U.S. stocks rose for a third straight week, sending the Standard & Poor’s 500 Index to a record, as earnings beat estimates and weak economic data fueled speculation the Federal Reserve will delay reducing stimulus.
Amazon.com Inc. jumped 10 percent to a record as sales exceeded projections. Boeing Co. climbed 7.1 percent after boosting its full-year earnings estimate. Corning Inc. gained 16 percent as it approved a $2 billion buyback. Caterpillar Inc. slid 2.9 percent after cutting its forecast amid a slump in orders from commodity producers. Coach Inc. lost 7.4 percent as stiffer competition curtailed North American handbag sales.
The S&P 500 gained 0.9 percent to 1,759.77 over the five days. The benchmark index has advanced 4.7 percent in October, heading for the biggest monthly rise since July. The Dow Jones Industrial Average advanced 170.63 points, or 1.1 percent, to 15,570.28. The gauge is 0.7 percent below its all-time high.
“Investors are getting a little more comfortable in the marketplace,” John Manley, who helps oversee $233.6 billion as chief equity strategist for Wells Fargo Funds Management in New York, said in a phone interview. “The Fed is accommodative and they’re going to stay that way. Earnings were supposed to start going down two years ago, and yet again they’re OK. Equities are still the asset class of choice, and I think that will continue.”
The S&P 500 rallied 0.6 percent on Oct. 22, boosted by speculation the Fed will delay curtailing its monetary stimulus after payrolls in the U.S. climbed by less than forecast in September. The data indicated the economy had little momentum leading up to the 16-day partial closure of the government as lawmakers wrangled over the federal budget.
Other economic reports during the week showed orders to manufacturers unexpectedly dropped in September, while consumer confidence in October fell to a 10-month low.
Members of the Federal Open Market Committee are scheduled to meet Oct. 29-30, when they will consider scaling back asset purchases that have helped propel the S&P 500 up 160 percent since March 2009. Policy makers will wait until March before starting to taper the $85 billion of monthly bond purchases, a Bloomberg survey showed this month.
“You’re going to continue to see a Fed-driven market,” Brad McMillan, chief investment officer for Waltham, Massachusetts-based Commonwealth Financial Network, said in a phone interview. His firm has more than $71 billion under management. “You’re probably looking at another four, five or six months before the taper is going to realistically happen.”
Investors were also analyzing corporate profits as some 145 companies in the S&P 500 reported results, making it the busiest week of the earnings season. Earnings for members of the gauge probably increased 3.7 percent in the third quarter as sales climbed 2.4 percent, according to analysts’ estimates compiled by Bloomberg.
Of the 244 companies in the S&P 500 that have reported so far, some 76 percent have topped analysts’ profit estimates, while 54 percent have beaten on sales.
The weekly gain in stocks pushed the S&P 500’s valuations to their highest levels in almost four years. The benchmark index trades at 15.9 projected earnings, up from a multiple of 13.1 at the beginning of this year, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, gained 0.4 percent to 13.09 for the week. The gauge has fallen 21 percent this month.
Eight out of 10 main industries in the S&P 500 rose for the week as industrial, utility and consumer-discretionary shares advanced at least 1.9 percent to pace gains. Financial shares fell 0.4 percent for the worst performance.
“Stocks are approaching fair value,” Jim Russell, who helps oversee $112 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone. “You’re seeing now in the third-quarter earnings a glaring light shined on the haves and have-nots.”
Amazon rallied 10 percent to $363.39. The world’s largest online retailer is stepping up spending on warehouses and Web-based services, boosting costs to a record level in a drive to sell more products during the holiday season.
Boeing, the world’s largest planemaker, climbed 7.1 percent to $131.19, an all-time high. Revenue and free cash flow are surging as Boeing speeds the production tempo for single-aisle 737s, wide-body 777s and 787 Dreamliners to take advantage of airlines’ demand for more fuel-efficient jets. Boeing raised the 787’s planned output rate to 12 a month in 2016, up from a goal of 10 by the end of 2013.
Corning, the maker of glass for televisions and mobile devices, surged 16 percent to $17.35 for the biggest increase in the S&P 500. The company said it will buy Samsung Electronics Co.’s 43 percent stake in a joint venture that makes glass for liquid crystal displays in South Korea. The $2 billion buyback will last until the end of 2015, assuming the Samsung deal is approved.
Microsoft Corp. climbed 2.2 percent to $35.73. The world’s largest software maker reported first-quarter sales and profit that exceeded projections as the company relied on corporate software demand to make up for weak consumer personal-computer purchases.
Apple Inc. gained 3.4 percent to $525.96. The company introduced new iPads in time for holiday shoppers, as it battles to stay ahead of rivals in the increasingly crowded market for tablet computers.
Whirlpool Corp. increased 9.6 percent, the most in a week since February 2012, to $146.18. The company lifted its forecast as it sees signs of improvement in some parts of the world, while progress in the U.S. housing market boosts domestic demand for its washers and dryers.
Homebuilders rallied 5.4 percent as a group, with PulteGroup Inc. soaring 8.8 percent to $18.04. Profit surged for the second-largest U.S. homebuilder by market value on a tax-related gain and rising revenue from house sales.
The Bloomberg U.S. Airlines Index climbed 4.2 percent to the highest level since July 2007. Southwest Airlines Co. added 6.9 percent to $17.17, a seven-year high.
Caterpillar, the world’s biggest maker of construction and mining equipment, slumped 2.9 percent to $84.77 for the steepest decline in the Dow. Slower demand for commodities in emerging markets has pushed miners to cut capital spending, including purchases of equipment.
Coach Inc. slid 7.4 percent to $49.89. Same-store sales in North America sank 6.8 percent in the quarter as Michael Kors Holdings Ltd., Fifth & Pacific Cos.’ Kate Spade and Tory Burch LLC increased distribution of their own products.