S&P 500 Rises as Economic Data Outweigh Overseas Concerns
New York (Nov 20) The Standard & Poor’s 500 Index (SPX) rose as retailers and energy companies rallied, while economic data showing improvements in America overshadowed concern over weaker growth overseas.
Best Buy Co. jumped 7.9 percent as demand for televisions and tablets helped the retailer post a surprise sales gain. Dollar Tree Inc. advanced 4.9 percent after raising its yearly earnings forecast and reporting third-quarter earnings that beat analysts’ estimates. Energy stocks rose the most of 10 groups in the S&P 500 as Brent crude oil gained for the first time in four days.
The Standard & Poor’s 500 Index rose 0.1 percent to 2,051.10 at 10:54 a.m. in New York, erasing an earlier loss. The Dow Jones Industrial Average dropped 8.96 points, or less than 0.1 percent, to 17,676.77. The Russell 2000 Index of smaller companies climbed 0.6 percent. Trading in S&P 500 companies was 18 percent below the 30-day average for this time of the day.
“The backdrop for holiday sales and retail is setting up to be a very good holiday season,” David Lyon, global investment specialist at JP Morgan Private Bank, which oversees about $1 trillion, said by phone in New York. “That additional cash or income that consumers will have to spend from lower energy prices at least for a quarter or two will be a fantastic tailwind for retailers.”
Dollar Tree, Best Buy (BBY) and Gap Inc. are among companies posting results today. Of the S&P 500 companies that have reported this earnings season, 79 percent beat profit estimates and 60 percent surpassed revenue projections, according to data compiled by Bloomberg.
Home Sales
Purchases of previously owned U.S. homes unexpectedly rose in October to a one-year high as low borrowing costs helped sustain the recovery in residential real estate. Other data showed fewer Americans filed for unemployment benefits last week as the need to retain staff keeps firings at the lowest levels in more than a decade.
A gauge of U.S. leading indicators widened more than estimated last month, while a Federal Reserve factory index for the Philadelphia region jumped.
The economic picture in the U.S. contrasted with weakness in Europe and Asia. A purchasing managers’ index for factories and services activity in the euro area unexpectedly dropped in November, to the lowest level in 16 months, London-based Markit Economics said today. In China, a factory gauge fell to a six-month low this month.
Global Slowdown
The S&P 500 and the Dow have rallied to records as better-than-forecast earnings and data boosted speculation that the economy is strong enough to overcome a global slowdown. The benchmark index has rebounded 10 percent from a six-month low in October and is trading at 17.1 times the projected earnings of its members, the highest multiple since 2009.
Stocks fell yesterday as minutes from the Fed showed some policy makers were concerned inflation isn’t rising fast enough. Concern economic recoveries from the U.S. to Europe and Japan are failing to spur inflation has been cited by central bankers worldwide as justification for prolonged stimulus efforts.
A government report today showed prices in the U.S. excluding fuel and food increased more than forecast in October as a drop in energy costs failed to filter through to other goods and services. The so-called core measure of the consumer-price index climbed 0.2 percent, the most in five months, after rising 0.1 percent in September.
Five out of 10 main industries in the S&P 500 advanced. Energy companies had the biggest gains, jumping 0.9 percent.
Source: Bloomberg
