U.S. stocks rose, sending benchmark indexes to records, as earnings from Morgan Stanley and UnitedHealth Group Inc. beat estimates and jobless claims fell amid testimony from Federal Reserve Chairman Ben S. Bernanke.
Morgan Stanley rallied 4.8% as stock-trading revenue bolstered profit. International Business Machines Corp. added 2% after raising its full-year earnings target. UnitedHealth jumped 6.7% after profit beat estimates as membership surged. Intel Corp. lost 3.7% after forecasting third-quarter sales that may fall short of some analysts’ predictions. EBay Inc. tumbled 6.7% after its forecast for third-quarter sales missed estimates.
The Standard & Poor’s 500 Index (CME:SPU13) gained 0.6% to 1,690.49 at 3:01 p.m. in New York, surpassing the previous intraday high of 1,687.18 set on May 22. The Dow Jones Industrial Average added 83.40 points, or 0.5%, to 15,553.92, also a record. Trading in S&P 500 stocks was 11% above the 30-day average at this time of day.
“The underlying concept of what Bernanke is trying to accomplish is taking hold in the marketplace, and that’s a good thing,” Rick Fier, director of equity trading at Conifer Securities LLC in New York, said in an interview. His firm oversees about $8 billion. “The market gets the idea the a tapering is coming, the economy is improving and rates are still going to be low for a time. The initial jobless claims were better than expected. Earnings are coming in OK. All in all its hard not to be bullish on the market here.”
Fed stimulus and better-than-forecast corporate earnings have fueled a surge in stocks worldwide, with the benchmark U.S. index jumping as much as 150% from its March 2009 low. Today’s S&P 500 rally pushed the estimated 2013 price-to- earnings ratio to 15.3, the highest since April 2010.
About 81% of stocks in the index traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. While that’s below a 19-month high of 93% reached in May, it’s up from its 2013 bottom of 27.8% in June. There were 56 stocks in the index that closed at a 52-week high yesterday and none at a 52-week low.
The S&P 500 rose yesterday as Bernanke said the pace of economic recovery will determine when the Fed reduces its asset purchases. In a prepared report, he said the central bank’s asset purchases are not on a preset course. In testimony to the Senate Banking Committee today, Bernanke said data since the Fed’s June meeting is mixed and it is “way too early to make any judgment” as to whether policy makers will start tapering purchases in September.
The central bankers have been debating the timing and pace of any cuts in the central bank’s $85 billion in monthly bond purchases. Bernanke has said any reduction will be tied to sustained improvement in the labor market or an increase in inflation.
“Bernanke is really guiding the market so that there are no real shocks when Fed actions do take place,” Jonathan Aldrich-Blake, who helps oversee about $10 billion at Ashburton Ltd., said by phone from Jersey, Channel Islands. “The ‘bad news is good news’ we saw in the market earlier this year is starting to die down as people have more belief in this recovery.”
Equity futures rose today after a report showed fewer Americans than forecast filed applications for unemployment benefits as the effects of auto-plant shutdowns began to ebb. Separate data from the Conference Board indicated an index of leading indicators in the U.S. economy was unchanged in June.
Stocks extended gains after a report showed the Philadelphia Fed’s general economic index increased to 19.8 in July from 12.5 the prior month. Readings greater than zero signal expansion in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware.
“Jobless claims were a little bit better than expected which gives some comfort,” Richard Sichel, who oversees about $1.9 billion as chief investment officer at Philadelphia Trust Co., said by phone. “And then you have earnings rolling full steam now so it becomes a stock-by-stock market.”
Some 32 companies, including Google Inc. and Microsoft Corp., are scheduled to post quarterly results today. Per-share earnings topped estimates at about 75% of S&P 500 members that have reported for the quarter so far, data compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, which measures the cost of protecting against swings on the S&P 500, dropped 0.8% to 13.67 for the 10th decline in 11 sessions. The equity volatility gauge, which moves in the opposite direction as the S&P 500 about 80% of the time, reached a six-month high on June 20 and has fallen 33% since.
Eight of 10 groups in the S&P 500 advanced today, led by a 1.3% surge among financial companies. The KBW Bank Index added 1.7% to its highest level since October 2008.
Morgan Stanley jumped 4.8% to $27.81 after posting a 66% earnings increase that beat analysts’ predictions as trading revenue rose and the profit margin at its wealth- management unit climbed.
Bank of America Corp., which yesterday reported earnings that beat estimates, gained 3.6% to 14.82. SLM Corp., the student lender known as Sallie Mae, advanced 5.1% to $24.60 after reporting second-quarter core earnings that beat analysts’ estimates as private education delinquencies fell.
Shares in companies whose earnings are most closely tied to economic growth rose to a record. The Morgan Stanley Cyclical Index added 1.3% to the highest level since the gauge started in 1978.
Automakers climbed 2.6% as a group, the biggest gain among 24 industries in the S&P 500. Johnson Controls Inc. led the advance, as shares surged 9.3% to $40.80, the most in the benchmark gauge. The largest U.S. auto-parts maker will sell its HomeLink line of installed garage-door openers to Gentex Corp. for $700 million as it seeks a buyer for the rest of its automotive electronics unit.
The Bloomberg U.S. Airlines Index climbed 2.4% to the highest since December 2007 as all 10 members advanced.
Boeing Co., which is not in the index, jumped 2.3% to $107.16. U.K. authorities said a beacon made by Honeywell International Inc. was likely the cause of last week’s fire on one of Boeing’s 787 Dreamliner jets. Honeywell added 0.7% to $83.05, reversing a dip of as much as 0.5%.
IBM gained 2% to $198.50 after predicting earnings will be at least $16.90 a share in 2013, up from its earlier prediction for $16.70. The company is betting that faster- growing market such as cloud computing and data analysis can offset a slowdown in information-technology spending.
UnitedHealth jumped 6.7% to $70.45, the most in the Dow. The biggest U.S. health insurer reported second-quarter profit that beat analyst estimates as a Brazilian acquisition and gains in U.S. plans swelled enrollment by 25%.
Sherwin-Williams Co. fell 7.7% to $169.12. The paint maker’s $2.34 billion bid to acquire Mexican competitor Consorcio Comex SA was rejected by the country’s antitrust regulator, which said the combined company would be able to set artificially high prices.
Intel slid 3.7% to $23.27 for the biggest slide in the Dow. The world’s largest semiconductor maker said late yesterday sales in the current period may miss estimates as a slump in the personal-computer market erodes its largest business.
EBay tumbled 6.7%, the most since October 2011, to $53.51. Third-quarter sales will be $3.85 billion to $3.95 billion as e-commerce growth rates in Europe and Korea slow and currencies weaken against the U.S. dollar, the online marketplace provider said. That’s less than the average analyst projection of $3.97 billion.
American Express Co. fell 3.2% to $74.31 after the biggest credit-card issuer reported revenue that missed some estimates. The drop extends a two-day decline to 5.1%, the most in a year, after some analysts said yesterday that a European Commission proposal to cap bank-card fees would crimp profit.
Phone stocks dropped 1.1% as a group, for the biggest drop among 10 S&P 500 industries. Verizon Communications Inc. slumped 1.9% to $49.78. The second-largest U.S. phone company said the surge in demand for high-speed wireless Internet cut into profit margins and boosted the need for network investments.
Amphenol Corp. plunged 8.5% to $77.36 for the biggest drop in the benchmark gauge. The maker of fiber-optic connectors and other telecommunications equipment for companies such as Apple Inc. cut its profit and sales forecasts for the year.
Celgene Corp. declined 2.3% to $133.49 after saying it will stop a late-stage trial of its Revlimid drug for treatment of leukemia in elderly patients because of the number of deaths in the study.