Stock market chart, bull shadow
U.S. stocks rallied for a fifth week as data showing improvement in the labor market and better-than-estimated earnings sent benchmark indexes toward record highs.
Caterpillar Inc. jumped 4.1 percent after forecasting earnings growth in the second half as the world economy improves. Valero Energy Corp. added 18 percent on a 20-fold profit gain. Verizon Communications Inc. and AT&T Inc. rose 4.4 percent as telephone companies led gains among 10 groups in the Standard & Poor’s 500 Index. United Parcel Service Inc. declined 3 percent as the world’s largest package-delivery company gave a profit outlook that trailed estimates.
The S&P 500 rose 0.7 percent to 1,513.17 for the week. The benchmark equity gauge is up 6.1 percent for the year. The Dow Jones Industrial Average rallied 113.81 points, or 0.8 percent, to 14,009.79. The gauge closed above 14,000 for the first time since 2007 and is 1.1 percent below the all-time record it reached in October 2007.
“The January jobs data came in line with expectations but the revisions were really the silver lining,” Joseph Tanious, a New York-based global market strategist for JPMorgan Funds, which oversees $400 billion, said in a telephone interview. “There were fairly meaningful revisions to the prior months, suggesting that the labor market is in fact continuing to heal. That reinforces the belief that the U.S. economy is growing.”
The S&P 500 jumped 1 percent on the last trading day after a report showed U.S. payrolls rose 157,000 last month following a revised 196,000 advance in the prior month and a 247,000 surge in November. The hiring gains indicated the labor market was making progress even as lawmakers quarreled over the federal budget at the end of 2012. Among other economic reports, manufacturing in the U.S. expanded more than forecast in January, reaching a nine-month high.
Shrinking Economy
Equities slumped earlier in the week as data showed the U.S. economy shrank at a 0.1 percent annual rate in the fourth quarter, the worst performance since the second quarter of 2009. The Federal Reserve said it will keep purchasing securities at the rate of $85 billion a month.
The S&P 500 has more than doubled from a 12-year low in 2009, trading about 3.3 percent below its record high, as Chairman Ben S. Bernanke has unleashed the power of the central bank to buy unlimited amounts of Treasury and mortgage-backed securities to keep interest rates low and spur growth.
The benchmark index ended last month with its best January return since 1997, at 5.2 percent including dividends, as fourth-quarter earnings beat estimates and U.S. lawmakers forged a deal to avert the so-called fiscal cliff of automatic spending cuts and tax increases. Of the 254 S&P 500 that have posted results, 73 percent exceeded analysts’ profit estimates and 65 percent topped sales projections, data compiled by Bloomberg show.
‘More Clarity’
“We’ve gotten a lot more clarity on important things that we didn’t have a short while ago, as it relates to the U.S. economy, the fiscal cliff, the debt ceiling, fourth-quarter earnings,” Tanious said. “As you continue to peel away that uncertainty and markets become more comfortable, you create an environment where risk assets can do quite well.”
Caterpillar gained 4.1 percent to $99.49 for the week. The largest maker of construction and mining equipment forecast 2013 earnings of $7 to $9 a share. The Peoria, Illinois-based company forecast that world economic growth will be weak initially and improve as 2013 unfolds to beat last year’s growth of 2.3 percent. Caterpillar posted record profit for last year of $8.64.
Valero surged 18 percent to $44.85. The world’s largest independent refiner by processing capacity rose to the highest level since June 2008 after reporting a 20-fold increase in fourth-quarter profit driven by cheap U.S. crude.
Verizon, AT&T
Telephone companies jumped 3.6 percent as a group. Verizon rallied 4.4 percent for the biggest gain in the Dow to $44.56. AT&T posted the second-largest advance, rising 4.4 percent to $35.51.
Consumer-staple stocks added 1.2 percent for the third- largest rally. Procter & Gamble Co. climbed 3.7 percent to $75.92. Utility stocks were fourth, rising 1.1 percent.
Pfizer Inc. rallied 2.3 percent to $27.63. The world’s largest drugmaker reported revenue of $15.1 billion, beating the estimate of $14.4 billion in its biggest positive surprise in five quarters. Zoetis Inc., the animal-health company owned by Pfizer, surged 19 percent to $31.01 in its debut on the last day of the week. Zoetis raised $2.24 billion in its initial public offering, the biggest in the U.S. since Facebook Inc.’s last year.
Next page: Last Refinery, Constrained Growth
Last Refinery
Hess Corp. jumped 16 percent to $68.21. The oil company said it will close its last refinery and sell its oil terminals after disclosing billionaire Paul Singer’s Elliott Associates LP planned to buy an $800 million stake and seek board seats. Hess also reported a $566 million profit for the fourth quarter, compared with a $131 million net loss a year earlier.
D.R. Horton Inc. rose 7.3 percent to $23.35. The largest U.S. homebuilder by volume reported that earnings more than doubled in the fiscal first quarter, as low mortgage rates and a shrinking inventory of existing residences on the market are fueling sales of new houses.
Merck & Co. lost 3.8 percent to $41.83 for the biggest decline in the Dow. The second-largest U.S. drugmaker forecast a decline in profit this year as generic competition to its top- selling drug Singulair cuts into results and research setbacks keep the company from getting new medicines to market.
Constrained Growth
UPS declined 3 percent to $79.97. The Atlanta-based company’s growth is constrained by a sluggish worldwide economy and disputes over the U.S. debt ceiling that erode shipping demand and confidence, Chief Executive Officer Scott Davis said. Investors and analysts use the company as an economic gauge because it handles goods as varied as auto parts and pharmaceuticals.
Dow Chemical Co. dropped 5.8 percent to $32.59. The largest U.S. chemical maker by sales reported fourth-quarter earnings that missed analysts’ estimates as sales fell in Europe and Chinese growth slowed.
Facebook Inc. slid 5.7 percent to $29.73. The operator of the biggest social network posted a 79 percent plunge in fourth- quarter profit as operating expenses jumped 82 percent, raising concern that margins will come under pressure.
Yahoo! Inc. erased 3 percent to $19.76. The largest U.S. Web portal gave first-quarter and full-year sales forecasts that fell short of some analysts’ projections. The disappointing forecasts underscore the challenge Chief Executive Officer Marissa Mayer faces in display advertising, an area where Yahoo lags behind Google Inc. and Facebook.
