S&P 500 Hits Record on Yellen Speech; Phone Shares RallyLu Wang and Callie Bost
U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, as Federal Reserve Chair Janet Yellen said the central bank may change its strategy for reducing asset purchases should the economy weaken.
Phone stocks rallied the most among the 10 main industries in the S&P 500 as JPMorgan Chase & Co. added Verizon Communications Inc. to its focus list. J.C. Penney Co. surged 25 percent after predicting an increase in annual revenue and wider margins. Sears Holdings Corp. rose 6.5 percent after reporting a narrower fourth-quarter loss. Transocean Ltd. fell 1.1 percent as sales missed analysts’ forecasts at the world’s largest offshore rig contractor.
The S&P 500 increased 0.5 percent to 1,854.29 at 4 p.m. in New York. The Dow Jones Industrial Average added 74.24 points, or 0.5 percent, to 16,272.65. About 6.5 billion shares changed hands on U.S. exchanges, in line with the three-month average.
“Yellen said that they would consider pulling back on their tapering schedule if the economy slowed in a meaningful manner,” Matt Maley, an equity strategist with Miller Tabak & Co., said in an interview from Boston. “She seems to be more willing to step back on the accelerator than she was when she last spoke to Congress.”
The S&P 500’s close at a record ended three days of the index failing to sustain all-time highs throughout the sessions. The benchmark gauge is up 4 percent in February, poised for the best monthly gain since October.
Investors continue to favor equities over bonds. They added $971.8 million to U.S. equity exchange-traded funds yesterday, compared with deposits of $49.8 million to domestic bond ETFs, data compiled by Bloomberg show.
Yellen said today in the testimony on monetary policy before the Senate that the Fed is likely to keep trimming asset purchases, even as policy makers monitor data to determine if recent weakness in the economy is temporary. The S&P 500 has rallied 6.5 percent since a low on Feb. 3 amid speculation that severe winter weather explains the weakness in reports such as housing and hiring.
Reports today showed orders for U.S. durable goods fell 1 percent in January, less than forecast, a sign manufacturing was beginning to emerge from the harsh winter weather. In the labor market, more Americans than forecast filed applications for unemployment benefits last week.
Stocks in Europe declined as Russia said it has begun military exercises near the Crimean border. Gunmen occupied Ukraine’s Crimea regional parliament and raised the Russian flag as lawmakers in the capital meet to approve a new cabinet after last week’s ouster of Viktor Yanukovych as leader.
“The story today is the unfolding situation in Ukraine and whether the S&P 500 can break above the 1,840 to 1,850 level,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said in an interview. His firm oversees $290 billion. Jobless “claims are taking a backseat to broader geopolitical and technical levels,” he said.
Benchmarks tracking smaller companies also made new highs. The Russell 2000 Index climbed 0.5 percent while the S&P Midcap 400 Index gained 0.3 percent today. The Dow is still about 2 percent below its record.
The Chicago Board Options Exchange Volatility Index slipped 2.2 percent to 14.03. The gauge of S&P 500 options known as the VIX is up 2.3 percent this year.
Phone stocks rose the most among the S&P 500’s 10 main industries, rallying 1.7 percent. Verizon climbed 2.5 percent to $47.50 as JPMorgan said shares of the wireless carrier may reach $57 over the next six to 12 months. Morgan Stanley resumed the coverage of the stock with a rating of overweight, the equivalent to buy.
J.C. Penney surged 25 percent to $7.47. Same-store sales will increase by a mid-single digit percentage and gross margin will “significantly” improve this year, the company said. Chief Executive Officer Mike Ullman forecast that the retailer’s turnaround will be completed this year.
Sears added 6.5 percent to $43.01. The retailer run by hedge fund manager Edward Lampert said its net loss narrowed to $3.37 a share from $489 million, or $4.61 a share, a year earlier. Revenue fell 14 percent to $10.6 billion.
Mylan Inc. climbed 9.4 percent to $56.27. The generic-drug maker forecast 2014 revenue of at least $7.8 billion, exceeding the average analyst estimate of $7.72 billion.
3M Co. gained 1.1 percent to $134.34. The company is working with Goldman Sachs Group Inc. to sell components of its electronics business that the industrial- and consumer-products maker has decided are underperforming, people with knowledge of the matter said.
Transocean declined 1.1 percent to $42.55. The company reported fourth-quarter revenue of $2.33 billion. Analysts on average estimated $2.36 billion, according to data compiled by Bloomberg.