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Thursday, 1 August 2013
S&P 500 Climbs Above 1,700 on Stimulus Bets, Economy
By Tom Stoukas & Lu Wang - Aug 1, 2013 7:04 AM PT
U.S. stocks rallied, sending the Standard & Poor’s 500 Index above 1,700 for the first time, after central banks vowed to maintain stimulus and jobless claims fell to the lowest level in five years.
Procter & Gamble Co. gained 1.9 percent after posting fourth-quarter profit that topped analysts’ estimates. DreamWorks (DWA) Animation SKG Inc. jumped 5.5 percent as earnings jumped 75 percent. Exxon Mobil Corp. declined 1.5 percent as profit fell for the first time in four years.
Specialists Peter Kennedy, Bernard Wheeler, and Philip Finale, confer on the floor of the New York Stock Exchange on July 31, 2013. Photographer: Richard Drew/AP Photo
The S&P 500 rose 1 percent to 1,703.02 at 10:03 a.m. in New York. The Dow Jones Industrial Average advanced 136.99 points, or 0.9 percent, to a record 15,636.53. Trading in S&P 500 stocks was 8.5 percent above the 30-day average during this time of day.
“The tone from central banks is that the economy is a little better, but has not reached the escape velocity yet without monetary support,” Michael Vogelzang, president and chief investment officer at Boston Advisors LLC, which manages $2.6 billion, said by phone. “As long as there is strong accommodative policy, the market can go up a lot. The market is driven by Fed policy and good corporate earnings.”
The Fed said yesterday that persistently low inflation could hamper the economy and pledged to keep buying $85 billion in bonds every month. The central bank statement came as data showed the U.S. economy grew more than projected in the second quarter.
Three rounds of bond purchases by the U.S. central bank, coupled with improving earnings and economic growth, has helped propel the S&P 500 (SPX) up more than 150 percent from its bear-market low in 2009. Speculation about the Fed’s monthly bond purchases has whipsawed stocks since May, when Chairman Ben S. Bernanke first indicated policy makers could begin reducing the stimulus this year if the job market continues to improve.
The benchmark index gained 5 percent in July, its biggest monthly advance since January. The gauge is trading at 15.3 times estimated earnings, compared with an average valuation of 13.9 times profit over the past five years, according to data compiled by Bloomberg.
European Central Bank President Mario Draghi said today that recent economic indicators signal that the euro region is through the worst and reiterated that officials plan to keep interest rates low for the foreseeable future.
Applications for unemployment insurance payments declined by 19,000 to 326,000 in the week ended July 27, the fewest since January 2008, from a revised 345,000 the prior week, the Labor Department reported today in Washington. The median forecast of 50 economists surveyed by Bloomberg called for 345,000.
Labor Department data tomorrow may show U.S. employers added 185,000 people to payrolls in July, as the jobless rate fell to 7.5 percent from 7.6 percent, according to Bloomberg surveys of more than 80 economists.
The Institute for Supply Management’s U.S. manufacturing index climbed to 55.4 last month from 50.9 in June, the Tempe, Arizona-based group said today. The median forecast of 84 economists surveyed by Bloomberg called for the measure to rise to 52. A reading of 50 is the dividing line between expansion and contraction. Construction spending unexpectedly dropped in June for the first time in three months, another report showed.
Reports overseas today showed manufacturing expanded more than forecast in China and Europe. China’s official purchasing managers’ index for July unexpectedly rose to 50.3, compared with economists’ estimates for a drop to 49.8. A similar gauge for the euro region increased to 50.3 last month from 48.8 in June, Markit Economics said. Readings above 50 indicate growth.
Some 40 companies in the S&P 500 report results today. Of the 373 companies in the gauge to have already reported quarterly results, 73 percent have exceeded analysts’ profit estimates and 56 percent have beaten sales projections, data compiled by Bloomberg show.
Procter & Gamble rose 1.9 percent to $81.80. Earnings beat analyst forecasts, giving Chief Executive Officer A.G. Lafley some breathing room as he works to turn around the company he rejoined two months ago.
Yelp (YELP) Inc. soared 21 percent to $50.44. The company, whose website compiles consumer-business reviews, said second-quarter sales climbed 69 percent to $55 million, topping the $53.3 million average analyst prediction compiled by Bloomberg.
DreamWorks climbed 5.5 percent to $26.11. The independent film studio run by Jeffrey Katzenberg reported a 75 percent surge in second-quarter profit, driven by the hit movie “The Croods.”
Sturm Ruger & Co. increased 7 percent to $54.41. The largest publicly traded U.S. firearms maker said second-quarter net income jumped 79 percent as revenue surged 50 percent to $179.5 million.
CBS Corp. gained 2.3 percent to $54.04. The owner of the most-watched U.S. TV network said second-quarter profit rose 11 percent, spurred by higher rates from pay-TV systems and new Internet streaming agreements.
Exxon Mobil dropped 1.5 percent to $92.38. Second-quarter profit fell as crude oil prices declined along with returns from its gasoline and diesel manufacturing business. Brent crude futures, a global benchmark, averaged $103.35 a barrel during the second quarter, down 5 percent from $108.76 a year earlier.