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U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level since May 2008, after Federal Reserve Chairman Ben S. Bernanke said that accommodative monetary policy is still needed to spur jobs.
The Morgan Stanley Cyclical Index of companies most-tied to the economy rose 1.3 percent. Apple Inc. (AAPL) jumped 1.8 percent to a record as the world’s most-valuable technology company said it plans to increase investment in China. Amazon.com Inc. (AMZN) and JPMorgan Chase & Co. (JPM) climbed at least 2.2 percent to pace gains among the largest companies. Pfizer Inc. (PFE) added 1.6 percent as health-care shares rose the most among 10 S&P 500 groups.
The S&P 500 advanced 1.4 percent to 1,416.51 at 4 p.m. New York time, erasing last week’s loss and posting the fourth- biggest gain of 2012. The Dow Jones Industrial Average added 160.90 points, or 1.2 percent, to 13,241.63 today. The Russell 2000 Index (RTY) of small companies rallied 1.9 percent to 846.13, the highest level since July. About 6.2 billion shares changed hands on U.S. exchanges, or 6 percent below the three-month average.
“Bernanke is in a difficult situation because the Federal Reserve is mostly relying on the Fed’s speech as opposed to money to move markets,” said David Kelly, who helps oversee about $394 billion as chief market strategist at JPMorgan Funds in New York. “What he’s trying to say is that they’re going to be pretty slow to remove stimulus.”
Equities rose as Bernanke said in a speech that while he’s encouraged by the unemployment rate’s decline, the economy still needs help. The number of Americans signing contracts to buy previously owned homes held in February near an almost two-year high, a sign that the real estate market may be stabilizing.
Gains in stocks were also driven by speculation the European Union will increase the size of its bailout fund. European finance ministers meet March 30 to discuss raising a 500 billion-euro ($664 billion) ceiling on the region’s financial firewall. Chancellor Angela Merkel said Germany may back plans for the temporary and permanent euro-area rescue funds to run in parallel.
“Europe took care of a liquidity problem, but the solvency concern still remains,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a telephone interview. His firm manages about $107 billion. “Some action to bolster the firewall would be viewed as positive.”
All 10 groups in the S&P 500 rose today as some of the largest companies rallied. The Dow Jones Transportation Average, a proxy for the economy, gained 1.4 percent. The KBW Bank Index added 1.5 percent as 23 of its 24 stocks rose. Amazon.com increased 4 percent to $202.87. JPMorgan climbed 2.2 percent to $46.17.
Apple jumped 1.8 percent to a record $606.98. Chief Executive Officer Tim Cook visited the world’s most populous country, where store openings have trailed a forecast the company made two years ago. Cook had “great meetings” with Chinese officials, Carolyn Wu, a Beijing-based spokeswoman, said by phone, without identifying the officials.
A measure of health-care companies in the S&P 500 rose the most among 10 industries, adding 1.7 percent. Pfizer added 1.6 percent to $22.16. Tenet Healthcare Corp. (THC) had the second-biggest advance in the S&P 500, adding 5.5 percent to $5.54.
The U.S. Supreme Court opened historic arguments on President Barack Obama’s health-care overhaul by debating whether it should rule this year at all. The justices are considering whether an 1867 law bars them from ruling for now on the measure that requires almost every American to get health insurance by 2014 or pay a penalty.
Arena Pharmaceuticals Inc. (ARNA) soared 25 percent to $3.01, the highest level since September 2010. The weight-loss pill maker faces an advisory panel on May 10 as Food and Drug Administration staff said in a report today that obesity treatment manufacturers may need to study the heart risks of their medicines before U.S. regulators weigh approval.
Edwards Lifesciences Corp. (EW) rallied 5.9 percent, the most in the S&P 500, to $75.51. The company’s Sapien device replaces damaged aortic heart valves as well as surgery, without cracking open the chest or triggering higher rates of stroke or death after two years, a company-funded study found.
Lions Gate Entertainment Corp. (LGF) added 4.5 percent to $15.18. “The Hunger Games” collected $155 million in weekend sales in the U.S. and Canada, a record opening for the company and for the month of March.
Safeway Inc. (SWY) declined 3.4 percent, the biggest loss in the S&P 500, to $20.42. The grocer was cut to neutral from outperform at Credit Suisse Group AG, meaning the firm expects the stock to perform in-line with the market over the next 12 months.
A123 Systems Inc. (AONE) tumbled 12 percent to $1.49, the lowest price since it went public in September 2009. The company said it’s replacing defective battery packs and modules it supplies to customers, including Fisker Automotive Inc., and that the flaw caused a Fisker Karma to shut down in a Consumer Reports test.
The S&P 500 today erased last week’s 0.5 percent decline and extended its monthly advance to 3.7 percent. The benchmark measure is poised for a fourth straight monthly gain, the longest winning streak since September 2009. The index has risen 13 percent in 2012 amid better-than-estimated economic and corporate data. It trades for 14.6 times reported earnings, below the average since 1954 of 16.4.
Hedge funds trailing the S&P 500 for the last five months are giving up on bearish bets and buying stocks at the fastest rate in two years.
A gauge of hedge-fund bullishness measuring the proportion of bets that shares will rise climbed to 48.6 last week from 42 at the end of November 2011, the biggest increase since April 2010, according to data compiled by the International Strategy & Investment Group. The Bloomberg aggregate hedge fund index gained 1.4 percent last month, lagging behind the S&P 500 by 2.65 percentage points.
Money managers struggling to catch up with the gains have contributed to the rally that pushed the S&P 500 up 27 percent since October.
Market bulls say they are a continuing source of cash that can move stocks higher. Bears say capitulating hedge funds are further evidence that equities have risen too far, too fast as economic growth remains sluggish, warning that the pool of potential buyers is being depleted.
“It’s encouraged me to gradually increase my exposure to stocks,” Barton Biggs, founder of hedge fund Traxis Partners LP in New York, said in a March 23 phone interview, referring to an improving economic outlook. “The shift has occurred gradually in the six or so months since the beginning of October. I’d be inclined to raise my net long further because the potential to the upside would be greater” should the S&P 500 fall 5 percent to 7 percent, he said.
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