S&P 500 climbs above 1,700 on stimulus bets, economic reports

Monthly Gain

The benchmark index gained 5 % in July, its biggest monthly advance since January. The gauge is trading at 15.5 times estimated earnings, compared with an average valuation of 13.9 times profit over the past five years, according to data compiled by Bloomberg.

Manufacturing in the U.S. expanded at the fastest pace in more than two years as orders and production jumped, according to the Institute for Supply Management’s factory index. Separate reports overseas showed manufacturing grew more than forecast in China and Europe.

In the U.S., applications for unemployment insurance payments declined by 19,000 to 326,000 in the week ended July 27, the fewest since January 2008, the Labor Department reported today in Washington. The median forecast of 50 economists surveyed by Bloomberg called for 345,000.

Labor Department data tomorrow may show U.S. employers added 185,000 people to payrolls in July, as the jobless rate fell to 7.5 % from 7.6 %, according to Bloomberg surveys of more than 80 economists.

Earnings Season

Some 40 companies in the S&P 500 report results today. Of the 373 companies in the gauge to have already reported quarterly results, 73 % have exceeded analysts’ profit estimates and 56 % have beaten sales projections, data compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index, or VIX, slipped 2.8 % to 13.07 today. The equity volatility gauge reached its highest level this year in June and has since fallen 36 %.

Companies whose growth is most tied to economic swings led today’s rally. The Morgan Stanley Cyclical Index rose 1.9 %. The Dow Jones Transportation Average surged 3.3 % to a record, while the Midcap 400 Index and the Russell 2000 Index for smaller companies hit all-time highs, climbing 2.2 % and 1.3 %, respectively.

Financial Shares

The KBW Bank Index rallied 1.8 % as all its 24 members gained. American Express Co. advanced 2.7 % to $75.76 for the biggest gain in the Dow and Bank of America Corp. climbed 2.3 % to $14.93.

MetLife jumped 6.5 % to $51.56. The largest U.S. life insurer said earnings, which exclude some investment results, were $1.44 a share. That beat the $1.33 average estimate of 20 analysts surveyed by Bloomberg.

Procter & Gamble rose 1.5 % to $81.48. Earnings beat analyst forecasts, giving Chief Executive Officer A.G. Lafley some breathing room as he works to turn around the company he rejoined two months ago.

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