Most U.S. stocks rose, as the Standard & Poor’s 500 Index extended its record level, following data last week that showed American employers added more workers than forecast in April.
Financial stocks rallied the most out of 10 S&P 500 groups, as Bank of America Corp. climbed 5.2 percent. Cliffs Natural Resources Inc. added 5.5 percent after being raised to outperform from market perform by FBR Capital Markets. Humana Inc. added 2.1 percent as its rating was boosted by JPMorgan Chase & Co. Tyson Foods Inc. slumped 3.3 percent after posting second-quarter profit and sales that missed estimates.
The S&P 500 rose 0.2 percent to 1,617.50 in New York. The Dow Jones Industrial Average lost 5.07 points, or less than 0.1 percent, to 14,968.89. About three stocks advanced for every two that fell on U.S. exchanges, as 5.3 billion shares traded hands, or 16 percent less than the three-month average.
“The market’s still feeding off the positive jobs number and the central bank easing that’s been going on,” Sean Lynch, the Omaha, Nebraska-based global investment strategist for Wells Fargo Private Bank, said by telephone. His firm oversees about $170 billion. “We still like equities. If you look at the landscape of alternatives and opportunities out there, equities are probably the more favorable asset class right now.”
The S&P 500 jumped 2 percent last week as U.S. payrolls expanded by 165,000 workers last month. The median forecast of economists in a Bloomberg survey called for an increase of 140,000 positions. Global equities also rose as the European Central Bank cut its main refinancing rate. Of the 407 companies in the S&P 500 that have reported profit so far, 73 percent exceeded analysts’ earnings predictions while 53 percent missed on sales, data compiled by Bloomberg show.
U.S. stocks are in the fifth year of a bull market, as better-than-estimated corporate earnings and three rounds of bond purchases by the Federal Reserve has driven the S&P 500 up 139 percent from a 12-year low in March 2009. The benchmark equity gauge traded above 1,600 for the first time last week, while the Dow briefly surpassed 15,000 on May 3 and ended the week 1.8 percent higher.
The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.5 percent to 12.66 after falling 5.6 percent last week. The equity volatility gauge is down 30 percent for the year.
Birinyi Associates Inc., which predicted the S&P 500 would reach 1,600, purchased options betting on more gains. The firm, among the first to advise buying U.S. stocks before the bull market began in 2009, said the S&P 500 may climb 18 percent to 1,900 should it conform to bull markets that began in 1982 and 1990.
The Westport, Connecticut-based firm run by Laszlo Birinyi bought an unspecified amount of $170 calls on the SPDR S&P 500 ETF Trust, according to a report e-mailed to Bloomberg News today. They will become profitable if the S&P 500 gains more than 5 percent by December.
“In addition to the historical parallels, we still view sentiment as subdued and nowhere approaching extremes,” Birinyi, president, and Jeffrey Yale Rubin, an analyst at the firm, wrote in the May 3 report.
Warren Buffett, chairman of Berkshire Hathaway Inc., said he ignores macroeconomic forecasts such as Bill Gross’s “new normal” when investing and sympathizes with people who stuck with bonds amid low interest rates. Gross’s firm, Pacific Investment Management Co., coined the term “new normal” in 2009 to describe an era of lower returns, heightened regulation and shrinking U.S. clout in the world economy following the 2008 financial crisis.
“What we see is a slow progress in the American economy,” Buffett, 82, said at Berkshire’s May 4 shareholders meeting in Omaha, Nebraska. “We’ll move forward but I don’t think we’ll be in any surge of any sort, but I don’t think we’ll stall either.”
Berkshire Class B shares climbed 1.3 percent to an all-time high of $110, and Class A shares jumped 1.3 percent to a record $164,990. First-quarter net income jumped 51 percent to $4.89 billion, or $2,977 a share, as profit improved at the largest operating segments and investment gains added to earnings, Berkshire said May 3.
Financial stocks increased 1 percent as a group. The KBW Bank Index added 1.3 percent as 22 out of its 24 members rose.
MBIA Inc. surged 45 percent to $14.29 and Bank of America jumped 5.2 percent to $12.88. The two companies settled a five-year legal battle over soured mortgage debt in a deal that will pay MBIA the equivalent of $1.7 billion and give the bank a 5 percent stake in the bond insurer.
JPMorgan climbed 1.3 percent to $48.18.
Technology stocks also advanced, adding 0.6 percent as a group. Apple Inc. jumped 2.4 percent to $460.71. Google Inc. climbed 1.9 percent to $861.55.
The Dow Jones Transportation Average jumped 1.3 percent to a record 6,297.98. Alaska Air Group Inc. rose the most in the index of 20 railroads, trucking companies and airlines, adding 5.5 percent to $66.15. FedEx Corp. climbed 1.8 percent to $96.23.
Cliffs added 5.5 percent to $21.01. The largest U.S. iron-ore producer was raised to outperform from market perform by FBR Capital Markets analyst Mitesh Thakkar, who cited higher confidence in the Cleveland-based company’s ability to withstand weak iron ore prices after meetings with management.
Humana climbed 2.1 percent to $75.49. The second-biggest private provider of Medicare coverage was raised to overweight from neutral by JPMorgan analyst Justin Lake.
BMC Software Inc. was unchanged at $45.42. The software maker that abandoned a sale last year agreed to be taken private by a group led by Bain Capital LLC and Golden Gate Capital for $6.9 billion.
Tyson Foods tumbled 3.3 percent for the biggest decline in the S&P 500 to $24.10. The largest U.S. meat processor reported earnings in the second quarter were 36 cents a share, missing the average analyst estimate by 9 cents. Sales were $8.42 billion, falling short of the $8.57 billion projected.
Monster Beverage Corp. sank 2.2 percent to $56.18. The maker of Monster Energy drinks was sued by the San Francisco Superior Court’s City Attorney Dennis Herrera for violating California law with its marketing of highly caffeinated energy drinks to children as young as six.