S&P 500 climbs to record on optimism over stimulus, earnings

Fed Debate

“Bernanke has made it very clear as of late that while the economy is recovering quite well from recent lows, it is still very far from where he would like it,” Ryan Larson, the Chicago-based head of U.S. equity trading at RBC Global Asset Management (U.S.) Inc., said by e-mail. “I think that is trumping the fact that some of the members might want purchases to end sooner.”

U.S. President Barack Obama released his proposed 2014 budget to Congress today, more than two months past the Feb. 4 deadline, after Democrats and Republicans deadlocked over taxes and spending. Under the plan, President Obama wants to again rely on the top-earning U.S. households for most of the tax increases he’s proposing.

Earnings Season

Constellation Brands Inc. and Bed Bath & Beyond Inc. are among six companies in the S&P 500 reporting earnings today. Members of the benchmark gauge will post a 1.8% profit decline in the first quarter, according to analysts’ projections compiled by Bloomberg.

Companies whose growth is most tied to economic swings led today’s rally. The Morgan Stanley Cyclical Index climbed 1.6%, and the Dow Jones Transportation Average jumped 1.8%.

The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slipped 3.7% to 12.36. The gauge, known as the VIX, is down 31% this year and reached its lowest level since February 2007 last month.

Betting on banks and software makers during earnings season has rewarded investors during the bull market. Since April 2009, the industries have generated stock market gains averaging about 2% in the two weeks after Alcoa Inc. marked the start of the earnings season, according to data compiled by Bloomberg. That compared with a gain of 1.7% for the S&P 500 in those weeks.

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