S&P 500 Caps Best 2-Day Gain Since 2011 Amid Global Rally

The Dow Jones Industrial Average surged the most since 2011 and the Standard & Poor’s 500 Index capped its best two-day gain in three years as global equities rallied on the Federal Reserve’s pledge to be patient on boosting rates.

The S&P 500 added 2.4 percent to 2,061.23 at 4 p.m. in New York. The index climbed 4.5 percent over two days, the most since November 2011. The Dow gained 421.28 points, or 2.4 percent, to 17,778.15, the biggest one-day jump since December 2011. Technology shares soared as Oracle Corp. increased the most in six years. About 8.7 billion shares changed hands on U.S. exchanges, 22 percent above the three-month average.

“Just as with other instances, a dovish Fed is making up for a lot of bad news, from Europe and from other parts of the world,” Russ Koesterich, chief investment strategist at New York-based BlackRock Inc., said in an interview on Bloomberg Television. “This is why you have this rebound rally after a few days of very harsh losses.”

Today’s gains came amid a global rally. The MSCI All-Country World Index soared 2 percent and emerging-market stocks surged 1.9 percent. The Stoxx Europe 600 Index advanced 3 percent, the most in three years.

The Chicago Board Options Exchange Volatility Index lost 14 percent to 16.81. The VIX plunged 29 percent over two days, the most since January 2013. The index climbed to a two-month high on Dec. 16 as a slide in oil and signs of a worldwide economic slowdown rippled through financial markets.

U.S. stocks are rebounding from a seven-day decline that erased $1 trillion from equity prices and coincided with a 15 percent drop in West Texas Intermediate crude between Dec. 5 and Dec. 16. S&P 500 energy producers tumbled 8 percent over the stretch while chemical and mining companies lost 7.4 percent. The S&P 500 is now 0.7 percent away from wiping out all its losses from the recent selloff.

Fifth Recovery

A full recovery would be the fifth time this year the S&P 500 has come back after falling more than 4 percent from a high. In comparable drops beginning in January, April, July and September, the index needed about a month to erase losses, data compiled by Bloomberg show.

The Fed meeting took place after a series of government reports showing that the U.S. economy is thriving. Payrolls rose by 321,000 last month, the biggest increase in almost three years, while retail sales increased 0.7 percent, the most in eight months.

Jobless claims decreased by 6,000 to 289,000 in the week ended Dec. 13, the fewest since early November, a Labor Department report showed today in Washington. The Conference Board’s leading indicators index, a gauge of the outlook for the next three to six months, increased 0.6 percent in November. The median forecast of 49 economists surveyed by Bloomberg called for a 0.5 percent advance.

‘Chug Higher’

“There’s no reason why the S&P 500 cannot continue to chug higher,” said Jonathan Aldrich-Blake, a U.S. equity fund manager at Ashburton Investments in Jersey, the Channel Islands. “The U.S. economy is one of the safest bets in the world, and the Fed coming out with a dovish tone yesterday just gives investors the confidence they needed.”

Stocks in the benchmark gauge for U.S. equities are heading for their third consecutive annual gain and have risen almost 200 percent since global equities bottomed in 2009. The biggest bull market since the 1990s technology bubble was fueled as the Fed executed three rounds of bond buying to stimulate the economy and held interest rates near zero since December 2008.

Equities rallied yesterday as Fed Chair Janet Yellen clarified the central bank’s monetary policy plans, saying it is likely to hold rates near zero at least through the first quarter. She also laid out the economic parameters that would need to be met for liftoff to begin later in the year and said that rates probably would be raised gradually thereafter. They may not return to more normal levels until 2017, she added.

December Gains

December has been one of the strongest months for equities since the bull market began. The S&P 500 has risen in the year’s final month sixth consecutive times, posting an annual average return of 2.2 percent. The index has pared this month’s decline to 0.3 percent.

Gains in the measure have been led by health-care companies and utilities, up 20 percent or more from the start of the year, followed by technology producers, makers of household products and banks and brokerages. Energy companies have been the biggest drag, falling 11 percent thanks to declines in four of the last five months.

Stocks in the S&P 500 are trading at 18.2 times annual earnings after valuations reached a four-year high of 18.3 times profit earlier this month. Income among the gauge’s constituents is poised to rise 3 percent in the fourth quarter and 7.3 percent in 2015, analyst estimates compiled by Bloomberg show.

Rite Aid

Among industries, analysts estimate that earnings will grow fastest next year for consumer discretionary companies, at 14.1 percent, followed by commodity producers at 14 percent and technology makers at 13.2 percent. Energy companies may see profits fall more than 13 percent in 2015, analyst estimates compiled by Bloomberg show.

All 10 groups in the S&P 500 advanced today, led by technology shares. Oracle jumped 10 percent, the most since 2008, after the software maker reported second-quarter profit and sales that beat analysts’ estimates.

Microsoft Corp. and International Business Machines Corp. climbed more than 3.6 percent to lead gains in the Dow.

Energy stocks, which soared the most in three years yesterday, added 2.1 percent even as West Texas Intermediate wiped out a gain of 4 percent, sinking 4.2 percent.

Hertz Global Holdings Inc. added 5.8 percent after shareholder Carl Icahn reported an increased stake in the car-rental company. Icahn bought 2.63 million shares on Dec. 15.

Rite Aid Corp. surged 12 percent after quarterly profit and revenue topped analysts’ estimates, helped by an increase in sales of prescription drugs, and the retailer boosted its annual earnings forecast.

Before it's here, it's on the Bloomberg Terminal.