U.S. Stocks Rise on Stimulus Bets as Manufacturing FallsNikolaj Gammeltoft
U.S. stocks rose, pushing benchmark indexes to fresh records, as data showing weakness in manufacturing fueled bets the Federal Reserve will be in no hurry to scale back stimulus.
JPMorgan & Chase Co. jumped 1.7 percent to its highest level since June 2007 as financial shares rallied. Procter & Gamble Co. added 1.5 percent as the index tracking consumer-staples stocks hit a record. Macy’s Inc. increased 2.5 percent after reporting profit that beat estimates. Netflix Inc. rose 4 percent, extending gains for a sixth day. Cisco Systems Inc. climbed 8.5 percent after the close of regular trading as quarterly earnings topped analyst forecasts.
The Standard & Poor’s 500 Index rose 0.5 percent to 1,658.78 at 4 p.m. in New York. The benchmark equity gauge has set a record in nine of the past 10 sessions. The Dow Jones Industrial Average added 60.44 points, or 0.4 percent, to a record 15,275.69 today. More than 6.5 billion shares traded hands on U.S. exchanges today, or 3.5 percent above the three-month average.
“The global economic outlook gives some support to the idea that more easing is on its way, especially with soft inflation,” Oliver Pursche, co-manager of the GMG Defensive Beta Fund and president of Suffern, New York-based Gary Goldberg Financial Services, said via phone. The firm manages about $650 million. “It would be surprising if there was a meaningful and prolonged pullback at this point.”
The U.S. bull market has entered its fifth year. The S&P 500 has surged 145 percent from a 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Federal Reserve.
The central bank’s policy makers debated at their April 30-May 1 meeting whether to expand or curb the pace of stimulus. They said they’re prepared to increase the $85 billion monthly rate of bond buying in response to changes in the labor market or inflation. Fed Chairman Ben Bernanke has said he would continue unprecedented stimulus until the jobless rate falls to 6.5 percent or inflation rises above 2.5 percent.
Data from the Labor Department showed wholesale prices dropped in April by the most in three years, reflecting a decrease in fuel costs that is helping underpin profits.
U.S. industrial production declined in April by the most in eight months, reflecting broad-based cutbacks in factory output and indicating American manufacturers will provide little support for an economy beset by weaker global markets and federal budget cuts. Manufacturing in the New York region unexpectedly shrank in May as factories received fewer orders and sales stagnated, a separate report showed.
The euro-area economy shrank 0.2 percent in the first quarter after a 0.6 percent decline in the previous three months, the European Union’s statistics office in Luxembourg said today. Bank of England Governor Mervyn King declared that a U.K. recovery is “in sight.”
The Chicago Board Options Exchange Volatility Index, or VIX, rose less than 0.1 percent to 12.81. The benchmark gauge for options, which moves in the opposite direction to the S&P 500 about 80 percent of the time, climbed with the equity gauge for the second straight day.
“The VIX being up in conjunction with new all-time highs in many indices is a function of risk protection given the strong move we’ve seen so far in equities,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview.
About 91 percent of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg, approaching the two-year high of 93 percent reached January.
Nine of 10 groups in the benchmark equity index advanced. Shares in companies that make food, beverages and household products surged 1 percent, pushing the S&P 500 Consumer Staples Index to an all-time high. Procter & Gamble added 1.5 percent to $80.68. Indexes tracking consumer-discretionary and health-care stocks also rose to record closes. Wal-Mart Stores Inc. climbed 1.4 percent to $79.86, a new high.
Bank shares jumped 1 percent as a group, sending the S&P 500 Financials Index to its highest close since Oct. 1, 2008. JPMorgan Chase climbed 1.7 percent to $50.89. American Express Co. added the most in the Dow, rising 1.8 percent to a record $72.78.
Macy’s jumped 2.5 percent to a record $48.57. The second-largest U.S. department-store chain reported fiscal first-quarter profit that beat analysts’ estimates and increased its share-buyback program by $1.5 billion.
Netflix extended gains for a sixth day, increasing 4 percent to $2413.40, the highest since August 2011. The world’s largest subscription video service’s streaming of the revived show “Arrested Development” is likely to have a larger impact on second-quarter gross additions than new series like “House of Cards” did in the previous three months, BTIG analyst Richard Greenfield said in note.
Google Inc. rose 3.3 percent to a record $915.89, extending its rally to 20 percent since reporting earnings after the market closed on April 18. The company introduced a subscription music-streaming service today, one of several product updates to be unveiled at a developer meeting this week.
Apple Inc. retreated 3.4 percent to $428.85. Appaloosa Management LP, the hedge fund run by billionaire David Tepper, cut its stake in the iPhone maker by 41 percent last quarter, according to a regulatory filing today. Birinyi Associates Inc. also trimmed its holdings in the company, a separate filing said.
Cisco climbed 8.5 percent to $23.02 as of 5:59 p.m. New York time. After the market close, the biggest maker of networking equipment reported quarterly profit that beat estimates as corporate customers increased spending to meet surging demands for data delivery over the Internet.
Energy shares fell 0.4 percent as oil was little changed after declining as much as 2.2 percent. Chevron Corp. dropped 1.6 percent to $123.01.
Deere Inc. declined 4.1 percent to $89.64 as the company cut its full-year equipment-sales forecast, citing global financial “pressures” and cold, wet weather that has delayed crop planting in the U.S.
ExOne Co. sank 15 percent to $41.15. The maker of 3-D printers reported a first-quarter loss per share of 20 cents, wider than the estimate for a loss of 8 cents a share. The shares have still more than doubled since the company sold stock at $18 in an initial public offering in February.
Computer Sciences Corp. dropped 9.6 percent to $44.71 for the biggest loss in the S&P 500. The technology consultant for governments and companies reported fourth-quarter revenue that fell short of analyst estimates.