The Standard & Poor’s 500 Index is one trading day away from completing the longest stretch of quarterly gains in 16 years, as central bank stimulus and confidence in economic growth sent stocks to all-time highs.
Netflix Inc. and Facebook Inc. advanced more than 12 percent in the quarter, leading a rebound from a two-month selloff in Internet and small-cap stocks. Allergan Inc. and Williams Cos. jumped at least 40 percent during the busiest period of takeovers in seven years. Schlumberger Ltd. and ConocoPhillips surged more than 20 percent, driving energy companies to the best gain among 10 S&P 500 industries, as oil prices climbed amid unrest in Iraq and Ukraine.
The S&P 500 has climbed 4.7 percent to 1,960.96 for the three months, poised for a sixth quarterly gain, the longest stretch since 1998. The Dow Jones Industrial Average added 394.18 points, or 2.4 percent, to 16,851.84. The Nasdaq Composite Index has jumped 4.7 percent and the Russell 2000 Index is up 1.4 percent.
“It’s as remarkable as anything that the market’s been given plenty of opportunity to sell off and it hasn’t,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which oversees $65 billion in assets, said by phone. “The equity markets continue to move higher even though I think what we’re seeing more recently is a bit of a struggle to get through some of the economic data.”
The S&P 500 rose to an all-time high of 1,962.87 on June 20 as data from employment to housing fueled confidence that the U.S. economy is rebounding after the worst contraction in gross domestic product since 2009. The index held at record levels in the latest week, falling only 0.1 percent for the five days, in the face of conflicts in Iraq and Ukraine, weaker-than-anticipated economic data and concern over rising rates.
Fed Chair Janet Yellen said on June 18 that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth. Fed Bank of Philadelphia President Charles Plosser said June 24 that he’s “fairly optimistic” economic growth will exceed 2.4 percent for the remainder of this year and next amid steady growth in jobs.
U.S. stocks joined an equity rally worldwide as stimulus spanned from Europe to Japan and the U.S. The European Central Bank unveiled an unprecedented package of stimulus measures designed to boost the economy. In Japan, Prime Minister Shinzo Abe said deflation has ended and will be thwarted by new government policies designed to encourage business expansion.
The MSCI All-Country World Index has climbed 4.1 percent since March, reaching a record on June 19. The Stoxx Europe 600 Index has rallied 2.3 percent while the MSCI Asia Pacific Index is up 5.1 percent.
Volatility is evaporating amid stock gains. The S&P 500 has failed to post a gain or loss exceeding 1 percent for 50 straight days, the longest stretch since 1995. The U.S. market has gone more than two years without a 10 percent drop. The Chicago Board Options Exchange Volatility Index, a gauge of option prices for the S&P 500, touched a seven-year low in June and is down 19 percent for the quarter.
“We’ve gone a long stretch without any shock to the market,” Giri Cherukuri, head trader and portfolio manager at Oakbrook Investments LLC in Lisle, Illinois, said in phone interview. The firm oversees $3.2 billion. “The Fed manages the market pretty well. Although first-quarter GDP was down, people are writing it off to weather and expecting a better economy going forward. If that doesn’t happen, that’s definitely going to hurt the market.”
The Federal Open Market Committee said it expects the benchmark interest rates to remain near zero for a “considerable time” after completing a bond-purchase program that’s set to end late this year.
Policy makers at the central bank are debating how long to keep borrowing costs low while the labor market improves. Equities slumped on June 26 after Fed Bank of St. Louis President James Bullard said rates could rise starting in the first quarter of 2015, sooner than most of his colleagues think.
Three rounds of monetary stimulus from the Fed and better-than-forecast corporate earnings have driven the S&P 500 up 190 percent from its March 2009 bottom.
Investors will get another chance to assess corporate strength when companies start releasing financial results in July. Earnings for S&P 500 companies probably grew 5.2 percent during the second quarter while sales rose 3.2 percent, analyst estimates compiled by Bloomberg show.
“Can we get revenue growth to finally kick in?” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said by phone. “That’s a big question the market is going to look at moving forward.”
Mergers and acquisitions are booming after five years of profit expansions bolstered corporate cash hoardings. About $528 billion worth of deals have been announced this quarter, the most since June 2007, data compiled by Bloomberg show.
Allergan rallied 40 percent this quarter after Valeant Pharmaceuticals International Inc. offered to buy the Botox maker for about $54 billion.
Williams jumped 44 percent. The fourth-largest U.S. pipeline operator agreed to buy control of Access Midstream Partners LP for $6 billion, creating one of the biggest natural-gas transporters.
Energy companies in the S&P 500 climbed 11 percent as oil rose above $105 a barrel amid escalated tensions in Iraq. ConocoPhillips advanced 22 and Schlumberger increased 21 percent.
Internet and small-cap companies recovered after a selloff ended in May. The Russell 2000 has climbed 8.5 percent since its low last month and the Dow Jones Internet Composite Index is up 13 percent.
Facebook, the world’s most popular social-networking site, jumped 12 percent for the quarter. Netflix, a video-subscription company, surged 26 percent.