U.S. stocks rose, sending benchmark indexes to records, after Federal Reserve Bank of St. Louis President James Bullard said the central bank should continue its bond buying to boost growth.
Home Depot Inc. jumped 2.5 percent after raising its earnings forecast as the housing rebound spurs renovation spending. JPMorgan Chase & Co. rose 1.4 percent as Jamie Dimon survived a campaign to split his chairman and chief executive officer titles. Apple Inc. fell 0.7 percent as the company faced a Senate panel that yesterday released a report saying the iPhone maker used loopholes to avoid paying taxes.
The Standard & Poor’s 500 Index (SPX) gained 0.2 percent to an all-time high of 1,669.16 at 4 p.m. in New York. The Dow Jones Industrial Average added 52.30 points, or 0.3 percent, to 15,387.58. About 6.2 billion shares changed hands today, in line with the three-month average.
“We have a long stretch now with no significant decline and I think that’s going to continue until there is some significant concern about the Fed stopping,” Jason Thomas, chief investment officer of Los Angeles-based Aspiriant, said in a phone interview. Aspiriant is an independent wealth management firm with over $7 billion in asset under management.
The Fed purchases known as quantitative easing should be maintained because financial markets indicate that they are improving financial conditions and can be adjusted based on how the economy changes, Bullard, who votes on the policy-setting Federal Open Market Committee this year, said today, according to the text of remarks prepared for delivery in Frankfurt.
Fed Bank of New York President William C. Dudley said in a separate speech today that he has not decided whether the next move should be to enlarge or to shrink the bond-buying program.
The central bank’s chairman, Ben S. Bernanke, testifies on the outlook for the U.S. economy before the Joint Economic Committee of Congress tomorrow. The FOMC also releases the minutes of its April 30-May 1 meeting tomorrow. Policy makers said after their last meeting that they will keep buying $85 billion of bonds every month, while standing ready to raise or lower purchases as conditions evolve.
Some policy makers in recent months have signaled they favor scaling back the quantitative-easing program in the next few months. Stocks erased gains yesterday after Fed Bank of Chicago President Charles Evans said the U.S. economy has improved “quite a lot” as the central bank maintains record stimulus. The question now is “how much confidence we have that the improvements that have been made will continue and be sustained,” said Evans, who holds a vote on the FOMC this year.
“I view a move by the Fed toward normalizing monetary policy as ultimately a good thing,” Liz Ann Sonders, chief investment strategist at Charles Schwab Corp., said on Bloomberg Television. Her firm has $2 trillion in client assets. “It will be a taper; they’re not going to grind this to a halt all of a sudden. If the reason is that economic growth has picked up with inflation expectations still fairly benign, then that’s the best reason for the Fed to do it.”
The S&P 500 has surged 147 percent from its 12-year low in 2009, driven by better-than-estimated corporate earnings and three rounds of bond purchases from the Fed.
Goldman Sachs Group Inc. said the U.S. stock-market rally may last at least another 2 1/2 years and send the S&P 500 up 26 percent to 2,100. David Kostin, the bank’s New York-based chief U.S. equity strategist, raised forecasts for the U.S. equity benchmark, predicting it will finish 2013 at 1,750 and 2014 at 1,900 as stock valuations increase, according to a research report dated yesterday.
The S&P 500 trades at 16.3 times reported operating profit, 16 percent below the average since 1998, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, rose 2.7 percent to 13.37. The equity volatility gauge, which moves in the opposite direction to the S&P 500 about 80 percent of the time, has slipped 26 percent this year.
Five out of the 10 S&P 500 industries gained as consumer-discretionary and health-care companies climbed at least 0.5 percent.
Eight companies on the S&P 500 reported financial results today. Of the stocks that have released earnings this season, 71 percent have beaten analysts’ estimates, while 52 percent have missed analysts’ sales predictions.
Home Depot increased 2.5 percent to $78.71. America’s largest home-improvement retailer beat analyst estimates for first-quarter profit. Home Depot is benefiting from rising U.S. home prices that are giving homeowners the confidence to start projects and spend more. Profit this year will be $3.52 a share, up from a previous estimate of $3.37, the company said.
Lowe’s Cos. added 0.2 percent to $42.45. The second-largest home-improvement retailer is scheduled to report quarterly results tomorrow.
JPMorgan gained 1.4 percent to $53.02. CEO Dimon, 57, won shareholder support to keep his chairman title, surviving a campaign to split the roles after a record trading loss at the biggest U.S. bank. The proposal to divide Dimon’s duties won 32.2 percent of the votes, down from 40 percent last year, the bank said today at its annual meeting in Tampa, Florida.
Medtronic Inc. jumped 4.9 percent to $52.35. The world’s biggest maker of heart-rhythm devices posted fourth-quarter earnings of $1.10 a share, exceeding the $1.03 profit projected by analysts on average. Sales in the period also beat estimates.
Merck & Co. rallied 4.7 percent, the most in the Dow, to $47.33. The company’s recently scheduled analyst meeting sparked speculation that it may make a “material” announcement on drugs, according to Mark Schoenebaum, an analyst with International Strategy & Investment Group LLC.
AutoZone Inc. advanced 4.6 percent to $427.84. The auto-parts retailer earned $7.27 a share in the fiscal third quarter, exceeding the average analyst estimate of $7.21.
Saks (SKS) Inc. surged 11 percent to $13.67 for the biggest increase since August 2010. The luxury retail chain reported first-quarter sales and profit that beat analysts’ estimates.
Clearwire (CLWR) Corp. rallied 4.3 percent to $3.40. Sprint Nextel Corp. increased its bid for full control of the wireless broadband service provider, seeking to persuade shareholders to accept its offer over a competing proposal from Dish Network Corp. Sprint gained 1.4 percent to $7.39.
Apple fell 0.7 percent to $439.66. Chief Executive Officer Tim Cook and Chief Financial Officer Peter Oppenheimer appeared before a Senate panel that yesterday released a report saying the iPhone maker has created a web of offshore entities to avoid paying billions of dollars in U.S. taxes.
Democrats and Republicans on the panel say Apple’s tax maneuverings, while not illegal, will help frame the debate about how to make the corporate tax system more fair. Senator John McCain of Arizona, the panel’s top Republican, said he and Senator Carl Levin, a Michigan Democrat, are seeking to craft a bipartisan proposal that would end some of the tax benefits, although the timing of an agreement isn’t clear.
Carnival Corp. (CCL) plunged 4.3 percent to $33.81 as it said price cuts undertaken after a series of mishaps will hurt margins. The company’s revenue per customer has fallen since it cut ticket prices in an attempt to fill cabins.
Rival cruise operator Royal Caribbean Cruises Ltd. lost 2.4 percent to $36.89.
Travelers Cos. fell 2.2 percent, the most in the Dow, to $83.63 as property insurers face losses from a mile-wide tornado that flattened a suburb south of Oklahoma City yesterday. Allstate Corp. slipped 1.5 percent to $49.08.
Urban Outfitters Inc. (URBN:US) lost 2.7 percent to $43.27 after the retailer reported quarterly sales that missed analysts’ estimates. Sales (URBN) of $648.2 million fell short of the $655.1 million average estimate compiled by Bloomberg.
Best Buy Co. dropped 4.4 percent to $25.64 as the biggest consumer-electronics retailer posted an $81 million first-quarter net loss as the company lowers prices to compete with online rivals.
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