U.S. Stocks Dominate Global Equities the Most Since 2004

The combination of this month’s retreat in global equities and gains by U.S. consumer stocks has made American companies the five biggest in the world for the first time in eight years.

Exxon Mobil Corp., Apple Inc., Google Inc., Berkshire Hathaway Inc. and Wal-Mart Stores Inc. are now the largest by market value, according to data compiled by Bloomberg. PetroChina Co., one of three Chinese stocks in the top five last year, slipped to No. 6. Two companies that relied on banking profits, Citigroup Inc. and General Electric Co., fell out since American firms last held the leading spots at the end of 2004.

The shift in the rankings, a barometer of investor expectations for profits and economic growth, shows increasing confidence in Federal Reserve Chairman Ben S. Bernanke’s $2.3 trillion of stimulus spending. Gains in retailers, computer-device makers and media companies have preceded increases in gross domestic product in the past as markets anticipated improving consumer demand.

“U.S. authorities have done an incredible job of maintaining the recovery and encouraging the consumer,” said Henk Potts, who helps oversee $282 billion as an equity strategist at Barclays Wealth in London. His team ranks U.S. shares as their top asset for 2013. “An aggressive policy is working. The U.S. consumer is in great shape. That trend continues to be very supportive of economic growth.”

Weekly Loss

The Standard & Poor’s 500 Index fell 2.1 percent to 1,555.25 last week, its biggest loss in five months, as concern the Fed will end its stimulus through bond buying sent copper into a bear market and oil down 3.6 percent. Of 103 companies in the S&P 500 that posted earnings this month, 51 percent trailed analyst sales forecasts, the most since 2009.

Since 2010, the stock market’s biggest retreats have started this time of year. The S&P 500 fell 9.9 percent between April 2 and June 1 in 2012, and 19 percent from April through October 2011. The benchmark gauge climbed 0.5 percent to 1,562.50 at 4 p.m. New York time today.

Stocks with profits tied to American consumers have led a 130 percent advance in the S&P 500 since March 2009 after trailing the index in the last bull market. Wal-Mart, the world’s biggest retailer, jumped 15 percent this year. Berkshire Hathaway, the largest investor in Coca-Cola Co., is up 17 percent.

Largest Stocks

The rise of U.S. companies in world rankings comes as the largest stocks in the world shrink. The average market value of the 10 biggest was $273 billion this week, a 9.2 percent decline from the end of the third quarter, even as the S&P 500 rose 5.8 percent in the period and the MSCI All-Country World Index of developed and emerging economies advanced 6.2 percent.

No company in the world is worth more than $400 billion for the first time since 2011. The balancing shows the breadth of the global rally. Unlike in the 1990s, when gains were concentrated in the largest companies, the advance since 2009 has been spread evenly among the S&P 500’s constituents. A gauge that strips out market bias in calculating the S&P 500’s return is up 190 percent since March 2009, or 1.5 times as much as the market-weighted gauge.

Economic reports this month slowed the rally. The S&P 500 fell 0.4 percent on April 5 after the Labor Department said employers added the fewest workers in nine months. It fell 0.3 percent a week later, when March retail sales unexpectedly fell, according to the Commerce Department. In the days between the reports, shares gained 2.6 percent.

Chinese Companies

U.S. companies got bigger as Chinese stocks shrunk. Losses averaged 9 percent this year in three equities that occupied the top five as recently as September: Beijing-based PetroChina, Industrial & Commercial Bank of China Ltd. the world’s most profitable lender, and China Mobile Ltd., the largest phone company by users, data compiled by Bloomberg show.

Economic expansion growth in China unexpectedly lost momentum last quarter as gains in factory output and consumption weakened, government figures April 15 showed. GDP rose 7.7 percent, less than the 8 percent median of economists’ forecasts. Hong Kong’s Hang Seng Index lost 7.6 percent since Jan. 30, while the Shanghai Stock Exchange Composite Index fell to an almost four-year low in December.

“China’s economy has failed to live up to the expectations priced into its stock market,” said Howard Ward, chief investment officer at Rye, New York-based Gamco Investors Inc., which oversees $36.7 billion. “Our economy has generally exceeded very low expectations.” The U.S. is “the better risk/reward option,” he said.

Fed Debate

Concern the slowdown will hurt global growth just as the Fed debates ending the bond-buying program known as quantitative easing has sent the S&P 500 down 2.4 percent since reaching a record on April 11. U.S. profit growth slowed last year to a quarterly average of 4.7 percent, less than one-fifth the rate during 2010 and 2011, data compiled by Bloomberg show.

“We need global GDP growth, we can’t do it in the U.S. alone,” Barry Bannister, equity strategist at Stifel Nicolaus & Co. in Baltimore, said in an April 17 phone interview. “We are not going to hit new highs without global GDP.”

The International Monetary Fund cut its 2013 world growth projection the last four quarters to 3.3 percent. That compares with 4.8 percent for 2012 and 5.7 percent in 2011, IMF data compiled by Bloomberg show.

PetroChina Passed

The U.S. took over the biggest-companies ranking this month when Wal-Mart’s 4.6 percent gain sent its market value to $258 billion, passing PetroChina. Shares of the store chain have risen 6 percentage points more than the S&P 500 in 2013, reaching a record high last week. The retailer may say in May that first-quarter earnings rose 5 percent, according to analyst estimates.

Berkshire Hathaway, the Omaha, Nebraska-based holding company run by billionaire Warren Buffett, climbed 17 percent this year to become the world’s fourth-largest at $259 billion. Buffett said March 1 that Berkshire’s five most profitable non-insurance units, which include toolmaker Iscar and chemical company Lubrizol, will boost earnings in 2013.

Apple became the world’s most valuable company in January 2012, a spot it held for 12 months as consumer demand for its iPhones and iPods helped more than double profits on record revenue. At its largest in September 2012, the Cupertino, California-based company was worth $658 billion, exceeding its closest peer, Exxon, by about $240 billion. The 44 percent drop since then left it at $374 billion, No. 2 on the list.

Google Rally

Google increased 13 percent since the end of 2012 and its market capitalization reached a record $278 billion in March. The Mountain View, California-based company, a member of the S&P 500 technology group, is up 4.4 percent since it reported profits last week that topped analyst projections as advertisers boosted spending on mobile and video promotions.

Gains in consumer stocks have preceded above-average economic growth in past bull markets. Following quarters in which they rallied the most or second-most in the S&P 500, GDP expanded 3.1 percent, compared with the historic average of 2.9 percent, according to data since 1990 compiled by Bloomberg.

Consumer companies are beating analyst earnings estimates by 4.3 percent so far this season, about 0.5 percentage point more than the rate for the S&P 500. Of the 15 companies that have reported, 11 have exceed analyst estimates.

Lennar, Mattel

Lennar Corp., the third-largest U.S. homebuilder, hit an almost six-year high in March after posting better-than-estimated profit and a 34 percent jump in orders. Mattel Inc. last week climbed the most in three months after the world’s largest toymaker said profit and revenue beat estimates.

Out of the world’s top 50 companies by market value, 26 are now American. That’s on track for the highest annual total since

2005. The number fell to 21 at the end of 2007, from as high as 35 in 2001, as losses in so-called subprime debt roiled financial firms and pushed the U.S. into a recession.

“The U.S. looks like a bright spot within the developed world,” said Tristan Hanson, who helps oversee about $1.5 billion as head of asset allocation at Ashburton Ltd. in London. “The housing market is recovering, credit is recovering, the labor market is recovering. You may be a bit frustrated with the pace, but there is recovery there.”

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