U.S. stocks rose, extending all-time highs for benchmark indexes, as Iran agreed to limit its nuclear program.
Alcoa Inc. climbed 4.3% and Caterpillar Inc. rose 2.2% after analysts recommended buying the shares. An index of airlines reached an almost seven-year high as crude slid. Schlumberger Ltd. and Noble Corp. declined more than 2.7%, pacing losses among energy shares. Homebuilders fell 0.4% as a group as the number of contracts Americans signed to buy previously-owned homes unexpectedly fell.
The S&P 500 (CME:SPZ13) climbed 0.1% to a record 1,806.83 at 2:40 p.m. in New York. The Dow Jones Industrial Average added 43.64 points, or 0.3%, to 16,108.41, also an all-time high. The Nasdaq Composite Index surpassed 4,000 for the first time since September 2000, rising 0.3% to 4,004.78. Trading in S&P 500 stocks was about 9.3% below the 30-day average during this time of the day.
“The market is not necessarily overextended, but probably moderately rich,” Cam Albright, director of asset allocation at the investment advisory unit of Wilmington Trust, said by phone from Wilmington. The firm oversees about $79 billion. “It’s probably difficult to envision this market getting a lot more upside unless it has this continued success on earnings and economic growth. The deal with Iran takes some of the risk premium out of the marketplace for the moment at least.”
Iran agreed yesterday to curtail nuclear activities in return for easing of some sanctions on oil, auto parts, gold and precious metals, an accord that broke a decade-long deadlock.
The S&P 500 has rallied 27% this year, closing for the first time above 1,800 on Nov. 22, as the Federal Reserve continued to buy $85 billion of bonds a month to stimulate economic growth. If the gauge holds on to its gains, it will mark the best year for U.S. equities since 1998.
The index is trading for about 17 times its companies’ reported earnings. While the valuation reached the highest level since May 2010, it’s still below the multiples at the market’s two previous peaks, when the ratio reached 17.5 in October 2007 and 31 in March 2000, data compiled by Bloomberg show.
Minutes from the latest Fed meeting indicated the central bank may reduce monetary stimulus in coming months. Four out of five investors expect the Fed to delay a decision to begin reducing the stimulus until March 2014 or later, according to the Bloomberg Global Poll of investors, traders and analysts who are subscribers. Just 5% are looking for a move at its Dec. 17-18 meeting, the Nov. 19 poll showed.