U.S. Stocks Gain for Week as Data Offset Budget, Italy

U.S. stocks rose for the week, sending the Dow Jones Industrial Average to the highest level since 2007, as better-than-estimated economic data overshadowed concern over federal spending cuts and Italian elections.

An index of homebuilders climbed 1.5 percent as home sales increased more than forecast. Home Depot Inc. jumped 5.3 percent after it raised its dividend and approved a $17 billion share buyback amid better-than-estimated earnings. J.C. Penney Co. tumbled 21 percent and Sears Holdings Corp. sank 6 percent on quarterly losses. Apple Inc. dropped 4.5 percent as Chief Executive Officer Tim Cook failed to assuage investors seeking more clarity on his plans for the company’s growing cash pile.

The Standard & Poor’s 500 Index rose 0.2 percent to 1,518.20 for the five days, rebounding after its only weekly loss in 2013. The Dow added 89.09 points, or 0.6 percent, to 14,089.66, the highest since October 2007. Both gauges gained in February, as the S&P 500 climbed 1.1 percent for a fourth straight monthly increase and the Dow advanced 1.4 percent.

“It’s been more of a continuation of the growth story, not deterioration or that the sequestration was going to cause a pullback in consumer spending,” Bill Schultz, chief investment officer who oversees about $1.1 billion at McQueen Ball & Associates in Bethlehem, Pennsylvania, said by phone. “This market still has a bias to the upside right now.”

Equities tumbled on the first day of the week, giving the S&P 500 its biggest drop since November, as Italian elections spurred concern about prospects for a stable government and a worsening of Europe’s debt crisis. Stocks rebounded as economic reports showed purchases of new homes in the U.S. jumped in January to the highest since July 2008. Consumer spending rose even as incomes fell by the most in 20 years and American factories expanded at the fastest pace in almost two years.

Budget Standoff

Democrats and Republicans are in a standoff over how to replace spending cuts totaling $1.2 trillion over nine years, $85 billion of which would occur in the remaining seven months of this fiscal year. President Barack Obama said the automatic spending cuts starting March 1 will be a “slow grind” on the economy and that it may take weeks to win over enough lawmakers from both parties to reach a deal on a replacement deficit-cutting plan.

“The market is digesting both strong fundamental data when it comes to the economy and then negative data when it comes to geopolitical background,” Andres Garcia-Amaya, New York-based global market strategist at JPMorgan Chase & Co.’s mutual funds unit, which oversees $400 billion in assets, said by phone. “As we peel away some of the layers of uncertainty and focus on the fundamentals, we think the fundamentals are resilient.”

Bull Market

The bull market in U.S. equities is entering its fifth year this month after the S&P 500 surged 124 percent from a 12-year low in 2009 amid better-than-expected corporate earnings and three rounds of bond purchases by the Federal Reserve to keep interest rates low and stimulate the economy. The S&P 500 has climbed 6.5 percent this year and is trading at about 3 percent below its record 1,565.15 reached in October 2007. The Dow is 0.5 percent from its high of 14,164.53.

Phone companies and consumer-discretionary stocks rose the most among 10 S&P 500 groups for the week, climbing at least 1.4 percent. KB Home jumped 4.8 percent to $18.77 and Lennar Corp. advanced 2.5 percent to $38.84 as homebuilders rallied.

Home Depot gained 5.3 percent to $69.03. The largest U.S. home-improvement retailer posted fourth-quarter profit that topped analysts’ estimates as shoppers spent more on projects and Hurricane Sandy repairs. The company raised its quarterly dividend 34 percent to 39 cents a share. It plans to repurchase $17 billion of stock by the end of its fiscal 2015.

Delphi Rises

Delphi Automotive Plc rose 10 percent to $42.20. The former parts unit of General Motors Co. initiated a dividend, its first since returning to the public markets after bankruptcy.

J.C. Penney tumbled 21 percent to $17.69. The department-store chain lost $4.3 billion in sales in the first year of Chief Executive Officer Ron Johnson’s turnaround plan, with annual revenue sliding 25 percent to $13 billion, the lowest since at least 1987. The company’s net loss for the quarter widened to $552 million from $87 million a year earlier.

Sears slipped 6 percent to $44.36. The retailer controlled by hedge-fund manager Edward Lampert posted a fourth-quarter loss that was larger than it forecast as sales fell for the sixth consecutive year.

‘Very Active’

Apple declined 4.5 percent to $430.47, the lowest level since January 2012. While Cook said he’s in “very, very active” talks about what to do with $137.1 billion in cash and investments that Apple has, he ended the company’s annual shareholder meeting without giving any additional insight.

First Solar Inc. plunged 25 percent, the most in the S&P 500, to $25.35. The world’s biggest maker of thin-film solar panels said first-quarter revenue will fall short of analysts’ expectations after it shuttering a plant in Germany. The company said its “expected revenue” fell 15 percent last year and its goal for this year is to avoid slipping further.

Cablevision Systems Corp. fell 9.1 percent to $13.76. The fifth-largest U.S. cable provider by subscribers reported a quarterly operating loss, blaming costs related to Superstorm Sandy.

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