Global equities rose today on expectations of continued Fed stimulus and as China’s ruling party announced changes to economic policy. The government vowed to allow more private investment in the state sector, loosen its one-child policy and better protect farmers’ rights to land, according to the Communist Party policy decision published today by the official Xinhua News Agency today.
The document, covering 60 measures, follows a communique issued Nov. 12 after a four-day party conclave in Beijing that omitted detailed policies for the world’s second-largest economy.
The S&P 500 has rallied 26% so far in 2013, poised for its best annual gain in a decade. The gauge is trading at 16.2 times projected earnings, topping the five-year average of 14 times earnings, according to data compiled by Bloomberg.
JPMorgan Chase & Co. expects the index to extend its rally this year after the gauge surpassed the firm’s year-end target. Chief U.S. equity strategist Thomas Lee raised his target for the gauge to 1,825 from 1,775, implying an increase of 1.9% from yesterday’s close.
‘Constructive’ on Equities
“The U.S. is in a secular bull market and remaining constructive on equities is warranted,” Lee said in a note to clients today. Pent-up demand in sectors from housing to cars will boost corporate earnings while the Fed continues its “supportive” monetary policy, he said. Technology and financial stocks account for about half of the increase in his S&P 500 target.
Of the 461 S&P 500 companies that have announced earnings so far, 75% have topped analysts’ income forecasts, data compiled by Bloomberg showed. Profits for the gauge increased 4.9% in the third quarter and will gain 5.8% in the final three months of the year, estimates compiled by Bloomberg show.
The Chicago Board Options Exchange Volatility Index, which measures future volatility signaled by S&P 500 options, was unchanged at 12.37. The gauge has fallen 4.1% this week to extend its loss for the year to 31%.
Nine of 10 main S&P 500 groups advanced. Energy and materials producers rallied 0.5% to pace gains, as the U.S. factory data and Chinese policy changes boosted demand prospects for commodities.
Exxon, the world’s biggest oil company by market value, advanced 1.8% to $94.90, for the Dow’s biggest rise. Berkshire Hathaway reported a stake valued at about $3.7 billion on Sept. 30.
Financial stocks increased 0.3% as a group. Visa Inc. jumped 1.1% to $202.26 and American Express Co. added 1.1% to $82.78.
FedEx climbed 1.3% to $138.21. Soros Fund Management LLC owned a $173 million stake and Paulson & Co. held $73.8 million in the shares of the operator of the world’s largest cargo airline at the end of last quarter.
The funds join Daniel Loeb’s Third Point LLC in disclosing new stakes in the period. FedEx shares have rallied four straight days and trade at a record.