U.S. stocks had their biggest weekly rally since June after President Barack Obama expressed confidence on a budget agreement with Congress and data from China to Germany bolstered optimism about global growth.
All 10 groups except for utilities in the Standard & Poor’s 500 Index rose during the Thanksgiving-shortened week. An index of homebuilders climbed 5.4 percent amid better-than-estimated housing data. Bank of America Corp. jumped 8.6 percent after an analyst said the lender may commit as much as $10 billion to dividends and share repurchases in 2013. Salesforce.com Inc. surged 11 percent after revenue beat estimates. Apple Inc. gained 8.3 percent, ending a streak of eight weekly losses.
The S&P 500 advanced 3.6 percent to 1,409.15 for the week, extending its 2012 gain to 12 percent. The Dow Jones Industrial Average rallied 421.37 points, or 3.4 percent, to 13,009.68. Both gauges had the best week since June 8.
“What you’re seeing out of Washington before the break is a very cooperative tone,” Bill Greiner, who oversees $14 billion as chief investment officer at Mariner Wealth Advisors in Kansas City, Missouri, said in a phone interview. “There is a gathering sense that the deceleration in economic growth in China seems to be bottoming right now. Both of those areas are adding to a little bit strength in the market.”
The S&P 500 began the week with the biggest advance in two months after Obama met with senior Democrats and Republicans on Nov. 16 for talks to avoid a so-called fiscal cliff of $607 billion in automatic tax increases and spending cuts next year. The index continued to climb after Israel and the Palestinian militant group Hamas agreed to call a halt to more than a week of air strikes and missile attacks. Data showed the first expansion in China’s manufacturing industry in 13 months and an unexpected gain in German business confidence.
The S&P 500 rallied 1.3 percent on the last day of the week, posting the best post-Thanksgiving performance since 2007, as the American holiday shopping season began. The index has gained an average 0.6 percent during the week of Thanksgiving, according to data since World War II compiled by Bloomberg. That compares with 0.15 percent in all calendar weeks in the same time frame.
Concern that Obama’s re-election set up a budget showdown with the Republican-controlled House of Representatives sent the S&P 500 down 7.7 percent from its 2012 high in September through Nov. 15. Federal Reserve Chairman Ben S. Bernanke said on Nov. 20 that the central bank doesn’t have the tools to offset the potential harm to the economy from the fiscal cliff.
“I don’t see a lot more downside to the markets even if we go off the fiscal cliff,” Brian Jacobsen, who helps oversee $208 billion as chief strategist at Wells Fargo Advantage Funds in San Francisco, said in a Bloomberg Television interview on Nov. 20. “The fiscal cliff would be somewhat of a speed bump if you look at the long trajectory of history.”
Companies whose growth is most tied to economic swings led the rally over the week. The Morgan Stanley Cyclical Index rose 4.7 percent, the most since December 2011. Raw-materials producers, consumer-discretionary and technology companies gained the most among 10 S&P 500 groups, jumping at least 4.3 percent.
An S&P index of homebuilders climbed 5.4 percent, with all its 11 members rising, as sales of previously owned U.S. homes gained and confidence among U.S. homebuilders unexpectedly increased to a six-year high. PulteGroup Inc. surged 8.6 percent to $17.03 while Lennar Corp. added 7.1 percent to $38.68.
Lowe’s Cos., jumped 9.9 percent to $35.15 after the home-improvement retailer said fiscal third-quarter profit topped analysts’ estimates, helped by better merchandising decisions and the recovering U.S. housing market.
A measure of retailers in the S&P 500 rose 4.7 percent for the week. Black Friday marked the traditional beginning of the holiday shopping season in the U.S., when retailers lure customers with deep discounts.
Teen apparel retailer Abercrombie & Fitch Co. rallied 8.6 percent to $44.40. Dollar Tree Inc., which sells everything from toys to pet food and cleaning supplies for $1 or less, jumped 8.3 percent to $42.03. Macy’s Inc., the second-largest U.S. department-store chain, added 3.9 percent to $41.73.
Bank of America rallied 8.6 percent, the most in the Dow, to $9.90. The lender has improved capital by the most among the biggest U.S. banks and could fare comparatively well after Federal Reserve stress tests, Ed Najarian, an analyst with International Strategy & Investment Group Inc., wrote in a note. The bank, which may have the equivalent of about $30 billion in capital beyond the minimum required by regulators, may dole out $5 billion to $10 billion for dividends and stock buybacks next year, he wrote.
Salesforce.com rose 11 percent to $159.45. The software maker reported fiscal third-quarter sales that beat analysts’ estimates, benefiting from contracts with large corporate customers.
Microsoft Corp., the world’s largest software maker, gained 4.5 percent to $27.70.
Apple advanced 8.3 percent to $571.50, after slumping as much as 25 percent from a record on Sept. 19. Even amid investor concerns about product shortages, stiffening smartphone and tablet competition and management changes, demand for Apple’s products remains strong and the stock slide is unfounded, Brian White, an analyst at Topeka Capital Markets, wrote in a report on Nov. 19.
Tyson Foods Inc. surged 14 percent to $19.25 for the biggest gain in the S&P 500. The largest U.S. meat processor said profit will increase about 10 percent in fiscal 2014 and 2015 after remaining unchanged in the year ahead as the company adds more prepared foods and international sales.
Hewlett-Packard Co. slumped 3.2 percent, the most in the Dow, to $12.44. The company accused Autonomy Corp., the software maker it bought last year, of a broad range of financial falsehoods that contributed to a $8.8 billion writedown, adding to challenges facing Chief Executive Officer Meg Whitman in the midst of a multiyear turnaround. Autonomy managers denied the allegations. Hewlett-Packard also forecast fiscal first-quarter profit that missed analysts’ estimates.
HP shares plunged 12 percent on Nov. 20 to the lowest level in 10 years. It rebounded 6.2 percent during the following two sessions.
Best Buy Co. tumbled 15 percent, the most in the S&P 500, to $11.70. The consumer-electronics retailer posted a $10 million third-quarter net loss as sales at established stores fell more than expected. S&P and Fitch Ratings cut the retailer’s credit ratings.
Cliffs Natural Resources Inc. declined 12 percent to $31.23. The largest U.S. iron-ore producer will delay parts of an expansion at an iron-ore project in Quebec and idle some production at two U.S. operations because of weaker demand for the steelmaking raw material.