U.S. stocks advanced, sending benchmark indexes to five-year highs, as earnings topped estimates and investors awaited President Barack Obama’s State of the Union address.
Michael Kors Holdings Ltd. rallied 11% after raising its forecast in anticipation of a jump in same-store sales. Avon Products Inc. jumped 19% on better-than-expected profit and a plan to consider options for its Silpada jewelry unit. Coca-Cola Co. slipped 2.7% as global volume sales missed analysts’ estimates. Facebook Inc. sank 2.4% as Sanford C. Bernstein & Co. cut its recommendation.
The Standard & Poor’s 500 Index gained 0.3% to 1,522.13 at 1:29 p.m. in New York. The Dow Jones Industrial Average increased 65.04 points, or 0.5%, to 14,036.28. Both gauges are poised for the highest close since October 2007. Trading in S&P 500 companies was 6.8% below the 30-day average at this time of day.
“This market is front-running better economic and earnings news,” John Augustine, who helps manage $27 billion as chief market strategist at Cincinnati-based Fifth Third Bancorp, said in a phone interview. “We all think of a correction coming in February. Guess what, we probably won’t get a correction in February. This market has got upward momentum.”
About 74% of the 354 companies in the S&P 500 that have released results during the earnings season have exceeded profit projections, and 66% have beaten sales estimates, data compiled by Bloomberg show.
The S&P 500 has rallied 6.7% in 2013 as U.S. lawmakers reached a budget compromise. It has more than doubled since bottoming in March 2009 as the Federal Reserve conducted three rounds of bond-buying to lower interest rates and boost economic growth.
The gauge is less than 3% below its record of 1,565.15 reached in October 2007, while the Dow is about 1% from its all-time high of 14,164.53.
“Every strategist I’ve talked to says that we’re due for a 5%-7% correction, and the reason why we haven’t seen it is because investors are buying on dips,” Diane Jaffee, the New York-based group managing director for U.S. equities who oversees about $5.9 billion in assets at TCW Group Inc., said in a phone interview. “The thought process is that people are willing to forgo the first 10% or 20% of the market rise to make sure it will really do it, and now they want in for the last 20% or 30% because they have more confidence.”