S&P 500 Index Caps Best Week This Year While Energy Rally Ends

  • Energy shares snap their longest winning streak since 2009
  • S&P 500 rallies to best weekly advance since December

U.S. stocks rose, with the Standard & Poor’s 500 Index posting its strongest weekly gain this year, as equities continued to rebound from their worst quarter since 2011.

Shares advanced Friday without the help of energy and raw-material companies, the two best-performing groups so far this month, as energy snapped its longest winning streak in six years. Apple Inc. added 2.4 percent to boost technology shares. Alcoa slumped 6.8 percent to weigh on commodity related companies.

The S&P 500 added 0.1 percent to 2,014.89 at 4 p.m. in New York, up 3.3 percent for the week, the most since December. The Dow Jones Industrial Average rose 33.74 points, or 0.2 percent, to 17,084.49. The Nasdaq Composite Index gained 0.4 percent. About 6.8 billion shares traded hands on U.S. exchanges, 8 percent below the three-month average.

“Policy makers are trying to be prudent with policy, but not panicking over the global outlook,” said Brian Jacobsen, who helps oversee $250 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin. “We’ll see whether or not we can hold above 2,000 in the S&P 500 and build from here ahead of earnings.”

The Chicago Board Options Exchange Volatility Index slipped 2 percent Friday to 17.08 to its lowest since Aug. 19. The measure of market turbulence known as the VIX extended its streak of declines to nine days, the longest in four years.

Federal Reserve minutes Thursday showed caution over raising interest rates, even as the U.S. economy improves, amid the threat that China’s slowing growth could spill over to other emerging market economies. That pushed expectations for an increase further into next year. Traders now price in about a 39 percent chance of a rate liftoff in December, with a 62 percent probability of a March increase.

Atlanta Fed President Dennis Lockhart said in prepared remarks Friday in New York that the first interest rate increase since 2006 will likely be warranted later this month or in December, as the economy “remains on a satisfactory track.”

Energy companies in the benchmark index posted their best weekly climb in 2015, up 7.8 percent, while materials and industrials marked their strongest week since December 2011. Those three industries have bolstered a rebound in the S&P 500 from a 6.9 percent slide in the third quarter, turning the tables on their role among the worst performers during the three-month period ending in September.

Most of their gains have come after a weaker-than-expected September jobs report damped expectations for a rate increase this year, touching off a slide in the dollar. The Bloomberg Dollar Spot Index had its worst week in four months. Industrials benefit from the weaker currency when their overseas earnings are converted back to dollars, while a lower buck boosts the appeal of dollar-denominated commodities.

The S&P 500 is up 4.9 percent since the quarter ended, and gained in eight of the last nine sessions. The benchmark has recovered 7.9 percent from the bottom of an August selloff that pushed the index into its first correction since 2011.

While the Fed’s policy intentions and China’s slowdown remain heavy influences on sentiment, attention is also shifting toward third-quarter results, with earnings at S&P 500 members projected to fall 7.2 percent. Energy and materials companies will see the steepest drop, according to analyst forecasts compiled by Bloomberg.

Some 35 S&P 500 companies are scheduled to report results next week, including Johnson & Johnson, Intel Corp. and JPMorgan Chase & Co.

Airlines Climb

Among the S&P 500’s 10 main industries, technology, health-care and industrials were the best performers Friday, while energy, financial and phone companies declined. Airlines led industrials after better-than-forecast monthly traffic results from American Airlines Group Inc. and United Continental Holdings Inc. Shares of the two rose more than 6.6 percent.

A Bloomberg gauge of U.S. carriers rose 4 percent, the most in a month. The Dow Jones Transportation Average gained 0.8 percent on the way to a 4.8 percent weekly increase, its biggest in almost a year.

Raw-materials shares slipped as Alcoa’s slide weighed on the group. The largest U.S. aluminum producer kicked off the reporting season late Thursday, with sales and profit missing estimates as aluminum prices slumped. The shares dropped the most since November 2013, and still ended 7.8 percent higher this week. Dow Chemical Co. fell 1.5 percent, trimming its climb this week to 5.9 percent.

International Paper Co. jumped 5.2 percent, the most in 14 months. The world’s largest paper producer is taking a step back from manufacturing in Asia as it exits a Chinese joint venture and evaluates the sale of 18 other factories in the region. Packaging company Westrock Co. gained 6.2 percent amid a report that it’s idling some capacity in containerboard production.

Energy Retreats

Energy companies in the benchmark index fell for the first time in nine days, even as oil rose to finish its strongest week since August. Marathon Oil Corp. and Chesapeake Energy Corp. slid more than 2.9 percent. Both were still up more than 12 percent for the week.

Banks slumped before a group of large lenders report results next week, including Bank of America Corp., Wells Fargo & Co., Citigroup Inc. and U.S. Bancorp. Regions Financial Corp. and Comerica Inc. sank more than 1.4 percent today.

Among other companies moving on corporate news, Gap Inc. lost 5.3 percent after a measure of September sales tumbled more than projected at its Banana Republic stores. Chief Executive Officer Art Peck blamed poor-fitting women’s clothing for a lingering slump at the retailer. The stock fell to its lowest since July 2012.

Apollo Education Group Inc. dropped 8.7 percent, the most in the three months. The company said in a filing that its University of Phoenix was notified by the Defense Department that it’s been placed on probationary status regarding tuition assistance for active-duty military personnel.

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