U.S. stocks climbed, sending the Standard & Poor’s 500 Index within two points of its record high, as government data showed jobless claims unexpectedly dropped last week to the lowest level in almost two months.
Energy shares rallied, as Chevron Corp. jumped 1.4 percent and Chesapeake Energy Corp. added 5.2 percent. Ryland Group Inc. and PulteGroup Inc. rose at least 3.5 percent, pacing gains among homebuilders. JPMorgan Chase & Co. and Goldman Sachs Group Inc. each tumbled 2 percent after the close of regular trading as the Federal Reserve said they must submit new capital plans to regulators to address weaknesses in their planning processes.
The S&P 500 rose 0.6 percent to 1,563.23 at 4 p.m. in New York, its highest level since October 2007. The Dow Jones Industrial Average climbed 83.86 points, or 0.6 percent, to 14,539.14. The 30-stock gauge reached another all-time high and extended its gains to a 10th straight day, the longest winning streak since 1996. About 6 billion shares changed hands on U.S. exchanges today, 4.6 percent below the three-month average.
“It’s a little bit more fuel on the fire,” Jeffrey Davis, chief investment officer at Lee Munder Capital Group, said in a phone interview. The Boston-based firm oversees $5 billion. “It’s been a long time since you’ve seen momentum both on the market and technical front being supported by economic fundamentals. In spite of the fact the market’s not as cheap as it once was, it’s looking like the rally should continue.”
The S&P 500 (SPX) is less than two points away from its record closing level of 1,565.15 set in October 2007. The gauge has more than doubled from its bottom in 2009, fueled by corporate earnings that topped estimates and monetary stimulus from the Fed. The Dow topped yesterday’s record for its eighth straight closing high.
The S&P 500 is valued at 15.4 times reported earnings, a 22-month high, according to data compiled by Bloomberg. That’s still 6.7 percent below an average of 16.6 over the last decade. The Dow is trading at a price-to-earnings ratio of 14.2, the highest level in almost two years and 10 percent below its 10- year average of 15.8.
“Hitting a new high is going to send a signal to all of the fence-sitters that maybe it’s time to take a fresh look at equities,” Alan Gayle, senior strategist at RidgeWorth Capital Management, said over the phone. The Richmond, Virginia-based firm oversees about $48 billion. “The U.S. economy is reasserting itself in a leadership role in terms of overall economic momentum. The housing market is showing recovery, so this is all good for wealth. The decline in jobless claims suggests that the job market is continuing to improve.”
The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, fell 4.5 percent to 11.30, the lowest level since February 2007.
First-time jobless claims fell by 10,000 to 332,000 in the week ended March 9, the fewest since mid-January, according to data today from the Labor Department in Washington. The median forecast of 49 economists surveyed by Bloomberg called for an increase to 350,000. The four-week average declined to a five- year low.
In Europe, stocks advanced to a 4 1/2-year high before the region’s leaders begin a two-day Brussels summit. Euro-area finance ministers meet separately tomorrow to discuss a bailout for Cyprus.
After financial markets closed in New York, the Fed said Goldman Sachs and JPMorgan “exhibited weaknesses” in their capital planning that were “significant enough to require immediate attention.”
The central bank didn’t object to the two New York-based firms’ capital plans, and approved 14 other banks’ proposals, the Fed said in a statement. Capital plans submitted by Ally Financial Inc. and BB&T Corp. were rejected, while American Express Co. had to revise its submission to win approval.
BB&T lost 3.2 percent to $30.72 and Goldman Sachs fell 2 percent to $150.89 in extended trading as of 6:02 p.m. in New York. Bank of America Corp. jumped 3.5 percent after winning approval to buy back as much as $5 billion in stock in its first repurchase program since the financial crisis.
JPMorgan lost 2 percent to $49.98 after hours. A Senate probe found that Chief Executive Officer Jamie Dimon sought to hide escalating trading losses that surpassed $6.2 billion by misleading investors and dodging regulators as the position deteriorated last year. JPMorgan also announced plans to buy back up to $6 billion in shares and boost its quarterly dividend to 38 cents a share from 35 cents.
Energy producers, phone and technology companies climbed the most among 10 groups in the S&P 500 during regular trading, rising at least 0.7 percent. Chevron gained 1.4 percent to a record $120. Chesapeake Energy surged 5.2 percent to $22.52 for the biggest increase in the benchmark index.
An S&P gauge of homebuilders rose 2.1 percent, as all 11 members advanced. Ryland Group added 4.3 percent to $40.18, while PulteGroup jumped 3.5 percent to $20.56.
Apple Inc. rose 1 percent to $432.50. BTIG Research analyst Walter Piecyk raised his rating on the company to buy from neutral, citing opportunity from yet to be announced products and expectation the iPad and iPhone maker will return to per share earnings growth in 2014.
CBS Corp. climbed 2.2 percent to its highest level since 2000 at $46.95. The most-watched U.S. television network announced plans to offer a full-episode streaming app for the iPad and iPhone.
Verizon Communications Inc. (VZ) jumped 1.1 percent to $48.48. Redbox Instant, the movie-streaming venture by Coinstar Inc. and Verizon, began commercial service today, vying with Netflix Inc. and Amazon.com Inc. for online viewers. Netflix fell 2.1 percent to $188.37.
Amazon dropped 3.4 percent to $265.74 after JPMorgan Chase & Co. lowered its recommendation on the shares to neutral from overweight, saying some of the online retailer’s key business lines indicate more material deceleration in 2013 gross profit.
EBay Inc., operator of the world’s largest online marketplace, climbed 1.6 percent to $51.80 after Evercore Partners Inc. raised its rating on the company to overweight from equalweight.
E*Trade Financial Corp. (ETFC:US) fell 8.2 percent, the most in the S&P 500, to $10.85. Citadel LLC, its largest shareholder, said late yesterday that it will sell the rest of its equity stake.
Citadel asked E*Trade (ETFC) in 2011 to hire a bank to review strategic alternatives and take immediate action to maximize shareholder value after “catastrophic losses” that had driven the shares down 97 percent since 2007.
Smith & Wesson Holding Corp. sank 2.7 percent to $9.26 and Sturm Ruger & Co. dropped 2.7 percent to $54.30. The biggest publicly traded gunmakers in the U.S. retreated after the Senate Judiciary committee approved a measure to ban assault weapons.
Merck & Co., the second-biggest U.S. drugmaker, slumped 0.7 percent to $44.27. Diabetes drugs including Merck’s Januvia and Bristol-Myers Squibb Co.’s Byetta are being scrutinized by U.S. regulators for a potential link to pancreatic cancer.
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