S&P 500 Climbs to Record on Stimulus, Earnings Optimism

U.S. stocks rallied, sending the Standard & Poor’s 500 Index to its highest level ever, as China’s imports grew, Japan reiterated its stimulus plans and investors speculated earnings will beat estimates.

All 10 industries in the S&P 500 advanced, with technology and health-care companies rallying more than 1.7 percent. The Nasdaq Composite Index, which counts on computer and software makers for about half its weighting, surged 1.8 percent. Intel Corp. and Micron Technology Inc. jumped at least 2.3 percent as Taiwan Semiconductor Manufacturing Co. predicted a rebound in industry sales. Citigroup Inc. and JPMorgan Chase & Co. added more than 1.2 percent, pacing gains among financial shares.

The S&P 500 rose 1.2 percent to 1,587.73 at 4 p.m. in New York, as minutes of the latest Federal Reserve meeting showed officials debated when to curtail stimulus efforts. The Dow Jones Industrial Average climbed 128.78 points, or 0.9 percent, to a record 14,802.24. About 6.2 billion shares changed hands on U.S. exchanges, in line with the three-month average.

“A lot of it is sentiment,” Rex Macey, who oversees $20 billion as chief investment officer at Wilmington Trust Investment Advisors in Atlanta, said by telephone. “People who were not in the market and people had been nervous are starting to feel as if it’s safe to go back in the water. They don’t feel there is a recession around the corner,” he said. “The market is expecting some bad reports for earnings. We think there might be some surprise to the upside.”

‘Bold’ Easing

Imports to China rose 14.1 percent in March from the year earlier, leaving the nation with an unexpected trade deficit. In Japan, Prime Minister Shinzo Abe said “bold monetary easing” will reverse persistent deflation in his nation. Bank of Japan Governor Haruhiko Kuroda said the central bank will take all steps necessary to meet a 2 percent inflation target even as he indicated policy adjustments are unlikely every month. The European Central Bank will keep rates low and continue injecting liquidity into the banking system, Governing Council member Christian Noyer said on Europe 1 radio.

The S&P 500 jumped the most since Feb. 27 today, topping a record intraday high of 1,576.09 set in October 2007, and is up 2.2 percent so far this week for its best three-day rally since the beginning of January. The index has more than doubled from its 12-year low in March 2009, helped by the Fed’s unprecedented bond purchases and three straight years of profit growth.

Several Fed officials said the central bank should taper its bond-buying program later this year and stop it by the end of 2013 if labor market conditions improve, according to minutes from the March meeting released today. Fed Chairman Ben S. Bernanke said on April 8 that economic conditions were far from where he would like them to be.

Fed Debate

“Bernanke has made it very clear as of late that while the economy is recovering quite well from recent lows, it is still very far from where he would like it,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said by e-mail. “I think that is trumping the fact that some of the members might want purchases to end sooner.”

U.S. President Barack Obama released his proposed 2014 budget to Congress today, more than two months past the Feb. 4 deadline, after Democrats and Republicans deadlocked over taxes and spending. Under the plan, President Obama wants to again rely on the top-earning U.S. households for most of the tax increases he’s proposing.

Earnings Season

Constellation Brands Inc. and Bed Bath & Beyond Inc. are among six companies in the S&P 500 reporting earnings today. Members of the benchmark gauge will post a 1.8 percent profit decline in the first quarter, according to analysts’ projections compiled by Bloomberg.

Companies whose growth is most tied to economic swings led today’s rally. The Morgan Stanley Cyclical Index climbed 1.6 percent, and the Dow Jones Transportation Average jumped 1.8 percent.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slipped 3.7 percent to 12.36. The gauge, known as the VIX, is down 31 percent this year and reached its lowest level since February 2007 last month.

Betting on banks and software makers during earnings season has rewarded investors during the bull market. Since April 2009, the industries have generated stock market gains averaging about 2 percent in the two weeks after Alcoa Inc. marked the start of the earnings season, according to data compiled by Bloomberg. That compared with a gain of 1.7 percent for the S&P 500 in those weeks.

Banks, Chipmakers

The KBW Bank Index climbed 1.4 percent, with 23 of its 24 members advancing. Citigroup added 2.7 percent to $45.06 while JPMorgan gained 1.2 percent to $49.25. JPMorgan and Wells Fargo & Co. are scheduled to report earnings on April 12.

The S&P 500 Information Technology Index soared 1.8 percent to the highest level since Oct. 17. The Nasdaq Composite Index surged the most since Jan. 2.

Intel, the world’s largest chipmaker, rallied 2.3 percent to $22.26. Micron jumped 5.4 percent to $10.09. Sales in the chip industry will grow 4 percent this year, after falling 2 to 3 percent in 2012, said Morris Chang, chief executive officer at Taiwan Semiconductor, the world’s largest contract producer of chips.

Pfizer Inc., the world’s biggest drugmaker, climbed 2.8 percent to $29.92. The Food and Drug Administration assigned the company’s palbociclib compound a breakthrough designation under a new regulation that’s aimed to expedite the development and review of drugs that may demonstrate substantial improvements in treatment for serious diseases, Pfizer said.

Facebook Inc. gained 3.7 percent to $27.57. General Motors Co. said it will test advertisements on the world’s largest social-network service a year after the automaker quit running marketing messages on Facebook’s website.

Health Management Associates Inc., the operator of acute-care hospitals, plunged 16 percent to $10.53 after it reduced the high end of its 2013 earnings forecast.

Other hospital stocks also fell. Community Health Systems Inc. lost 3.8 percent to $42.26. Tenet Healthcare Corp. slipped 5.5 percent to $41.14. Deutsche Bank AG cut the three stocks to hold from buy.

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