U.S. Stocks Advance as Investors Weigh Data, Earnings
By Lu Wang & Katie Brennan - Jul 26, 2013 4:01 AM
U.S. stocks rose, halting two days of losses for Standard & Poor’s 500 Index, as investors weighed corporate earnings and economic reports for clues on when the Federal Reserve may reduce stimulus measures.
The S&P 500 rose 0.3 percent to 1,690.31 at 4 p.m. in New York, after earlier falling as much as 0.4 percent. The equity benchmark completed its first two-day drop in a month yesterday after rallying to within two points of 1,700.
“For a good part of this year, people have been looking for an acceleration in the economy in the second half,” Jim Welsh, who helps oversee $5.7 billion at Forward Management LLC in San Francisco, said in a phone interview. “What we’re starting to see is the tug of war between investors acknowledging that P/E ratios have expanded over the last couple years and now in order to see P/E to go even higher, we’re going to need to see more revenue growth.’
The S&P 500 declined the most in a month yesterday as investors weighed global manufacturing reports and corporate earnings to determine whether and how fast the Fed will scale back its monthly asset purchases.
The benchmark gauge rose to session highs today after a Wall Street Journal article suggested the central bank will reassure investors it won’t be quick to raise interest rates at its next policy-making meeting on July 30-31.
The central bank has said economic data will determine the timing and pace of any reduction in its $85 billion in monthly bond-buying, known as quantitative easing. The Fed will start trimming purchases in September, according to a Bloomberg survey of economists.
Fed Support
Support from central banks and better-than-estimated corporate earnings have driven the S&P 500 (SPX) up as much as 151 percent from its March 2009 low.
Separate reports showed today that orders for durable goods rose more than forecast in June while more Americans filed for unemployment benefits last week as annual auto-plant shutdowns continued to affect data.
‘‘We are kind of stuck in that middle ground where data is not bad enough to be encouraging about more quantitative easing, but it’s not good enough to convince people that there is enough there fundamentally to justify sharply higher prices,” Bruce McCain, who helps oversee more than $20 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in an interview.
Equity valuations have climbed 16 percent this year, with the S&P 500 trading at 16.3 times reported earnings, close to the highest level since May 2010, according to data compiled by Bloomberg.
Of the 233 S&P 500 companies that have posted quarterly results, 74 percent have exceeded analysts’ profit estimates and 57 percent have beaten sales projections, data compiled by Bloomberg show. Some 56 members of the index, including Amazon.com Inc., Starbucks Corp. and Newmont Mining Corp., release results today.
To contact the reporter on this story: Lu Wang in New York at [email protected]; Katie Brennan in New York at [email protected]
To contact the editor responsible for this story: Lynn Thomasson at [email protected]
