug distributor based on revenue rose to its highest level since 1998 after the company won a $31.6 billion contract from the Department of Veterans Affairs.

Illumina Inc. slipped 5.8 percent to $49.51. Roche Holding AG, which bid $51 a share to buy the maker of DNA analysis equipment, said publicly available information doesn’t justify a higher price.

Before capping a two-day rally, the S&P 500 had tumbled 4.3 percent from an almost four-year high on April 2. The retreat in the index may not be over, as a gauge of bullishness reached levels that coincided with the market’s peak in 2007 and preceded the biggest pullback in both of the last two years.

The Consensus Bullish Sentiment index on stocks, based on a weekly survey of brokerage strategists and newsletter writers, exceeded 75 percent for seven weeks through April 3, the longest streak since Kansas City, Missouri-based Consensus Inc. began compiling the data in 1983.

S&P 500’s Drop

The index fell to 69 percent this week as the S&P 500 had the worst five-day drop since November amid concern the recovery in the American labor market is slowing and Europe’s debt crisis is worsening.

Increasing bullishness is considered a contrarian indicator by some analysts who follow price charts to make market predictions, because investors who have bought shares now have less money to purchase stocks.

“We’re concerned at what we view as very complacent bullish sentiment, almost frothy, and it needs to be unwound,” John Kattar, chief investment officer at Eastern Investment Advisors in Boston, which manages $1.7 billion, said in a telephone interview. “We should see some fear creeping back into the market, but we’re a long way from that happening yet.”

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