S&P 500 Approaches Last Year’s High Amid Optimism on Greece Bailout Effort
Monday, 20 February 2012 | 00:00
U.S. stocks rallied this week, putting the Standard & Poor’s 500 Index 0.2 percent away from erasing its losses since April, amid optimism Greece will get another bailout and better-than-estimated economic data.
All 10 groups in the S&P 500 rose as energy and technology companies posted the biggest gains, increasing at least 1.7 percent. Hewlett-Packard Co. (HPQ), Home Depot Inc. (HD) and Intel Corp. added more than 2.6 percent, leading the Dow Jones Industrial Average higher. Frontier Communications Corp. (FTR) climbed 18 percent after cutting its dividend to reduce debt. Apple Inc. (AAPL) climbed 1.8 percent, exceeding $500 for the first time.
The S&P 500 added 1.4 percent to 1,361.23, rallying for the sixth time in seven weeks. The index is less than 3 points away from completing its recovery from a 19 percent retreat between April and October. Topping 1,363.61 would put the measure at the highest level since 2008. The Dow climbed 148.64 points, or 1.2 percent, to 12,949.87.
“We’ve seen the promise of a solution to Greece, and we’ve moved closer to it,” Mark Bronzo, who helps manage about $24 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “The U.S. economic data continues to be better, especially on the jobs front, so the market continues to move higher.”
Global equities rallied as Germany expressed confidence that euro-area governments will agree on a 130 billion-euro ($171 billion) rescue for Greece within days, while seeking to keep a bond swap of the nation’s debt on track. German Chancellor Angela Merkel, Italian Prime Minister Mario Monti and Greek Prime Minister Lucas Papademos discussed plans in a conference call and are optimistic finance ministers will resolve remaining issues when they meet on Feb. 20.
The S&P 500 has climbed 8.2 percent in 2012. Stocks also rose this week as reports on jobless claims, manufacturing and housing boosted optimism in the world’s largest economy.
Applications for jobless benefits decreased by 13,000 last week to 348,000, less than the lowest forecast in a Bloomberg survey of economists and the fewest since March 2008. The Philadelphia Fed (OUTFGAF)’s general economic index increased to 10.2, topping the median economist forecast for a reading of 9. Housing starts increased 1.5 percent to a 699,000 annual rate and building permits increased.
U.S. stocks may extend gains this year and mirror the performance of 1995, when the S&P 500 rallied 34 percent even after Mexico devalued its currency and Treasury yields dropped, Laszlo Birinyi, the president of Birinyi Associates Inc. in Westport, Connecticut, said in a Bloomberg Television interview this week.
“We still think you should buy stocks,” the fund manager said in London. “It’s a continuation of the bull market and we’re encouraged by what we are seeing in Europe. I look at the markets, I find they are strong. There’s real buying going on. This is not short covering or a temporary or transitory thing.”
Blackstone Group LP’s Byron Wien said he may need to lift his estimate for the S&P 500 for this year. Wien, chairman of Blackstone’s advisory services unit, said in January in his annual “10 Surprises” list the benchmark gauge for U.S. stocks may exceed 1,400.
That forecast, “when the market was 1,250 at the beginning of the year, was a reasonable target, a conservative target,” Wien said in an interview. “But I think we could well exceed it. Look, S&P 500 operating earnings are going to be in excess of $100. Very often, almost always, the S&P 500 sells at 15 times, that would take you over 1,500.”
All 10 groups in the S&P 500 rallied. Energy stocks led gains, rising 2.2 percent, as oil posted its biggest weekly advance this year. Technology stocks climbed the second-most, adding 1.7 percent.
Hewlett-Packard, the largest computer maker, added 3.1 percent to $29.59 for the biggest gain in the Dow. Intel (INTC), the biggest chipmaker, climbed 2.5 percent to $27.37, its highest level since December 2007. All but three companies in the 30- stock Dow advanced. Home Depot, the world’s largest home- improvement retailer, rose 3 percent to $46.71, its highest level since May 2002.
Frontier Communications climbed 18 percent to $4.78 for the biggest gain in the S&P 500. The U.S. phone company serving rural markets cut its quarterly dividend to 10 cents from 18.75 cents so it can pay off debt. Frontier also beat the average analyst profit estimate by 32 percent.
Apple advanced 1.8 percent to $502.12. It closed at $509.46 on Feb. 14 after rallying eight straight days.
Devon Energy Corp. (DVN) gained 16 percent, its biggest weekly rally since May 2009, to $74.95. The biggest independent oil and natural-gas producer in the U.S. reported fourth-quarter earnings that beat analysts’ estimates and said it plans to cut spending on exploration and production to no more than $5.5 billion in 2012, from $6.9 billion last year.
Dean Foods Co. (DF) rose 13 percent, its biggest gain since May, to $12.07. The largest U.S. dairy processor forecast first- quarter earnings excluding some items of as much as 23 cents a share, more than the average analyst estimate of 19 cents.