U.S. stocks fluctuate near records on earnings, stimulus bets

Retailer Results

Some 14 companies in the S&P 500 report earnings this week, including News Corp. after the market closes today. Wal-Mart Stores Inc., Macy’s Inc. and Nordstrom Inc. are among retail companies reporting earnings later this week. Home Depot Inc. posts results on Nov. 19.

“Investors want to know the strength of the U.S. consumer going into what might be a tepid holiday season,” said Alison Porter, who helps oversee $108 billion as U.S. equities fund manager at Ignis Asset Management. “Consumer spending has been fairly restrained. With big retailers like Wal-Mart and Home Depot yet to report, we’ll want to see whether that has picked up.”

Economists still forecast the Fed will delay tapering asset purchases until March even after the payrolls data beat forecasts. Policy makers will probably pare the monthly pace of bond buying, known as quantitative easing, to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 estimates in a Bloomberg survey Nov. 8. The median forecast in an Oct. 17-18 survey of 40 economists also called for a cut to $70 billion in March.

Stimulus Correlation

“There’s been a correlation between rising share prices and low interest rates and the QE program,” Carey said. “People legitimately are wondering if and when the Fed begins the tapering.”

The S&P 500 has rallied 24% in 2013, heading for the best annual gain in a decade. The gauge is trading at 16 times projected earnings, more than the five-year average of 14 times earnings, according to data compiled by Bloomberg.

Investors have poured money into exchange-traded funds tracking U.S. stocks, pushing assets in the iShares Core S&P 500 ETF above the Vanguard FTSE Emerging Markets ETF for the first time since 2010. The iShares S&P 500 fund manages $50.5 billion, compared with $48.3 billion for the ETF linked to shares of developing nations, according to data compiled by Bloomberg. The SPDR S&P 500 ETF Trust is the world’s largest ETF with about $156 billion.

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