U.S. Stocks Rise Amid World Bank Forecast as Banks Rally
U.S. stocks rose, with the Standard & Poor’s 500 Index erasing a loss for 2014 to close at a record, as the World Bank lifted its global growth forecast and Bank of America Corp. (BAC)’s profit spurred a rally in financial shares.
Bank of America jumped 2.3 percent after the second-biggest U.S. lender reported fourth-quarter earnings and revenue that beat analysts’ estimates. Apple Inc. gained 2 percent after China Mobile Ltd. said pre-orders for iPhones had reached 1 million. Regeneron Pharmaceuticals Inc. declined 4.3 percent amid an analyst downgrade.
The S&P 500 added 0.5 percent to 1,848.38 at 4 p.m. in New York, surpassing its previous record of 1,848.36 from Dec. 31. The Dow Jones Industrial Average gained 108.08 points, or 0.7 percent, to 16,481.94. About 6.8 billion shares changed hands on U.S. exchanges, 12 percent above the 30-day average.
“It’s a true, cyclical, macro upswing that’s broad-based,” Jerry Braakman, chief investment officer of First American Trust in Santa Ana, California, said in a phone interview. His firm manages $1.1 billion. “People who have reported have posted really solid numbers, specifically yesterday’s JPMorgan and today with BofA. Just tells us that when the banks are doing well, the economy is going well.”
The benchmark for U.S. equities is little changed in 2014 after declining as much as 1.6 percent. The gauge gained 1.1 percent yesterday, the most since Dec. 18, as better-than-forecast retail sales and corporate merger activity signaled confidence in the economy.
The index rallied 30 percent last year, sending the gauge to a record and its highest valuation since the end of 2009. The S&P 500 (SPX) trades at 15.6 times the estimated earnings of its members, more than the five-year average multiple of 14.1, data compiled by Bloomberg show.
Shares in shipping stocks and companies with smaller market capitalizations, considered most closely tied to economic swings, hit records today. The Russell 2000 Index of small stocks increased 0.7 percent to an all-time high while the Dow Jones Transportation Average added 0.6 percent to a record.
“When most of the averages are making new highs together, that shows that the overall market is in a pretty good shape,” Jim Welsh, a market strategist who helps oversee $5.7 billion at Forward Management LLC in San Francisco, said in a phone interview. “The odds favor that there will be another rally to one more new high by the end of the first quarter.”
The World Bank raised its global growth forecasts as a recovery in advanced economies tempers the effects of tighter monetary conditions on developing markets. The forecast for the richest nations was raised to 2.2 percent from 2 percent. Part of the increase reflects improvement in the 18-country euro area, with the U.S. ahead of developed peers, growing twice as fast as Japan.
International Monetary Fund Managing Director Christine Lagarde said today that momentum in the world economy seen in the second half of last year should continue in 2014. The Washington-based fund plans to raise its forecast for global growth when it releases a report later this month.
Data today indicated that manufacturing in New York, northern New Jersey and southern Connecticut grew at a faster pace this month. The Federal Reserve Bank of New York’s general economic index surged to 12.5, topping the 3.5 estimate in a Bloomberg survey. Positive readings mean that activity expanded.
A separate report showed wholesale prices in the U.S. climbed in December for the first time in three months to cap the smallest annual increase in five years.
Investors are watching economic data for signals on the pace of Federal Reserve stimulus cuts. Three rounds of monetary stimulus from the central bank have helped push the S&P 500 higher by 173 percent from a 12-year low in 2009.
The Fed said ‘‘moderate’’ growth across most of the country last month was buoyed by gains in holiday spending by consumers, an improving labor market and strength in manufacturing.
“The economic outlook is positive in most districts, with some reports citing expectations of ‘more of the same’ and some expecting a pickup in growth,” the Fed said today in its Beige Book business survey, based on reports gathered on or before Jan. 6.
The officials decided at their December meeting to reduce their monthly bond buying by $10 billion to $75 billion. They cited the improving labor market.
Bank of America and Fastenal Co. are among companies reporting financial results today. Fourteen members of the S&P 500, including Goldman Sachs Group Inc. and Citigroup Inc., release earnings tomorrow.
Profit per share for companies in the index probably climbed 4.9 percent on average in the fourth quarter, while sales increased 1.8 percent, according to analysts surveyed by Bloomberg.
“Expectations are not really high for earnings season,” Richard Sichel, chief investment officer at Philadelphia Trust Co., said in a telephone interview. He helps oversee $1.9 billion. “The main thing that each quarter needs is top line growth. Companies can only go for so long squeezing earnings out of the bottom line. We need to some improvement in growth.”
The Chicago Board Options Exchange Volatility Index was unchanged today at 12.28. The gauge of S&P 500 options known as the VIX (VIX) is down 11 percent this year.
Seven out of 10 industry groups in the S&P 500 advanced as telephone, technology and financial companies climbed more than 1.1 percent to lead the gains. Microsoft Corp. surged 2.7 percent to $36.76 and Verizon Communications Inc. gained 2.5 percent to $48.27 among the biggest advances in the Dow.
Bank of America climbed 2.3 percent to $17.15, the highest since May 2010. The lender’s profit more than quadrupled as the company quelled claims tied to defective mortgages.
Wells Fargo & Co., the largest U.S. home lender that yesterday reported record quarterly profit, rose 1.8 percent to an all-time high of $46.40. JPMorgan Chase & Co., whose earnings beat analysts’ estimates this week, rallied 3 percent to $59.49, the highest level since April 2000.
Technology companies in the S&P 500 rallied 1.2 percent as a group and the Nasdaq-100 Index rose 0.8 percent to the highest level since September 2000.
Apple climbed 2 percent to $557.36. China Mobile, the world’s largest phone company by users, said pre-orders for the iPhone have reached about 1 million units ahead of sales in the carrier’s outlets that start at the end of this week.
Data-storage companies rallied after Datalink Corp.’s quarterly earnings and sales surpassed its expectations. Datalink surged 38 percent to $14.96, the highest since August 2000. NetApp Inc. jumped 8.3 percent to $43.51 for the best performance in the S&P 500 and Teradata Corp. climbed 4 percent to $47.63.
Tesla Motors Inc. advanced 1.8 percent to $164.13, the highest since November. Elon Musk predicted that the company will deliver its first Model S vehicles to China in March. The electric-car maker surged 16 percent yesterday after saying it delivered 6,900 Model S cars in the fourth quarter, pushing its full-year sales beyond a company target.
Aeropostale Inc. added 0.7 percent to $7.78 after earlier rising as much as 6.2 percent. The teen-clothing retailer has contacted at least two private-equity firms as management explores strategic options, people with knowledge of the matter said.
General Motors Co. declined 1.6 percent to $39.38. The carmaker forecast 2014 profit to “modestly” improve as it introduces 15 new or refreshed vehicles in the U.S. The company yesterday announced a dividend of 30 cents a share, the first payout since 2008.
GM also named Chuck Stevens as its new chief financial officer. Mary Barra, who had been the company’s product chief, today becomes the first female chief executive officer of a global automaker, succeeding Dan Akerson, who is retiring.
Regeneron dropped 4.3 percent to $287.49. Jim Birchenough, an analyst with BMO Capital Markets Corp., cut the stock’s rating to market perform, an equivalent of neutral, from outperform, saying the market opportunity of the eye drug Eylea, the company’s top-selling product, is fairly valued.
Fastenal lost 4.5 percent to $46.06 for the biggest decline in the S&P 500. The seller of industrial and construction supplies reported profit and revenue that fell short of analysts’ forecasts.
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