Stocks Gain, Dow Erases 2010 Decline on Home-Sale Data
FedEx and United Parcel Service Inc., package-delivery companies that are considered harbingers for global growth, gained at least 1.9 percent. Pulte Group Inc. and Lennar Corp. jumped more than 3.2 percent. Genzyme Corp. rallied 7.8 percent to the highest price since February 2009 amid speculation the drugmaker will become the target of a bidding war.
The Standard & Poor’s 500 Index rose 1.1 percent to 1,115.01 as of 4 p.m. in New York. It’s down less than 0.1 percent in 2010 and closed above its average price from the last 200 days, a bullish sign to some analysts who use charts to make forecasts. The Dow gained 100.81 points, or 1 percent, to 10,525.43, and is up 0.9 percent in 2010.
“Stocks are going to move higher,” said Philip Orlando, a New York-based chief equity market strategist at Federated Investors Inc., which manages about $350 billion. “When a bellwether like FedEx boosts its forecast, it’s not just about the company, but about the implications for the global economy. In addition, the home sales number was much better than we thought it would be.”
U.S. stocks rose last week after better-than-estimated earnings at companies from UPS to Apple Inc. and Ford Motor Co. lifted confidence the economy is recovering. Of the 152 companies in the S&P 500 that reported earnings since July 12, more than 83 percent have beaten the average analyst earnings forecast, according to Bloomberg data. More than 160 S&P 500 companies are scheduled to post quarterly results this week.
Barton Biggs, the hedge-fund manager who slashed his equity holdings in half three weeks ago, has rebuilt his stakes. Traxis Partners LLC, his firm, returned 38 percent in 2009, triple the industry average. Bets that stocks will rally make up 75 percent of his fund, up from about 35 percent earlier this month.
“I’ve definitely changed my mind to the degree of risk out there,” Biggs said today in a radio interview with Tom Keene on Bloomberg Surveillance. “Economic data around the world in the last 10 days to two weeks has turned more positive. It has exceeded forecasts almost without exception. The odds of the world slumping into a significant slowdown has diminished.”
The benchmark index for U.S. stock options fell 3.2 percent to 22.73, the lowest level since May 3. The VIX, as the Chicago Board Options Exchange Volatility Index is known, measures the cost of using options as insurance against declines in the S&P 500. It’s down from this year’s closing high of 45.79 on May 20.
All nine stocks in the S&P 500 Transportation Index rose, sending the benchmark 2.4 percent higher, for the second-biggest gain among 24 industries. The Dow Jones Transportation Average of 20 stocks advanced 2.6 percent to 4,482.09, its highest level since May 14, rising above what analysts who study charts to make forecasts call its upper Bollinger Band. Technical analysts say this indicates the potential for further gains.
FedEx rose 5.6 percent to $83.39. The second-largest U.S. package-shipping company raised its 2010 profit forecast because of more demand for international express shipping.
UPS, the world’s biggest shipper, rallied 1.9 percent to $64.88. It jumped the most in two months on July 22 after raising its annual profit forecast and saying the U.S. economy will continue to recover.
“Earnings reports are pretty good, especially things connected to global trade” such as Expeditors International of Washington Inc., FedEx and UPS, said Karl Mills, president and chief investment officer at Jurika, Mills & Keifer in Oakland, California, which manages $30 million. “All point to strengthening economic activity.”
A gauge of 12 homebuilders in S&P indexes rose 2.9 percent. Pulte gained 4.7 percent to $9.07, while Lennar climbed 3.3 percent to $15.42.
Sales of U.S. new homes rose in June more than forecast following an unprecedented collapse the prior month. Purchases increased 24 percent from May to an annual pace of 330,000, figures from the Commerce Department showed today in Washington. The rate was the second-lowest in data going back to 1963 after May’s downwardly revised 267,000 pace.
“The numbers were so dismal on housing for the previous two months that any gradual improvement is perceived very positively by equity investors,” said David Kovacs, head of quantitative strategies at Turner Investment Partners in Berwyn, Pennsylvania, which manages $19 billion. “The data on Europe and housing had investors turning very risk-averse. Now suddenly all those fears are temporarily subsiding.”
Genzyme jumped 7.8 percent to $67.38. GlaxoSmithKline Plc asked the drugmaker to keep it in mind if it considered selling itself, the Wall Street Journal reported, citing an unidentified person. The world’s largest maker of drugs for rare genetic diseases rebuffed Sanofi-Aventis SA’s takeover approach last week, two people with knowledge of the matter told Bloomberg News today.
BP Plc rose 4.9 percent to $38.65. The oil producer plans to name Robert Dudley to succeed Tony Hayward as chief executive officer as the board looks to recover the company’s position in the U.S., two people with knowledge of the matter said.
AT&T Inc. advanced 1.6 percent to $25.96, leading phone companies to the third-biggest gain among 10 industries. The largest U.S. phone company was raised to “buy” from “hold” at Deutsche Bank AG.
Institutions pushed equities up to 68 percent of their holdings in July, the highest level in 15 months, from 63 percent in April, a Citigroup Inc. survey showed. The ratio of bullish to bearish respondents in a survey by the American Association of Individual Investors has fallen to 0.68, the lowest level since July 2009, based on a four-week average.
The last time money managers and individuals were this far apart was in March 2009, before the S&P 500 began its 63 percent rally, according to data compiled by Bloomberg.