S&P 500 Climbs for 4th Week to Record on Earnings, Fed

U.S. stocks rose for a fourth week as companies reported higher-than-estimated earnings and Federal Reserve Chairman Ben S. Bernanke said the central bank’s asset purchases are not on a preset course.

Bank of America Corp. and Morgan Stanley rallied more than 5.6 percent for the week to pace an advance among financial shares. Yahoo! Inc., the biggest U.S. Web portal, gained 6.9 percent after analysts raised estimates on the value of its stake in Chinese e-commerce company Alibaba Group Holding Ltd. Technology stocks had the worst performance among 10 groups in the Standard & Poor’s 500 Index, as Google Inc. and Microsoft Corp. tumbled at least 2.9 percent on disappointing earnings.

The S&P 500 advanced 0.7 percent to a record 1,692.09 over the five days, extending its rally for the year to 19 percent. The Dow Jones Industrial Average increased 79.44 points, or 0.5 percent, to 15,543.74. Both gauges on July 18 surpassed their previous intraday record highs, set on May 22.

“Bernanke has been on a heavy communications circuit mode to make it clear that the Fed will remain flexible in its policy approach,” Tim Leach, who manages $112 billion as the San Francisco-based chief investment officer of U.S. Bank Wealth Management, said by phone. “Earnings are well supported going forward by economic activity and strong corporate balance sheets.”

Stocks rallied as Bernanke told the House Financial Services Committee on July 17 that the central bank’s bond purchases could be reduced more quickly or expanded as economic conditions warrant. He said the next day it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September.

Timing Debate

Central bank policy makers have been debating the timing and pace of any cuts in the central bank’s $85 billion in monthly bond purchases. Monetary stimulus has helped fuel a surge in stocks worldwide, with the S&P 500 jumping 150 percent from its March 2009 low.

Equities also gained during the week as reports suggested continued improvement in the economy and corporate earnings. U.S. industrial production rose in June by the most in four months, while fewer Americans than forecast filed applications for unemployment benefits in the latest week.

Of the 103 companies in the S&P 500 that have reported earnings so far, 73 percent have topped analysts’ estimates, according to data compiled by Bloomberg. About 53 percent have beaten revenue projections. About 157 S&P 500 companies are scheduled to release quarterly results in the coming week.

ETF Flows

Investors have increasingly turned to stocks this month, as U.S. equity exchange-traded funds are getting money at the fastest rate since September 2008. About $27.9 billion was sent to American share ETFs in the last 13 days, about four times the amount deposited last month and the most in almost five years, according to data compiled by Bloomberg from about 1,500 funds.

“We’re seeing a broad-based move that retail investors are coming into the market,” Vincent Lowry, chief executive officer of VTL Associates in Philadelphia, said in a phone interview. The firm has $1.3 billion under management. “I do believe the equity markets are the place to be because they will be able to absorb any gradual increase in interest rates.”

The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, dropped 9.4 percent to 12.54 for its fourth weekly retreat. The VIX is at its lowest level since May 17, five days before Bernanke signaled the central bank could start scaling back monetary stimulus.

Bank Earnings

Industrial stocks, energy companies and utilities climbed at least 1.9 percent as seven of 10 industry groups in the S&P 500 rose for the week.

The KBW Bank Index added 2.4 percent to the highest level since October 2008 as earnings from lenders beat estimates. Bank of America climbed 7 percent to $14.75 as the second-biggest U.S. lender topped profit predictions on the strength of cost-cutting and better credit.

Morgan Stanley jumped 5.6 percent to $27.60 after net income increased 66 percent as trading revenue rose and the profit margin at its wealth-management unit climbed. The firm also said it will buy back $500 million in stock.

Earnings among financial companies in the S&P 500 have outperformed the index average, with 80 percent of the firms surpassing estimates. The group’s results have exceeded forecasts by an average of 8.7 percent.

Banks and insurers are predicted to report earnings growth of 26 percent this quarter, data compiled by Bloomberg show. Excluding financial stocks, analysts forecast S&P 500 companies will report a 2 percent drop in profit, the data show.

Alibaba’s Value

Yahoo climbed 6.9 percent to $29.11 as earnings beat analysts’ estimates. Alibaba may be worth as much as $101 billion after Yahoo said the Chinese company’s profit tripled in the first three months of the year, according to Sameet Sinha, an analyst at B. Riley & Co.

Leap Wireless International Inc. more than doubled to $17.39. AT&T, the second-largest U.S. wireless carrier, agreed to acquire the company for $1.2 billion, giving the company 5 million customers, more airwaves and a larger piece of the pay-as-you-go market. AT&T was unchanged at $35.81.

Johnson Controls Inc. climbed 11 percent, the most in the S&P 500, to $40.95. The largest U.S. auto-parts maker will sell its HomeLink line of installed garage-door openers to Gentex Corp. for $700 million as it seeks a buyer for the rest of its automotive electronics unit.

Customer Spending

Schlumberger Ltd. increased 7.7 percent to $82.74. The largest oilfield-services provider, will buy back $10 billion in shares as quarterly profit rose and it forecast “double-digit” customer spending increases on crude exploration.

Technology shares sank 1.8 percent as a group, the most among 10 industries in the S&P 500 as companies missed forecasts. The 17 technology companies in the S&P 500 that have reported earnings have missed estimates by an average 3.6 percent. The average result for all companies in the index has come in 2.7 percent above forecasts, the data show.

Intel Corp. dropped 3.6 percent to $23.04. The world’s largest semiconductor maker forecast sales for the current period that may fall short of some analysts’ estimates as a slump in the personal-computer market erodes its largest business.

Google retreated 2.9 percent to $896.60. The company posted second-quarter earnings that missed projections as mobile advertising crimped average prices.

Microsoft plunged 12 percent, the most since 2009, to $31.40 for the biggest slide in the Dow. The company’s fourth-quarter profit missed analysts’ estimates by the biggest margin in at least a decade, depressed by weakening demand for PCs running Windows.

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