Bloomberg News

U.S. Stocks Advance Amid Fed Minutes as Tiffany Rallies

May 21, 2014

The Standard & Poor’s 500 Index (SPX) advanced, erasing yesterday’s declines, as Tiffany & Co. rallied and Federal Reserve policy makers said continued stimulus doesn’t risk sparking a jump in the inflation rate.

Tiffany gained 9.2 percent to lead an advance among retailers as quarterly profit beat estimates. Netflix Inc. (NFLX:US) rose 5.1 percent after saying it will expand its online-video service in Europe. Exxon Mobil Corp. and Chevron Corp. climbed more than 1.4 percent as the price of oil surged.

The S&P 500 added 0.8 percent to 1,888.03 at 4 p.m. in New York. The equity benchmark is 0.5 percent away from a record reached on May 13. The Dow Jones Industrial Average climbed 158.75 points, or 1 percent, to 16,533.06. The Russell 2000 (RTY) Index of smaller companies was up 0.5 percent, while the Nasdaq 100 Index rose to the highest level since April 3. About 5.3 billion shares changed hands on U.S. exchanges, 20 percent below the three-month average.

“There were no big surprises in the Fed minutes,” Darrell Cronk, deputy chief investment officer at Wells Fargo Private Bank, which manages $170 billion, said by phone. “There was more of the same and that means more dovish statements. We continue to think the domestic equity markets will climb higher. The fundamentals are good.”

Minutes of the central bank’s April 29-30 meeting released today in Washington showed Fed officials also discussed the need to improve their guidance on the likely path of interest rates. Participants agreed that “early communication” of their exit strategy “would enhance the clarity and credibility of monetary policy.”

Fed Stimulus

Policy makers said last month the economy is showing signs of picking up and the job market is improving. The central bank pared its monthly asset buying to $45 billion in April, its fourth straight $10 billion cut, and said further reductions in measured steps are likely.

The Fed reiterated at the time that it will keep the key rate target near zero for a “considerable time” once it concludes the bond-purchase program.

Fed Chair Janet Yellen testified to lawmakers May 7 that the Fed will probably end bond buying in the fall if the labor market continues to improve. Still, she said “a high degree of monetary accommodation remains warranted” with inflation and employment far from the central bank’s goals.

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009. It is trading at 16 times the projected earnings of its members, greater than a five-year average of 14.3 times, according to data compiled by Bloomberg.

Earnings Season

About 75 percent of S&P 500 companies that have posted results this season have beaten analysts’ estimates for profit, while 53 percent have exceeded sales projections, data compiled by Bloomberg show.

The S&P 500 fell 0.7 percent yesterday after retailers reported lower-than-estimated earnings and small-cap shares slumped. The benchmark index closed at an all-time high of 1,897.45 on May 13 before a selloff in small-cap stocks spread to the broader market. The Russell 2000 tumbled 1.5 percent yesterday, and is down 8.7 percent from a record set in March.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, fell 8.1 percent to 11.91 today, the lowest level since August. The measure has lost 13 percent this year.

All 10 main industries in the S&P 500 rose today, with consumer-discretionary and energy companies gaining at least 1 percent for the biggest advances.

Tiffany Earnings

Retailers rose 1.2 percent as a group in the S&P 500, after slumping 1 percent yesterday amid worse-than-estimated results from companies from Staples Inc. to Urban Outfitters Inc.

Tiffany (TIF:US) increased 9.2 percent to a record $96.30 today. The world’s second-largest jewelry retailer reported first-quarter profit that exceeded analysts’ estimates and raised its forecast for the year as price increases helped boost sales.

Netflix jumped 5.1 percent to $390.60, the highest level in two months. The shares have rebounded (NFLX:US) 24 percent from a six-month low on April 28. The world’s largest Internet subscription service will enter Germany, France, Austria, Belgium, Luxembourg and Switzerland, according to a statement. The company already operates in the U.K., Ireland, the Netherlands, Denmark, Norway, Sweden and Finland.

TJX Cos. rallied 4.9 percent to $56.60. The owner of the T.J. Maxx discount chain tumbled 7.6 percent yesterday, the most in more than five years, after posting first-quarter profit and sales that trailed analysts’ estimates.

Internet Stocks

The Dow Jones Internet Composite Index increased 1.2 percent, as Facebook Inc. added 3.3 percent. TripAdvisor Inc. and LinkedIn Corp. rose more than 1.9 percent.

Exxon Mobil advanced 1.4 percent to $102.03 and Chevron increased 1.4 percent to $124.16 to pace gains among energy companies. Occidental Petroleum Corp. surged 2.2 percent to $97.59. West Texas Intermediate crude rose to a one-month high after a government report showed U.S. supplies tumbled last week as imports dropped to a 17-year low.

PetSmart Inc. tumbled 8.3 percent to $57.02. The pet services retailer cut its profit forecast this year to below analysts’ forecasts as first-quarter revenue missed estimates.

To contact the reporter on this story: Callie Bost in New York at cbost2@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net Jeff Sutherland, Michael P. Regan


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Companies Mentioned

  • NFLX
    (Netflix Inc)
    • $476.66 USD
    • -0.98
    • -0.21%
  • TIF
    (Tiffany & Co)
    • $101.68 USD
    • 0.74
    • 0.73%
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