Dow Average Rises to Five-Year High Amid Housing ReportRita Nazareth and Sarah Pringle
U.S. stocks rose, sending the Dow Jones Industrial Average to the highest level in five years, as better-than-estimated housing data bolstered economic optimism and European shares rebounded amid gains in Italian bonds.
FedEx Corp., operator of the world’s largest cargo airline and an economic bellwether, added 2.5 percent to pace gains in transportation shares. Priceline.com Inc., the biggest online travel agency by market value, added 2.6 percent after revenue growth in international markets pushed profit past estimates. Apple Inc. dropped 1 percent after its annual shareholder meeting. Target Corp. slid 1.5 percent as earnings fell amid the worst holiday-season store sales performance in four years.
The Standard & Poor’s 500 Index rose 1.3 percent to 1,515.99 at 4 p.m. in New York. The Dow added 175.24 points, or 1.3 percent, to 14,075.37. The 30-stock gauge is 0.6 percent away from its October 2007 record. About 6.3 billion shares changed hands on U.S. exchanges today, in line with the three-month average, according to data compiled by Bloomberg.
“The housing market is proving a positive delta to the economy for this quarter and year,” David Katz, who oversees about $825 million as chief investment officer at New York-based Matrix Asset Advisors Inc, said in a phone interview. “The rally is driven by improvement in sentiment from Europe coupled with positive data.”
Equities rose as contracts to purchase previously owned U.S. homes climbed more than forecast in January, a sign the industry will keep strengthening this year. Orders for U.S. durable goods excluding transportation equipment climbed in January by the most in a year, indicating business investment is holding up.
Federal Reserve Chairman Ben S. Bernanke said the central bank has the “tools” necessary to scale back record stimulus and avert a rise in inflation expectations, in congressional testimony that was identical to his remarks yesterday to the Senate Banking Committee.
The S&P 500’s two-day rally erased a 1.8 percent slump on Feb. 25, which was triggered by concern that the Italian elections will worsen the region’s debt crisis. Europeans shares rose today as Italy sold 6.5 billion euros ($8.5 billion) of five- and 10-year bonds in its first auction following inconclusive election results that pushed yields to a four-month high yesterday.
The S&P 500, which is trading less than 3.5 percent from its record, has gained 6.3 percent this year as lawmakers agreed on a compromise on taxes and amid better-than-estimated earnings. About 75 percent of the S&P 500 companies that have released quarterly results beat profit estimates, according to data compiled by Bloomberg. The index trades at 14.96 times reported earnings, below the average since 1954 of 16.4.
All 10 groups in the S&P 500 rose today as industrial and commodity shares had the biggest gains. The Morgan Stanley Cyclical Index of companies most-tied to economic growth added 2.2 percent, its biggest advance since Jan. 2.
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slumped 13 percent to 14.73. The gauge tumbled 22 percent in two days.
The Dow Jones Transportation Average rallied 2.9 percent, the most since June. FedEx added 2.5 percent to $105.74 and United Parcel Service Inc. rose 1.1 percent to $82.83. The Bloomberg U.S. Airlines Index jumped 2.9 percent.
“Our call -- that 2013 is poised to be ‘The Year of Transports’ -- has gradually gained steam,” Peter Nesvold, an analyst at Jefferies Group Inc., wrote in a note today. He cited the strength in car and housing prices.
Priceline added 2.6 percent to $695.91. The company is racing with smaller rival Expedia Inc. to sell hotel reservations in Europe and Asia, where consumers are warming to booking travel online. Expedia, whose growth has lagged behind Priceline’s in recent years, said last month that international sales accounted for almost half of its fourth-quarter sales, a sign of improving growth opportunities abroad.
Coach Inc. advanced 2.8 percent to $47.82. The largest U.S. luxury-handbag maker rose after DealReporter said there is speculation the company may consider a sale, citing two bankers it didn’t name. Andrea Resnick, a spokeswoman for Coach, said the company doesn’t comment on speculation or rumors, “particularly unsubstantiated ones.”
LinkedIn Corp. gained 6.8 percent to $168.55 after Wunderlich Securities recommended buying the shares. The 12-month share-price estimate is $195.
Deere & Co. rose 1.5 percent to $87.82. The world’s largest agricultural-equipment maker raised its quarterly dividend by 11 percent to 51 cents a share from 46 cents previously. The increase is the 11th since early 2004, the Moline, Illinois-based company said today in a statement. The boosted dividend is payable May 1 to holders of record on March 28.
Dollar Tree Inc. surged 10 percent to $45.39, reaching its highest level since October and advancing the most in the S&P 500. The discount retailer forecast a strong second half after posting fourth-quarter earnings of $1.01 a share, beating the average analyst estimate of 99 cents.
Apple fell 1 percent to $444.57. Chief Executive Officer Tim Cook said he’s in “very, very active” talks about what to do with the company’s growing cash pile. His comments were not enough to assuage investors seeking more clarity on his plans to return cash to shareholders.
Cook is being urged to return some of the $137.1 billion on Apple’s balance sheet to investors in the form of increased dividends, stock buybacks or new class of preferred shares. The calls have grown louder as the stock has fallen by about a third from a September peak amid concerns about slowing sales and profit growth.
The CEO said he and other executives are “focused on the long term” and aren’t happy with the falling stock price.
Target dropped 1.5 percent to $63.12. Chief Executive Officer Gregg Steinhafel struggled to increase sales during the holidays after a luxury goods line co-branded with Neiman Marcus Group Inc. flopped with shoppers.
First Solar Inc. slumped 14 percent to $27.04 for the worst performance in the S&P 500. The biggest maker of thin-film solar panels said its “expected revenue” fell 15 percent last year and its goal for this year is to avoid slipping further. The shares plunged the most in five months.