Update US stocks advanced, giving the Standard & Poor’s 500 Index its biggest weekly gain since July 2009, as retail sales beat economists’ estimates and the Group of 20 nations began discussions on Europe’s debt crisis.
The S&P 500 rose 1.7 per cent to 1,224.58 at 4 p.m. New York time, extending its weekly gain to 6 per cent. The Dow Jones Industrial Average added 166.36 points, or 1.5 per cent, to 11,644.49, erasing its 2011 loss.
The Nasdaq Composite Index rallied 1.8 per cent, also wiping out this year’s decline. More than 6.7 billion shares changed hands on US exchanges at 4:32 p.m., the slowest volume since Aug. 29.
Australian shares are poised to reclaim much of Friday’s losses when they reopen on Monday, with the SPI futures recently up 46 points, or more than 1 per cent, to 4266. The ASX200 benchmark share index closed the week yesterday with a 0.9 per cent loss, or 38.9 points, at 4205.6 points - cutting the week’s gain to about 1 per cent. The broader All Ords dropped 37 points on Friday, or 0.86 per cent, to 4269.
The Australian dollar surged overnight to trade recently at $US1.034, and it was also buying 74.5 euro cents, 65.4 pence and just under 80 yen.
Google jumps
Google Inc., the world’s biggest Internet-search company, jumped 5.9 per cent after sales topped projections. Apple Inc. gained 3.3 per cent as the company is poised to sell as many as 4 million units of its new iPhone 4S this weekend after customers lined up to buy one of the last products developed under Steve Jobs. Amazon.com Inc. and Caterpillar Inc. added at least 3.2 per cent, pacing gains among companies most-tied to the economy.
“The economy seems to be re-accelerating as the threats to growth moderate,” David Goerz, San Francisco-based chief investment officer at Highmark Capital Management Inc., which oversees $US17.2 billion, said in an e-mail. “If the economy is unable to slow much and resilient profit margins are maintained, then increasing volumes will drive earnings growth.”
Today’s rally sent the benchmark gauge to the highest close since Aug. 3, two days before S&P stripped the US of its AAA credit rating. The rebound brought the gauge close to the top of a price range where it’s traded for more than two months. The index has fluctuated between 1,074.77 and 1,230.71 since Aug. 5.
‘Next Stop’
“It would be pretty important to break that trading range,” Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $US54 billion, said in a telephone interview. “Even as we had this robust rally, it hasn’t drawn the technicians to have conviction in buying. If we crack through this 1,230 area, then they are going to say -- it’s clear that hurdle, we’re into the next stop.”
The Citigroup Economic Surprise Index for the US turned positive for the first time since April 29, the day the S&P 500 peaked at an almost three-year high. It climbed to 2.2, up from minus 117.20 on June 3. The reading four months ago showed reports were missing the median economist projection in Bloomberg surveys by the most since January 2009.
US equities gained as retail sales in the US rose more than forecast in September, easing concern slumping confidence and scant hiring will derail the biggest part of the economy.
‘Not as Weak’
“The economy is not great, but it’s not as weak as some people expected,” Mark Bronzo, who helps manage $US26 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “There’s a good a chance we’ve made a bottom in stocks.”
US stocks also followed a rally in European shares as finance ministers and central bankers from the Group of 20 began talks in Paris. Nations from China to Brazil are considering increasing the International Monetary Fund’s lending resources to help stem the European debt crisis, Group of 20 and IMF officials said. European officials are considering writedowns of as much as 50 per cent on Greek bonds, according to people familiar with the discussion.
Google jumped 5.9 per cent to $US591.68. The shares rallied 19 per cent in nine days, the biggest gain since February 2009. Chief Executive Officer Larry Page, who succeeded Eric Schmidt in April, is benefiting from Google’s leadership in search advertising, even as the company pushes into new markets such as mobile, display and social networking.
Earnings season
Profit for S&P 500 companies will climb 17 per cent in the third quarter and rise 18 per cent to a record $US99.77 for all of 2011, according to analyst estimates compiled by Bloomberg. The S&P 500 is trading for 11.1 times forecast earnings for 2012, compared with its five-decade average of 16.4 times reported income, according to data compiled by Bloomberg.
“Investor sentiment might be recalibrated,” Keith Wirtz, who oversees $US16.7 billion as chief investment officer at Fifth Third Asset Management in Cincinnati, said in a telephone interview. “We’re expecting this rally in stocks to be indicative of the whole quarter. There has been so much negative sentiment that the simple fact that we’re now in earnings season and we have a new type of information hitting the market, that might be a catalyst.”
Apple gained 3.3 per cent to $US422, adding 14 per cent in five days, the most since March 2009. The iPhone 4S, available today in the US, Australia, Canada, France, Germany, Japan and the U.K., is projected to outperform last year’s introduction of the iPhone 4, which topped 1.7 million units in its first weekend.
Most-tied
The Morgan Stanley Cyclical Index of companies most-tied to economic growth, added 2.3 per cent. Amazon.com, the world’s largest online retailer, increased 4.5 per cent to $US246.71. Caterpillar climbed 3.3 per cent to $US84.09.
The Dow Jones Transportation Average, a proxy for the economy, gained 2.2 per cent. J.B. Hunt Transport Services Inc. jumped 8.7 per cent to $US42.28 after the trucking company reported third-quarter earnings of 57 cents a share, beating the average analyst estimate of 56 cents.
Energy and raw-material producers rose the most among 10 industry groups in the S&P 500, adding at least 2.5 per cent. Exxon Mobil Corp. climbed 2.3 per cent to $US78.11. Chevron Corp. added 2.7 per cent to $US100.47.
Freeport-McMoRan Copper & Gold Inc. gained 4.3 per cent to $US36.77. Stabilizing copper inventory worldwide and rising demand from China are “favorable” for the world’s largest publicly traded copper producer, Morgan Stanley said in a note.
The KBW Bank Index rose 0.6 per cent, reversing an earlier decline of 1.6 per cent. Wells Fargo & Co. rallied 2.1 per cent to $US26.67. JPMorgan Chase & Co. advanced 0.9 per cent to $US31.89.
Bloomberg, with BusinessDay