The Standard & Poor’s 500 Index (CME:SPZ13) rose as data showing higher home prices boosted shares of builders. European stocks fell for the first time in three days, while the euro gained against most of its peers and the yen snapped a three-day decline versus the dollar.
The S&P 500 rose 0.2% at 1:34 p.m. in New York, while the Stoxx Europe 600 Index declined 0.6%. Europe’s 17-nation shared currency gained 0.4% to $1.3565 and the yen appreciated 0.4% to 101.28 per dollar. Indonesia’s rupiah slid to the weakest since 2009 after a dollar-bond sale fell short of its target. The yield on Treasury five-year notes slid three basis points to 1.31% after a $35 billion auction. Oil dropped 0.2% to $93.87 a barrel.
Home prices in 20 U.S. cities rose by the most since February 2006 in the 12 months through September, indicating the housing market sustained progress even as borrowing costs climbed. The Conference Board’s index of U.S. consumer confidence in November fell to 70.4 from 72.4 in the prior month. More than $8 trillion has been added to the value of global equities this year, the biggest increase since 2009, as central banks took steps to shore up economies worldwide.
“We’ve been riding a pretty good wave of momentum that’s taken the market higher than most people had expected at the beginning of the year,” Jeff Layman, chief investment officer of BKD Wealth Advisors in Springfield, Missouri, said by phone. His firm has $2.4 billion under management. “Much of that has been driven by multiple expansion, not underlying earnings growth. As we close out this year and get into 2014, that dynamics will probably change. We think it’ll be a return to focus on earnings growth.”
The S&P 500 fell 0.1% from a record yesterday. The benchmark gauge closed above 1,800 for the first time on Nov. 22, capping seven straight weeks of gains. The index is poised for its best annual performance since 1998, with a gain of 26.6%. The S&P 500 is trading for about 17.1 times its companies’ reported earnings.
While the valuation is at 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.
Three rounds of Federal Reserve bond purchases have helped push the S&P 500 up 167% from a bear-market low in 2009. Four out of five investors expect the Fed to delay a decision to begin reducing the stimulus until March 2014 or later, according to a Bloomberg Global Poll on Nov. 19.
Policy makers have been scrutinizing data to determine whether the economy is strong enough to withstand a reduction in their $85 billion a month in bond purchases.
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