U.S. Stocks Advance Amid Factory Orders, Cyprus Deal
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record close, as concern over Europe’s debt crisis eased and factory orders topped forecasts.
Humana Inc. (HUM) jumped 5.5 percent as health-care providers rallied the most among 10 groups in the S&P 500, after medical insurers won an increase in a key Medicare payment rate. Hertz Global Holdings Inc. (HTZ) added 6.9 percent as it forecast earnings above analysts’ estimates. Nasdaq OMX Group Inc. (NDAQ) plunged 13 percent, the most in the S&P 500, after agreeing to buy BGC Partners Inc. (BGCP)’s bond platform. Hewlett-Packard Co. (HPQ) fell 5.2 percent as Goldman Sachs Group Inc. advised selling the shares.
The S&P 500 rose 0.5 percent to 1,570.25 at 4 p.m. in New York. The Dow Jones Industrial Average climbed 89.16 points, or 0.6 percent, to 14,662.01, also reaching a record high. About 5.9 billion shares changed hands on U.S. exchanges, 6.6 percent below the three-month average.
“It’s an agonizingly slow economic recovery but it is a recovery,” Tom Mangan, who helps oversee about $4 billion as a money manager at James Investment Research Inc. in Xenia, Ohio, said in a phone interview. “The risk has so far not been that you are in the stock market, the risk is that you’re not in the stock market and that you don’t own enough stocks.”
U.S. equities fell yesterday as a report showed American manufacturing expanded less than forecast, after the S&P 500 climbed above its highest closing level reached in October 2007. The index has yet to reach the all-time intraday high of 1,576.09. The S&P 500 rallied 10 percent in the first quarter, extending a recovery that has added more than $10 trillion of value to the world’s largest stock market. The Dow first passed its 2007 record on March 5.
U.S. factory orders rose in February, boosted by a pickup in demand for motor vehicles and commercial aircraft. The 3 percent gain in bookings, the biggest in five months, followed a revised 1 percent decline in January, a Commerce Department report showed. The median forecast of 64 economists in a Bloomberg survey called for a 2.9 percent rise.
In Europe, the Cypriot government completed talks on the terms for aid with the so-called troika of officials representing the International Monetary Fund, the European Central Bank and the European Union. Cyprus was granted two extra years, to 2018, to implement measures linked to its bailout, government spokesman Christos Stylianides told reporters. The accord will be discussed at a euro working group meeting of finance officials on April 4.
“We get these little dust-ups whether it’s Cyprus or negative economic data, but then the market comes back to the thinking that the best game in town is U.S. equities and that’s what is driving stocks,” Dan Veru, chief investment officer at Palisade Capital Management LLC, said over the phone. The Fort Lee, New Jersey-based firm manages about $4 billion. “The U.S economy is growing, and relative to the rest of the world we’re far more stable.”
The bull market in equities entered its fifth year last month, with the S&P 500 more than doubling from its bottom in 2009, as corporate earnings topped estimates and the Federal Reserve carried out an unprecedented three rounds of bond purchases to spur the economy.
Companies begin releasing their first-quarter earnings next week, with Alcoa Inc. scheduled to announce results on April 8. Earnings among S&P 500 companies are forecast to decline 1.9 percent for the period, for the first retreat since 2009, according to estimates compiled by Bloomberg. In January, analysts forecast earnings growth of 1.2 percent. Profit expanded by 8 percent in the fourth quarter of 2012.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against claims, fell 5.9 percent to 12.78 today. The gauge, known as the VIX, is down 29 percent for the year.
Health-care stocks advanced 1.4 percent as a group. Humana (HUM), the second-largest private Medicare insurer, climbed 5.5 percent to $79.11 after the government announced a decision to do away with a planned rate reduction. Instead, insurers will receive a 3.3 percent increase in the rate that determines the payments they get for running the government’s Medicare Advantage plans.
UnitedHealth Group Inc. advanced 4.7 percent to $61.74 and Aetna Inc. gained 3.7 percent to $54.30 on the decision.
Hertz (HTZ), the Park Ridge, New Jersey-based car rental company, climbed 6.9 percent to $23.41 after giving a 2015 earnings outlook above analyst estimates. The company predicts earnings between $3.10 and $3.30 a share for 2015, compared with the average analyst estimate of $2.39.
Ford Motor Co. gained 0.9 percent to $13.01 after the Dearborn, Michigan-based automaker announced its best monthly sales in its home market since 2007. Ford delivered 5.7 percent more light vehicles in March than a year earlier, beating estimates.
General Motors Co. added 0.5 percent to $27.93, as March sales expanded 6.4 percent. Analysts had estimated a 12 percent climb. Sales of GM’s Cadillac jumped almost 50 percent in the month while Chevrolet sales rose 0.5 percent.
Nasdaq OMX (NDAQ) plunged 13 percent, the most since November 2008, to $27.91. The company will buy eSpeed, an electronic trading system for U.S. Treasuries, from BGC Partners for about $750 million in cash. Moody’s Investors Service and Standard & Poor’s warned that Nasdaq’s debt rating may be lowered.
The deal gives the second-largest U.S. equity market a foothold in fixed income. Nasdaq will also issue about 15 million common shares over 15 years as part of the acquisition, pushing the potential value of the transaction to $1.23 billion, according to statements by the two companies. BGC Partners jumped 49 percent, its biggest gain since 1999, to $5.72.
Hewlett-Packard (HPQ) slipped 5.2 percent to $22.10. Goldman Sachs lowered its recommendation on the shares to sell from neutral. The brokerage said it remained cautious on the market for printers and servers.
The Bloomberg U.S. Airlines Index (BUSAIRL) lost 5.7 percent, the biggest drop since June, as Delta Air Lines Inc. (DAL) declined 8.1 percent to $14.94. The carrier’s March passenger revenue per available seat mile missed its estimate, the company said in a filing. Delta expects system capacity to be down by 2 to 3 percent in the latest quarter.
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