U.S. stocks rose, snapping a three-day retreat, as hospital and health-insurance stocks rallied ahead of Friday’s employment report and the start of fourth-quarter earnings season this week.
The Standard & Poor’s 500 Index (SPX) advanced 0.6 percent to 1,837.75 at 4 p.m. in New York. The gauge lost 1.2 percent from Jan. 2 through yesterday, the longest stretch of declines to start a year since 2005. The index climbed 30 percent last year, the most since 1997. The Dow average added 105.32 points today, or 0.6 percent, to 16,530.42.
“Equities are the place to be,” John Lynch, the Charlotte-based regional chief investment officer for Wells Fargo Private Bank, said by telephone. His firm manages $170 billion. “Everyone’s waiting on the Fed minutes tomorrow and the jobs report on Friday could be a driver of further confidence.”
Alcoa Inc. will mark the unofficial start of the fourth quarter earnings season when it reports results after the market close on Jan. 9. Earnings for companies in the S&P 500 will climb 9.7 percent on average this year, almost twice the rate of 2013, while sales will probably increase 3.8 percent, according to analyst estimates compiled by Bloomberg.
The ADP Research Institute reports the change in companies’ payrolls tomorrow and minutes from the Federal Reserve’s December meeting will be released the same day. The Labor Department will provide the unemployment rate and new hiring figures for last month on Friday. The Fed, which has made job creation a condition for reducing asset purchases, said on Dec. 18 that it would slow the pace of bond buying.
Three rounds of stimulus have helped propel the S&P 500 higher by as much as 173 percent from a 12-year low in 2009. Janet Yellen won Senate confirmation with a 56-26 vote to become the 15th chairman of the Fed. She will replace Ben S. Bernanke, whose second term as chairman expires Jan. 31.
Data today showed the trade deficit in the U.S. shrank more than forecast in November as oil imports dropped to the lowest level in three years and exports climbed to a record. The gap narrowed 12.9 percent to $34.3 billion, smaller than projected by any economist surveyed by Bloomberg and the least since October 2009, figures from the Commerce Department showed today in Washington.
“Sentiment is still very high,” said Francois Savary, who oversees about $9.4 billion as chief investment officer at Reyl & Cie. in Geneva. “The key question now will be to see if earnings growth really does come through. When you have less liquidity in the system and good economic numbers to support the recovery, it’s time for companies to deliver.”
Accelerating earnings growth will pave the way for stocks to extend their bull market this year, according to Thomas J. Lee, JPMorgan Chase & Co.’s chief U.S. equity strategist. After climbing 6 percent this quarter, S&P 500 profit will rise 10 percent in the second quarter, 11 percent in the third and 14 percent in the fourth, according to the New York-based strategist’s estimates.
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