Bloomberg News

U.S. Stocks Rally as S&P 500 Climbs to Highest Level Since 2008

February 25, 2012

U.S. stocks rose this week, driving the Standard & Poor’s 500 Index to the highest level since 2008, after Greece got a bailout and better-than-expected data boosted confidence in the world’s largest economy.

Energy companies surged 1.9 percent, the most among 10 S&P 500 (SPXL1) industries, as crude oil futures exceeded $109 a barrel. Sears Holdings Corp. (SHLD) rallied 25 percent, the most in the S&P 500, after announcing real estate sales and a rights offering. Technology companies in the stock index advanced an eighth straight week even as Hewlett-Packard Co. (HPQ) tumbled 10 percent. Procter & Gamble Co. added 2.8 percent after saying it will cut 5,700 jobs.

The S&P 500 added 0.3 percent to 1,365.74, the seventh gain in the past eight weeks. It exceeded last year’s high of 1,363.61 as a 24 percent rally since October restored $3.2 trillion to American equity values. The Dow Jones Industrial Average (INDU) climbed 33.08 points, or 0.3 percent, to 12,982.95. The measure exceeded 13,000 for the first time since 2008.

“You’re seeing a whiz of optimism mainly because of a lack of negative news out of Europe and moderate growth in the U.S.,” Matt McCormick, who helps oversee about $5.1 billion at Bahl & Gaynor Inc. in Cincinnati, said in a phone interview. “This trend will continue until either of these two variables change.”

European finance ministers this week approved 130 billion euros ($175 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. In the U.S., data showed applications for jobless benefits stayed at the lowest level since 2008, consumer confidence rose to a one-year high and purchases of new homes exceeded economists’ forecasts.

No 1% Losses

The S&P 500 has gone without losing 1 percent for 39 consecutive days, the longest streak since the 40 days through May 9, 2007, according to data compiled by Bloomberg. While the gauge surpassed last year’s peak set on April 29, its price- earnings (SPX) ratio is 9 percent cheaper than it was then as profit growth outpaced stock prices.

Earnings topped analysts’ estimates at 68 percent of the 440 companies in the index that released results since Jan. 9. The S&P 500 trades at 14 times reported earnings, compared with a high of 15.4 in April and the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

The lower valuation reflects lingering concern among investors over Europe’s debt crisis, according to Jeff Sica, who oversees $1 billion of assets as president of SICA Wealth Management in Morristown, New Jersey.

‘Quick to Sell’

“The more in depth they get to looking at what’s coming out of Europe, the more likely investors are going to be quick to sell,” Sica said in a phone interview.

Energy stocks in the S&P 500 climbed this week as crude oil futures increased 6.3 percent, completing a seven-day winning streak that’s the longest in two years. Prices rose as tensions with Iran threatened supplies while signs of economic growth boosted the outlook for demand.

Chevron Corp. (CVX), the second-largest U.S. energy company, advanced 2.3 percent to $109.08.

Nabors Industries Ltd. (NBR) rose 7.3 percent to $22.31 after the largest land-drilling contractor beat analysts’ earnings forecasts for a second straight quarter. Profit excluding some items was 53 cents a share in the last three months of 2011, higher than the 50-cent average in a Bloomberg survey.

Sears rose for a fourth week, rallying 25 percent to $68.31. The retailer controlled by hedge-fund manager Edward Lampert said it plans to raise as much as $770 million by selling 11 buildings and separating its Hometown and Outlet shops as well as some hardware stores through a rights offering.

Winning Streak

The S&P 500 Information Technology index added 1 percent, completing the longest streak of weekly gains since 2009. Salesforce.com Inc. (CRM) rallied 11 percent to $143.64. The largest seller of online customer-management software reported fourth- quarter profit that topped analysts’ estimates after adding features and pushing into social media. The company boosted its sales forecast for the current fiscal year.

Hewlett-Packard slumped 10 percent, the most in the Dow, to $26.64, after the company’s fiscal second-quarter profit forecast missed analysts’ estimates as consumers curtail personal-computer purchases.

Procter & Gamble rose 2.8 percent to $66.71. The world’s largest consumer-products company will eliminate the jobs by the end of its fiscal year in June 2013.

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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