- Banks, commodity shares continue role in pacing advance
- S&P 500 caps longest weekly winning streak in 4 months
U.S. stocks joined a global rally, sending the Standard & Poor’s 500 Index to its highest close this year, as investors reassessed stimulus measures in Europe and warmed to the steps taken to boost growth.
Banks and commodity shares were the best performers, continuing to pace a monthlong advance. Citigroup Inc. and Wells Fargo & Co. added more than 2.6 percent. Dow Chemical Co. gained 3.1 percent while Anadarko Petroleum Corp. jumped to a two-month high as crude posted its longest run of weekly gains since May.
The S&P 500 rose 1.6 percent to 2,022.19 at 4 p.m. in New York, capping a fourth straight week of gains, the most since November. The gauge finished above its average price during the past 200 days for the first time this year, ending its longest streak below that threshold since 2011. The Dow Jones Industrial Average added 218.18 points, or 1.3 percent, to 17,213.31. It also closed at a 2016 high and above its 200-day moving average. The Nasdaq Composite Index gained 1.9 percent.
“Any aggressive moves to stimulate growth to keep expansion on track is positive,” said Joe Quinlan, chief market strategist at U.S. Trust, Bank of America Private Wealth Management. “Global recessionary fears have receded, and that has been key. What the ECB did yesterday helped that momentum. What’s key for U.S. investors is the euro-dollar rate, and that’s back up which is good news for U.S. earnings and for affiliates of multinationals.”
Equities rallied Friday after a late-day rebound yesterday erased a selloff in the wake of expanded measures announced by the European Central Bank, along with comments by President Mario Draghi that suggested further cuts to interest rates were not likely. Investors today shrugged off worries the ECB steps might not be enough to revive growth, and piled back into shares that have carried the S&P 500’s recovery from a 22-month low last month, including energy, raw-materials, technology and financial companies.
The S&P 500 has rebounded more than 10 percent since a Feb. 11 low and trimmed its 2016 drop to less than 1.1 percent, after losses of as much as 11 percent amid concern over China’s economic slowdown and a deepening oil rout.
Investor sentiment in the aftermath of the ECB’s announcements, swinging from optimism the stimulus could boost growth to concern the measures would fall short, illustrates the tension in markets and the challenges central banks face in mollifying them after seven years of unconventional policy maneuvers.
In the U.S., the Federal Reserve’s two-day meeting next week may further illuminate the trajectory of interest rates. While traders are pricing in little chance of an increase on March 16, they have boosted the odds for later in the year. The probability of a June move is now about 51 percent, from less than 2 percent a month ago, bolstered by improving economic data, stabilizing oil prices and the comeback in equities.
Fed officials have stressed that the pace of rate increases, following December’s first boost since 2006, will be gradual and data-dependent. Reports on retail sales, industrial production and housing starts are due next week before the meeting.
“The market is now looking forward to the Fed decision next week so it’s going to be pretty quiet,” said Patrick Spencer, equities vice chairman at Robert W. Baird & Co. in London. “This is the most hated bull market ever, but it’s all bubbling up back again.”
The Chicago Board Options Exchange Volatility Index fell 8.6 percent Friday to 16.50, the lowest this year. That helped reverse gains Monday and Tuesday in the measure of market turbulence known as the VIX, as it finished lower for a fourth week, the most since October. About 7.5 billion shares traded hands on U.S. exchanges, 15 percent below the 2016 average.
All of the S&P 500’s 10 main industries increased, with seven groups rising more than 1.4 percent. Energy and financial shares rose at least 2.2 percent while raw-materials gained 1.8 percent. More defensive sectors such as consumer staples, utilities and phone companies lagged, while consumer discretionary shares advanced 1.6 percent.
Energy producers posted their fourth consecutive week of gains, the longest winning streak since May. West Texas Intermediate crude rose 1.7 percent, topping $38 a barrel, amid signs of rising U.S. fuel demand and easing crude production. Southwestern Energy Co. and Devon Energy Corp. advanced at least 10 percent. Anadarko Petroleum, which yesterday said it was cutting 1,000 jobs to cope with lower oil prices, added 8.9 percent.
Fertilizer maker CF Industries Holdings Inc. gained 6 percent as the strongest performer in raw-materials. DuPont Co. advanced 2.7 percent and Monsanto Co. climbed 2.2 percent. Agriculture prices saw the longest rally in four years, as adverse weather and rising demand finally help to reduce the outlook for global gluts of food supplies.
Banks in the benchmark posted their strongest advance since March 1 amid speculation higher bond yields would help boost profitability. The 10-Year U.S. Treasury yield reached its highest since January. Citizens Financial Group Inc. and SVB Financial Group increased at least 4 percent. The KBW Bank Index added 2.9 percent, closing at a one-week high.
Insurance providers also helped lift the index, advancing 2.8 percent. Lincoln National Corp. gained 5.1 percent to a two-month high, while Principal Financial Group Inc. and MetLife Inc. added at least 4.7 percent. The companies, among the most sensitive to interest rates, posted their third consecutive day of gains.
Symantec Corp. jumped 3.9 percent after RBC Capital Markets Corp. upgraded the company amid growing demand for security products. Micron Technology Inc. and Western Digital Corp. gained more than 4.1 percent, buoying technology companies in the index. Intel Corp. climbed 1.6 percent to its highest since Jan. 14. People familiar with the matter said the chipmaker is planning to sell part of its venture capital unit, assets that could be worth as much as $1 billion.
An S&P index of homebuilders extended a climb to a fourth week, the longest since June. The measure is up 21 percent in the past month after losing nearly 22 percent in the first six weeks of the year. D.R. Horton Inc. posted its best climb in four months, up 5.2 percent. Toll Brothers Inc. added 3.4 percent.
The Dow Jones Transportation Average rose 2.3 percent to erase losses during the previous four sessions, as the measure extended a rally to an eighth straight weekly advance, the most since May 2009. Alaska Air Group Inc. surged 5.7 percent to a 2016 high after reporting a 13 percent increase in February traffic. Norfolk Southern Corp. climbed 4.3 percent, the railroad’s biggest one-day gain since November.