S&P 500 Caps Longest Weekly Gain Since August on EarningsRita Nazareth and Leslie Picker
The Standard & Poor’s 500 Index advanced for a sixth straight week, capping the longest winning streak since August, amid better-than-estimated corporate earnings as European leaders reached a budget agreement.
Apple Inc. added 4.7 percent after saying it’s in discussions to return more cash to shareholders and considering a proposal that it issue preferred stock. Computer Sciences Corp. rose 7 percent amid a higher earnings forecast. Dell Inc. was unchanged for the week, after a four-day rally, as it’s going private in a $24.4 billion leveraged buyout that’s the biggest in technology since 2007.
The S&P 500 rose 0.3 percent for the week to 1,517.93, a five-year high. The benchmark measure is about 3 percent away from its October 2007 record of 1,565.15. The Dow Jones Industrial Average lost 16.82 points, or 0.1 percent, to 13,992.97.
“When you have this situation, where earnings are outperforming estimates, it’s generally supportive for stocks,” Michael Holland, chairman and founder of New York-based Holland & Co., which oversees assets of more than $4 billion, said in a telephone interview. “The global economy is moving forward and that continues to bode well.”
About 75 percent of the 341 S&P 500 companies which reported fourth-quarter results have beaten estimates, according to data compiled by Bloomberg. Stocks also rose as European Union leaders prepared the first-ever cuts in the bloc’s budget after European Central Bank President Mario Draghi said recent currency advances may slow price gains and the pace of expansion.
The S&P 500 has rallied 6.4 percent so far this year as U.S. lawmakers reached a budget compromise. Yet the index is trading at 14.96 times reported earnings, or below the average since 1954 of 16.61, Bloomberg data show. The Dow climbed above the 14,000-level on Feb. 1 for the first time since 2007, and is about 1 percent away from its all-time high.
“Records don’t matter much,” Troy Gayeski, partner and senior fund manager at New York-based SkyBridge Capital, which oversees $7.3 billion in assets under management, said in a telephone interview. “Strategic allocators are looking more at relative value between asset classes and measures of valuation. If you look at the path we’ve been on, it’s of extreme strength. On a valuation basis, you can’t argue that it’s grossly cheap.”
Measures of household-good makers and technology companies in the S&P 500 rose for the week, while phone and raw-material shares fell. The Dow Jones Transportation Average, considered a proxy for economic growth, added 0.9 percent to a record.
Apple jumped 4.7 percent to $474.98. The company’s statement followed a call by Greenlight Capital Inc.’s David Einhorn for the iPhone maker to return more of its $137.1 billion in cash. He also urged shareholders to vote against a company proposal to eliminate preferred stock without investors’ approval.
The statement suggests Apple is softening its stance on preferred shares after saying previously in its annual proxy that it has no plans to issue them. Apple also said that it’s already committed to returning $45 billion over three years.
Computer Sciences gained 7 percent to $45.70. The company has been firing workers and seeking ways to manage its contracts more efficiently to improve cash flow. Profit margins in all three of the company’s divisions -- managed services sector, business solutions and services, and North American public sector -- rose in the fiscal third quarter from a year earlier.
LinkedIn Corp. rallied 22 percent to $150.48, a record. The biggest online professional-networking service surged after increased membership helped fourth-quarter profit and sales beat analysts’ estimates.
Ralph Lauren Corp. added 9.9 percent to $177.56. The retailer of its namesake brand clothing reported fiscal third-quarter profit that topped analysts’ estimates, helped by lower-than-expected expenses and cheaper cotton.
Archer-Daniels-Midland Co. increased 5.4 percent to $30.22. The world’s largest corn processor reported fiscal second-quarter profit and revenue that topped analysts’ estimates as its U.S. soybean-crushing operations ran at record capacity.
Dell was unchanged at $13.63. The shares tumbled 2.6 percent on Feb. 4 before the deal was announced, and rebounded over the next four days. In the largest LBO since the financial crisis, Chief Executive Officer Michael Dell and Silver Lake Management LLC are paying $13.65 a share, the companies said in a statement. The deal signals the waning of the personal-computer industry Dell once dominated.
Akamai Technologies Inc. slumped 15 percent to $35.42. The company, which helps customers speed the delivery of online content, tumbled after its quarterly revenue and forecast missed estimates.
McGraw-Hill Cos. fell 27 percent to $42.67. The U.S. Justice Department sued its S&P unit on Feb. 4, accusing the company of defrauding investors by assigning inflated credit ratings to mortgage-backed securities and collateralized debt obligations.