S&P 500 advances to five-year high on better-than-forecast data

January 17, 2013 10:49 AM

U.S. stocks rose, sending the Standard & Poor’s 500 Index to a five-year high, amid better- than-forecast initial jobless claims and housing data.

A measure of homebuilders in S&P indexes jumped 3.1% and was poised for the highest closing level since 2007. EBay Inc., operator of the world’s largest online marketplace, increased 2.7% as revenue topped some analysts’ estimates. BlackRock Inc., the world’s biggest money manager, added 4.4% as earnings increased 24% and the firm boosted its dividend and its share buyback program.

The S&P 500 rose 0.6% to 1,481.93 at 3:51 p.m. New York time. The Dow Jones Industrial Average added 91.96 points, or 0.7%, to 13,603.19, after briefly climbing above the highest closing level since December 2007. Trading in S&P 500 companies was 22% above the 30-day average at this time of day.

“The economy is entering the year maybe not with a running start, but certainly a head start,” said Jack Ablin, who helps oversee about $66 billion as chief investment officer of BMO Private Bank in Chicago. He spoke in a telephone interview. “It helps build a nice story for 2013.”

Equities rose as builders broke ground on more houses than forecast in December, capping the best year for the industry since 2008, another sign residential real estate is boosting the U.S. economic expansion. The number of Americans filing first- time claims for unemployment insurance payments fell more than forecast last week to the lowest level in five years, pointing to further improvement in the labor market.

Spending Cuts

A separate report showed that manufacturing in the Philadelphia region unexpectedly contracted in January, an indication companies are becoming more concerned about across- the-board U.S. government spending cuts that could slow growth.

The S&P 500 is 5.2% below its all-time high of 1,565.15 set in October 2007. The Dow is 4% away from hitting its record of 14,164.53. About 71% of the 52 S&P 500 companies which have reported quarterly results beat analysts forecasts. Fourth-quarter profits grew 2.5%, according to analysts’ estimates compiled by Bloomberg. That would be the second-slowest quarterly growth since 2009, the data show.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, rose 1.4% to 13.61, erasing an earlier drop of 1.9 percent.

All 11 companies in a measure of homebuilders in S&P indexes gained. PulteGroup Inc., the largest U.S. homebuilder by revenue, rose 5.4% to $20.39. Toll Brothers Inc., the biggest U.S. luxury-home builder, advanced 3.8% to $36.25.

More Revenue

EBay rose 2.7% to $54.32. The results suggest Chief Executive Officer John Donahoe is sustaining a turnaround effort that began in March 2008, when he succeeded Meg Whitman. The company has been pushing to generate more revenue from consumers shopping on tablets and smartphones, and from retailers that use EBay to sell their merchandise.

BlackRock added 4.4% to $232. Net income climbed to $690 million, or $3.93 a share, from $555 million, or $3.05, a year earlier, the New York-based company said today in a statement. Profit beat the $3.71 a share average estimate of six analysts surveyed by Bloomberg. BlackRock increased its quarterly dividend 12% to $1.68 a share and expanded its share buyback program.

CBS Corp. surged 8.5% to $41.15. The owner of the most-watched U.S. television network said it will convert its outdoor advertising division into a real estate investment trust and seek a buyer for the European and Asian parts of that business.

$15 Billion

Dell Inc. advanced 1.9% to $12.86. Silver Lake Management LLC and partners are close to lining up about $15 billion in funds for a buyout of the third-biggest maker of personal computers, said people familiar with the matter.

Lenders including Credit Suisse Group AG, Royal Bank of Canada, Barclays Plc and Bank of America Corp. may informally disclose terms to a small group of possible buyers of the bridge loan as soon as today, said one of the people, who asked not to be named as the process is private.

The S&P 500 Regional Banks Index gained 2.7%. Fifth Third Bancorp., Ohio’s largest lender, said fourth-quarter profit rose 27% as the firm booked a gain on a stake in Vantiv Inc. Earnings at PNC Financial Services Group Inc. and BB&T Corp. beat analysts’ estimates. Fifth Third rose 4.7% to $16.28. BB&T climbed 2.4% to $31.03 and PNC added 4.1% to $62.22.

Financial shares had the worst performance in the S&P 500 among 10 industries, gaining less than 0.1%.

BofA Slumps

Bank of America slumped 4.1%, the most in the Dow, to $11.30 after saying profit dropped 63%, hurt by shrinking revenue and more costs from cleaning up bad mortgages.

Citigroup Inc. retreated 3.1% to $41.17. The third-biggest U.S. bank by assets reported a profit increase that was less than analysts estimated as litigation costs rose and benefits from releasing loan-loss reserves declined.

“I think people who haven’t been discriminating among banks will probably be more discriminating now,” Jeffrey Davis, who oversees $5 billion as chief investment officer at Lee Munder Capital Group in Boston, said in a telephone interview. “The banks were a very important macro play last year with attractive valuations. Now, you’re at a higher level with them where you’re starting to pay more attention to the differences.”

SLM Corp. declined 2.5% to $16.86. The student lender known as Sallie Mae reported a drop in fourth-quarter profit as charge-offs increased, offsetting a climb in originations.

S&P 500 Calls

Laszlo Birinyi, among the first to advise buying U.S. stocks before the bull market began in 2009, said he purchased options to bet the S&P 500 will rally more than 8% by the end of the year.

Birinyi said he bought an unspecified amount of $160 calls on the SPDR S&P 500 ETF Trust that expire in December on speculation more investors will be attracted to the rally that’s more than doubled the benchmark gauge of U.S. equities since March 2009.

“This is where the fireworks begin,” Birinyi, the president of Birinyi Associates Inc. in Westport, Connecticut, said today during the Bloomberg Global Markets Summit in New York. “The last phase of the bull market is very strong.”

Investors are returning to the stock market and poured a record $3.1 billion into U.S. equity mutual funds in the first week of January, according to data compiled by research firm EPFR Global. They had withdrawn almost $250 billion the last four years, even as the S&P 500 rallied 118% and strategists from Birinyi to Citigroup Inc.’s Tobias Levkovich forecast higher prices as earnings climbed.

Bloomberg News

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