U.S. stocks rose for the fifth week, giving the Standard & Poor’s 500 Index the longest rally since March, amid better-than-expected earnings and optimism that global central banks will take actions to stimulate growth.
Cisco Systems Inc., Alcoa Inc. and Hewlett-Packard (HPQ:US) Co. rose at least 7.3 percent, driving the Dow Jones Industrial Average (INDU) to its longest winning streak since October. Raw-material producers rose the most among 10 S&P 500 groups, as International Flavors & Fragrances Inc. (IFF:US) climbed 11 percent on better-than-estimated earnings. Knight Capital Group Inc., the firm driven to the brink of bankruptcy by trading losses, tumbled 28 percent after receiving a cash infusion.
The S&P 500 advanced 1.1 percent for the week to 1,405.87, extending its 2012 gain to 12 percent. The Dow climbed 111.78 points, or 0.9 percent, to 13,207.95. The Chicago Board Options Exchange Volatility Index (VIX), a benchmark gauge for options that protect against losses in the S&P 500, slipped 5.8 percent to 14.74, the lowest level since March.
“The risk-on trade is back,” Scott Armiger, a money manager at Christiana Trust in Greenville, Delaware, which has $11 billion in client assets, said in a phone interview. “People think things are on a much better footing now. No matter what they do, it’s either if the numbers are good, then we’re recovering, or if the number are bad, the Federal Reserve will stimulate and we’ll still move up.”
Equities advanced as German Chancellor Angela Merkel backed a bond-buying proposal by the European Central Bank. A collapse in China’s exports added to signs the global economy is weakening, stoking speculation the government will step up measures to support expansion. In the U.S., central bank officials debated whether more action is needed to stimulate growth.
Fed Bank of Boston President Eric Rosengren said the central bank should pursue an “open-ended” easing program of “substantial magnitude,” while his counterpart in Dallas, Richard Fisher, said adequate economic stimulus already is in place. The San Francisco Chronicle reported that Fed Bank of San Francisco President John Williams said the lack of progress in reducing the unemployment rate and the slow economic recovery have convinced him it’s time to move ahead with a third round of asset purchases.
“In light trading, the markets are moving on rumors of monetary policy around the globe,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co. which oversees more than $130 billion of assets, said in a phone interview. “Any word from a central banker in the U.S. or Europe can send the markets up with very little volume.”
About 5.7 billion shares a day changed hands on U.S. exchanges this week, 15 percent lower than the daily average volume of 6.73 billion shares this year through Aug. 3, according to data compiled by Bloomberg.
Bets on global central bank action to stimulate the economy have driven the S&P 500 up 10 percent since June 1. The index is at the highest level since April 3, also helped by better-than- estimated corporate profits. About 72 percent of S&P 500 companies the reported quarterly results have beaten estimates, according to data compiled by Bloomberg, even as sales missed forecasts at 59 percent of companies.
An S&P 500 index (SPX) of technology companies advanced 2.1 percent during the week.
Cisco (CSCO:US) climbed 7.3 percent to $17.54. The biggest maker of computer-networking equipment was added to Goldman Sachs Group Inc.’s “conviction buy” list while Piper Jaffray Cos. boosted the stock to overweight, an equivalent of buy. Cisco trimmed its gain on the final day, falling 0.9 percent, after Ryan Hutchinson, an analyst at Lazard Capital Markets LLC, said the outlook for the company may be worse than estimated.
Hewlett-Packard gained 7.9 percent to $19.70. The world’s largest maker of personal computers raised its profit forecast and appointed a new head for its enterprise services unit as it restructures the business.
Computer Sciences Corp. (CSC:US), a technology contractor for government and corporate customers, surged 26 percent, the most since 1980, to $31.32 after topping estimates with its quarterly results and annual forecast.
The S&P gauge of raw materials producers rallied 2.8 percent, the most since June. International Flavors & Fragrances jumped 11 percent to $61.43. The maker of scents and tastes for food and household products reported quarterly earnings that exceeded the average analyst estimate by 5 percent, the most in more than a year, according to data compiled by Bloomberg.
Fossil Inc. (FOSL:US), a maker of jewelry and leather goods, surged 26 percent to $86.47 after forecasting earnings that exceeded analysts’ projections amid increasing sales of its Skagen brand.
Chesapeake Energy Corp. (CHK:US) advanced 10 percent to $19.68. The second-largest U.S. natural-gas producer reported the highest quarterly profit in company history and boosted its asset-sales target to avoid a funding shortfall. The shares slid 3.1 percent on the final day of the week after the company said it received a subpoena in June from the antitrust division of the U.S. Justice Department’s Midwest Field Office.
Dean Foods Co. (DF:US), the biggest U.S. dairy processor, surged 36 percent to $16.63 as its WhiteWave unit filed to raise $300 million in a U.S. initial public offering. The parent company boosted its full-year profit forecast as second-quarter results beat analysts’ estimates.
Best Buy Co. gained 8.9 percent to $19.21. Founder Richard Schulze, who stepped down as chairman in June, offered to take the electronics retailer private at $24 to $26 a share.
Knight (KCG:US) plunged 28 percent to $2.90. The company, whose computer malfunction spewed orders through exchanges Aug. 1 and led to a $440 million loss, was saved from insolvency after receiving a $400 million cash infusion through the sale of convertible securities to a consortium of investors. The bailout would reduce the stake of existing shareholders by more than 70 percent. Shares have tumbled 72 percent since its $10.33 closing price before the software malfunction.
Priceline.com Inc. (PCLN:US) erased 15 percent to $563.16. The biggest U.S. online travel agency by market value forecast third-quarter earnings that trailed analysts’ estimates as turmoil in Europe curtailed trip reservations in the region.
Yahoo! Inc. (YHOO:US) slid 5.1 percent $15.15. Chief Executive Officer Marissa Mayer has embarked on a strategy that may result in a reversal of plans to restructure operations and return billions of dollars in cash to shareholders. The review could mean that the company alters plans to return to shareholders the proceeds from the sale of Yahoo’s stake in Alibaba Group Holding Ltd., Yahoo said in a regulatory filing.
Monster Beverage Corp. (MNST:US) slumped 19 percent, the most in the S&P 500, to $54.27. The largest U.S. energy drink maker by volume sales reported second-quarter profit and revenue that trailed analysts’ estimates as costs increased. Monster also said an unspecified attorney general is investigating the company’s flagship drink and ingredients.
To contact the reporters on this story: Lu Wang in New York at email@example.com; Julia Leite in New York at firstname.lastname@example.org
To contact the editor responsible for this story: Lynn Thomasson at email@example.com