Dow Climbs Above 15,000 on Stimulus Optimism, Earnings
Nine out of 10 groups in the Standard & Poor’s 500 Index rose. DirecTV (DTV) gained 6.9 percent to an all-time high after adding more subscribers than analysts projected. Fossil Inc. advanced 9 percent after profit beat estimates and the company lifted its forecast for the year. EOG Resources Inc. (EOG) jumped 7.7 percent after seeing higher growth rates for crude oil. First Solar Inc. (FSLR) plunged 8.9 percent after earnings fell short of estimates.
The S&P 500 (SPX)rose 0.5 percent to 1,625.96 at 4 p.m. in New York, its fourth straight record close. The Dow added 87.31 points, or 0.6 percent, to 15,056.20. The gauge briefly surpassed 15,000 for the first time in intraday trading on May 3. More than 5.8 billion shares traded hands on U.S. exchanges today, or 6.7 percent below the three-month average.
“This is a QE-fueled market,” Steven Bulko, the New York-based chief investment officer of Lombard Odier Investment Management’s $1 billion long/short 1798 Fundamental Strategies Fund, said by telephone. “You’re just not seeing sales based on allocation into any other asset class because of the relative unattractiveness of everything other than equities. That’s putting in place a firm bid to the equities market.”
The S&P 500 advanced 0.2 percent yesterday, after the benchmark gauge for U.S. equities topped 1,600 for the first time on May 3. U.S. stocks are in the fifth year of a bull market amid better-than-estimated corporate earnings and three rounds of bond purchases by the Federal Reserve.
Fed Chairman Ben S. Bernanke has injected more than $2.3 trillion into the financial system since 2008. The Fed is currently buying $85 billion of debt each month under a policy of so-called quantitative easing. Bank of Japan Governor Haruhiko Kuroda last month began a campaign to end falling prices in a bid to reach 2 percent inflation in two years. The European Central Bank cut its main refinancing rate last week.
Global equities rose today as the Reserve Bank of Australia cut its benchmark interest rate to a record low of 2.75 percent. The Bank of England will probably leave its stimulus program on hold this week amid signs the economy has found a firmer footing. A Bloomberg News survey of economists shows policy makers will refrain from expanding quantitative easing beyond 375 billion pounds ($582 billion) on May 9.
About 84 percent of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. That’s the highest level since March 14, while below the two-year high of 93 percent in January.
American Express Co., Walt Disney Co. Disney and Home Depot Inc. have led the Dow’s rally since its 2009 low, climbing more than 311 percent as the world’s largest economy recovered from the worst recession in seven decades. Hewlett-Packard Co., the largest personal computer maker, is the only stock still in the measure to fall since March 9, 2009. The shares are down 20 percent as consumers favor tablets and mobile phones over PCs.
“It becomes harder and harder for central banks to be the odd man out,” Steven Soranno, a Bethesda, Maryland-based senior equities analyst for Calvert Investments Inc., which oversees about $12 billion, said by telephone. “The old adage used to be ‘Don’t fight the Fed.’ Now it’s ‘Don’t fight the Feds’, plural. Australia came in with the rate cut and that just adds to the coordinated central bank easing.”
About 72 percent of the 425 S&P 500 companies that have released results since the start of the earnings season have exceeded profit projections, while 53 percent have missed sales estimates, data compiled by Bloomberg show.
Phone, industrial and utility companies rallied the most out of 10 S&P 500 groups, gaining at least 0.9 percent. Caterpillar Inc. added 2.5 percent to $89.79 for the biggest gain in the Dow. Investors bought shares of stocks most tied to economic growth, sending 24 out of 30 members of the Morgan Stanley Cyclical Index (CYC) higher. The gauge has rallied 4.7 percent in the last four days.
DirecTV (DTV) jumped 6.9 percent to a record $61.95. The largest U.S. satellite-television provider added 21,000 U.S. subscribers and 583,000 Latin American customers in the first quarter, compared with the 10,000 and 505,000, respectively, predicted by analysts. The gains may help reassure investors, who have been concerned that growth is sputtering.
Fossil surged 9 percent to $107.88 for the biggest advance in the S&P 500. The maker of the namesake watch brand reported first-quarter earnings were $1.21 a share, exceeding the 97-cent profit estimated by analysts on average. The Richardson, Texas-based company also boosted its earnings forecast for 2013 to as much as $6.26 a share after earlier predicting no more than $6.15.
EOG Resources jumped 7.7 percent to $135.69. The natural-gas and crude-oil producer reported first-quarter profit that beat analysts’ estimates by 52 percent and said it sees “sustained” high growth in rates for oil production through 2017. The Houston-based company also said its sees a moderate increase in North American natural gas next year.
Electronic Arts Inc. (EA) added 0.7 percent to $18.41. The second-largest video-game publisher reached a multiyear agreement with Disney to create games based on “Star Wars” characters. Disney said it will retain certain rights to develop new titles within the mobile, social, tablet and online game categories.
After the close of regular trading, EA posted fiscal fourth-quarter profit that missed analysts’ estimates. The company forecast fiscal-year profit of $1.20 a share, ahead of the $1.10 a share analysts estimated. The shares jumped 9.2 percent to $20.10 as of 4:56 p.m. in New York.
Disney said fiscal second-quarter profit rose 32 percent, beating analysts’ estimates on gains at its theme parks and film division. Its shares were little changed in late trading after adding 1.6 percent to $66.07 during the regular session.
Yahoo! Inc. climbed 3.6 percent to $26.07, its highest since June 2008. Alibaba Group Holding Ltd., China’s largest e-commerce company, had revenue that rose 80 percent and profit that doubled in the three months ended in December. Sunnyvale, California-based Yahoo owns a 24 percent in Alibaba.
Separately, the largest U.S. Web portal also recorded $273 million in gains resulting from steps taken to guard against swings in the Japanese yen, according to a regulatory filing.
Urban Outfitters Inc. (URBN) climbed 4.8 percent to a record $43.66, after Wells Fargo & Co. lifted its rating on the retailer to outperform from market perform. Tiffany & Co. slumped 0.1 percent to $75.45. Wells Fargo lowered its rating on the world’s second-largest luxury jewelry retailer to market perform from outperform.
First Solar tumbled 8.9 percent to $43.43 for the biggest decline in the S&P 500. The largest U.S. solar manufacturer by shipments posted earnings, excluding one-time expenses related to restructuring, of 69 cents a share, or 6 cents less than the average of 17 analysts’ estimates compiled by Bloomberg.
Technology stocks fell 0.2 percent for the only decline among S&P 500 groups. Microsoft Corp., the world’s largest software maker, sank 1.3 percent to $33.31. Cisco Systems Inc. retreated 2.1 percent to $20.38 for the biggest drop in the Dow.
Baxter International Inc. erased 2.5 percent to $68.58. The company’s Gammagard failed to help patients with Alzheimer’s disease in a late-stage study, adding to a string of failures to develop a treatment for the most common form of dementia. Baxter will halt all studies of the therapy for mild to moderate forms of the disease and reconsider its Alzheimer’s program, the Deerfield, Illinois-based company said in a statement today.
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