S&P 500 Extends Record as Bank Rally Offsets UPS ForecastInyoung Hwang and Alex Barinka
U.S. stocks rose for a seventh day, extending a record for the Standard & Poor’s 500 Index, as better-than-estimated bank earnings overshadowed a reduced profit forecast from United Parcel Service Inc.
Financial stocks rose the most out of 10 S&P 500 groups after Wells Fargo & Co. reported earnings that topped analysts’ estimates. UPS fell 5.8 percent as it lowered its forecast for earnings in 2013, citing a slowing economy in the second quarter. Boeing Co. plunged 4.7 percent after a parked 787 Dreamliner caught fire at London’s Heathrow Airport.
The S&P 500 advanced 0.3 percent to a record 1,680.19 at 4 p.m. in New York. The Dow Jones Industrial Average added 3.38 points, or less than 0.1 percent, to 15,464.3, also an all-time high. More than 5.4 billion shares traded hands on U.S. exchanges today, or 15 percent below the three-month average.
“Earnings are going to be very important,” Stephen Wood, the New York-based chief market strategist who helps oversee $173 billion at Russell Investments, said by telephone. “It’s going to be the story of the week and the story of the month.”
The S&P 500’s advance today extended a record from yesterday, when the gauge jumped 1.4 percent after Fed Chairman Ben S. Bernanke backed sustained monetary stimulus. The index has added 3 percent in the past five days for a third week of gains and its biggest rally since Jan. 4. The surge has helped to erase losses since Bernanke first signaled the Fed may trim its $85 billion in monthly bond purchases later this year.
Equities retreated earlier today after Fed Bank of Philadelphia President Charles Plosser, who has opposed the central bank’s current round of asset purchases, said the Fed should begin tapering in September. The benchmark gauge halted the decline after Fed Bank of St. Louis President James Bullard said the central bank shouldn’t cut back until inflation accelerates toward the Fed’s 2 percent goal.
The debate among policy makers in the past six weeks has sent markets lurching as investors speculate on the timing and rate of any cuts in bond buying. Central bank stimulus has helped fuel a rally in stocks worldwide, with the benchmark U.S. index surging 148 percent from its March 2009 low.
The S&P 500 sank as much as 5.8 percent after reaching a record May 21, the day before Bernanke said the Fed may start paring stimulus efforts as soon as September if the economy improves in line with its forecasts. The index has rebounded 6.8 percent from a June 24 bottom, the fastest rally since December 2011, as economic data from hiring to housing tempered concern over possible tapering.
“The Fed’s hope is that investors shift over time from liquidity-driven strength to economy-driven strength,” James Gaul, a portfolio manager at Boston Advisors LLC, which oversees about $2.6 billion in assets, said by phone. “I don’t know if we’ve seen true economic strength here yet, but we’re a lot closer than we were a couple of years ago.”
A report today showed consumer confidence unexpectedly cooled in July as Americans became less optimistic about the outlook for the economy. Separate data indicated wholesale prices in the U.S. rose more than projected in June, reflecting higher costs for energy and automobiles.
The Chicago Board Options Exchange Volatility Index, or VIX, slid 1.2 percent to 13.84. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80 percent of the time, has declined seven straight days, the longest streak of losses since October 2011. The index reached a six-month high on June 20 and has fallen 32 percent since.
Investors have also turned their attention to earnings results this week. Profit at companies listed on the S&P 500 rose 2 percent last quarter, down from a projection of 8.7 percent six months ago, according to analyst estimates compiled by Bloomberg. Lower expectations helped about 73 percent of the companies in the benchmark measure exceed forecasts by an average of 5.1 percent for the first three months of the year, Bloomberg data show.
Reports from JPMorgan and Wells Fargo, the first of the six largest U.S. lenders to report, drove bank stocks 1.5 percent higher as a group. The lenders were the only two S&P 500 companies to release earnings today.
Wells Fargo rose 1.8 percent to $42.63. The largest U.S. home lender said second-quarter profit climbed 19 percent as the company clamped down on expenses.
JPMorgan slipped 0.3 percent to $54.97 after Chief Executive Officer Jamie Dimon warned investors that higher interest rates could lead to a “dramatic reduction” in the bank’s profits by eroding demand for mortgage refinancing.
The biggest U.S. bank by assets reported a 31 percent increase in second-quarter profit that beat analysts’ estimates as revenue from trading stocks and bonds climbed.
Netflix Inc. gained 5.4 percent to $257.26, the highest level since August 2011. The largest subscription video-streaming service rose to its highest in more than 23 months as expectations for strong customer growth prompted Barclays Plc to boost its price target for the shares.
Alexion Pharmaceuticals Inc. surged 13 percent to $114.26. Roche Holding AG, the largest maker of cancer drugs, is seeking billions of dollars in financing for a potential takeover of the maker of a drug for rare blood diseases, people with knowledge of the situation said.
Alexion led the Nasdaq 100 Index to a 13th straight gain, matching its longest rally since 1992.
Regeneron Pharmaceuticals Inc. added 7.3 percent to $266 after Joshua Schimmer, a New York-based analyst at Lazard Capital Markets Ltd., lifted his rating on the maker of the eye medicine Eylea to buy from neutral.
WebMD Health Corp. surged 25 percent, the most since 2008, to $33.82. The company said second-quarter revenue rose to as much as $125 million, above analyst estimates for $117 million. The health information services provider raised its full-year earnings outlook to as much as $11 million, from a previously anticipated loss of as much as $13 million. Shares have more than doubled this year.
UPS said a slowing U.S. economy hurt second-quarter profit and revenue. The world’s largest package delivery company and rival FedEx Corp. are often viewed as economic bellwethers because they transport goods across the world.
UPS tumbled 5.8 percent to $86.12, the most since December 2008. FedEx slid 2 percent to $102.29.
Boeing plunged 4.7 percent to $101.87 for the biggest retreat in the Dow. London Heathrow airport closed to flights after a fire involving a Boeing 787 jet operated by Ethiopian Airlines Enterprise, while a second Dreamliner was forced to abandon a trip with technical issues.
The aircraft, Boeing’s newest model and beset by battery-related fire incidents that grounded the global fleet earlier this year, was sprayed with fire-retardant foam after the Heathrow event.
Precision Castparts Corp., the maker of metal forgings for jet engines and a Boeing supplier, slid 1.1 percent to $234.69.