U.S. stocks rose to successive records during the week and the Standard & Poor’s 500 Index traded above 1,600 for the first time, extending a 2013 rally fueled as individuals and professionals alike increased bullish bets.
The S&P 500 climbed 2 percent to 1,614.42 for the week. The Dow Jones Industrial Average briefly surpassed 15,000 on May 3 and ended the week up 261.41 points, or 1.8 percent, to 14,973.96. Microsoft Corp., International Business Machines Corp. and Walt Disney Co. led the Dow’s advance during the week, gaining at least 4.7 percent.
Stocks advanced as U.S. employment picked up more than forecast, the European Central Bank cut interest rates and data on home sales and consumer confidence signaled the American economy gaining momentum. Investors have become more confident with hedge funds doubling bullish bets on the S&P 500 and individuals adding $66.5 billion to equity mutual funds in 2013.
“As we move through some of these psychological barriers, Dow 15,000 and S&P 500 1,600, that’s a reinforcing confidence factor for investors to say, ‘Wow, the market’s continuing to move up. The recovery’s intact. Maybe I need to increase my equity exposure,’” Darrell Cronk, the New York-based regional chief investment officer at Wells Fargo Private Bank, which oversees $170 billion, said by telephone.
Technology, energy and material stocks advanced the most out of 10 S&P 500 groups as investors bought shares of companies most tied to economic growth. Chevron Corp., the world’s third-biggest energy company by market value, increased 2.9 percent to $123.49. Alcoa Inc., the largest U.S. aluminum producer, added 4.2 percent to $8.62. The S&P GSCI gauge of 24 commodities jumped 1.4 percent for the second week of gains.
Apple Inc. rose 7.9 percent to $449.98 for the biggest gain since November. The iPhone maker sold $17 billion of debt in the biggest corporate bond sale ever. IBM surged 5.2 percent, the most in three months, to $204.51 after approving $5 billion in buybacks and boosting its dividend.
Facebook Inc. rallied 5.4 percent to $28.31. The social-networking company posted first-quarter sales that topped estimates, a sign that Chief Executive Officer Mark Zuckerberg is gaining ground in his effort to make more money from mobile advertising.
The S&P 500 reaching 1,600 shows is another milestone in its recovery from the 38 percent plunge in 2008, the worst performance since 1937, as the housing bubble burst and the U.S. financial system required a government bailout. The Dow reached a record on March 5, erasing its losses from the financial crisis three weeks faster than the S&P 500.
“We’ve finally seen the broader market break out to all-time new highs, and it’s being led by blue-chip stocks,” Craig Johnson, Minneapolis-based technical market strategist at Piper Jaffray Cos., said by phone. “When this blue-chip index is breaking out to new highs, it’s pretty hard to ignore,” he said of the Dow.
Central bank efforts to ignite economic growth and reduce unemployment have supported stock prices. The ECB cut its main refinancing rate on May 2 and President Mario Draghi said policy makers may take the unprecedented step of charging banks to hold excess reserves.
Fed Chairman Ben S. Bernanke has injected more than $2.3 trillion into the financial system since 2008 and Bank of Japan Governor Haruhiko Kuroda last month began a campaign to end falling prices by doubling monthly bond purchases in a bid to reach 2 percent inflation in two years.
“The fact of the matter is the Fed and the ECB stand ready to do whatever it takes to stimulate growth,” Ron Sloan, chief investment officer of Atlanta-based Invesco Ltd.’s U.S. Core Equity team, said by phone. He oversees about $12 billion. “The market takes great comfort in that.”
Hedge funds and other institutions are speculating stocks will extend gains by purchasing futures on the U.S. equity benchmark. Money managers were net long 56,172.60 contracts on the S&P 500 in the week ended April 30, data compiled by Bloomberg and the Commodity Futures Trading Commission show. The figure reached 56,800 in March, the highest since January 2009, the data going back 15 years show.
“Everyone does appear to be a bit more bullish, relative to where they were one year ago,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said by phone. “Institutional investors are leading the way and retail investors are hopping on the bandwagon.”
About $14.5 billion was deposited in equity funds in March and $14.2 billion in February, according to data from Washington-based Investment Company Institute. Flows in January were positive for the first time in 11 months and the highest in nine years, ICI data show.
The market may have run too far, too fast as some companies are struggling to boost sales, according to Randy Bateman, chief investment officer of Huntington Asset Advisors in Columbus, Ohio. About half of the S&P 500 missed analysts’ estimates on sales, while 73 percent beat profit forecasts, according to Bloomberg data on the 405 companies that have reported so far.
“There is some sluggishness in earnings that I think the market will pay a lot of attention to, particularly since it’s already had a big move,” Bateman said by phone. His firm oversees $15 billion and is holding more cash than usual. “We could very well see some backing and filling in this market.”
The second quarter has historically meant losses for equities. The S&P 500 slumped as much as 9.9 percent from April through June last year. It erased 19 percent from April through October in 2011 and 16 percent from April to July in 2010.
American Express Co., Home Depot Inc. and Disney have led the Dow’s rally since its 2009 low, climbing more than 300 percent as the world’s largest economy recovered from the worst recession in seven decades. Hewlett-Packard Co., the largest personal computer maker, is the only stock still in the measure to fall since March 9, 2009. The shares are down 19 percent as consumers favor tablets and mobile phones over PCs.
The S&P 500 is cheaper than when it reached a record in October 2007. The gauge is valued at 15.8 times earnings in the last year, compared with 17.5 at its 2007 peak and 31 when it reached a record in March 2000.
“The fact that we still have record earnings provides good fundamental support to the markets,” Brian Jacobsen, who helps oversee about $217 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin, said by telephone. “We also have quite a bit of support from central banks around the world. You put those two together -- the fundamentals and the support from not just the Fed but now the Bank of Japan and the European Central Bank -- and it’s hard to say that the market shouldn’t be where it is.”