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Stocks rise modestly on factory data

Bloomberg News

May 22. 2014 8:17PM

NEW YORK — Stocks rose Thursday, sending the Standard & Poor’s 500 index to near a record, and small-cap shares rebounded as data showing strength in manufacturing boosted confidence in the global economy.

Best Buy and Williams-Sonoma added at least 3.4 percent to pace gains among retailers. An index of homebuilders rallied as sales of previously owned U.S. homes rose in April. Hewlett-Packard dropped 2.3 percent as it reported second- quarter sales that fell short of estimates and announced it is cutting more jobs.

The S&P 500 rose 0.2 percent to 1,892.49. The benchmark index came within two points of its all-time high of 1,897.45 reached last week. The Dow Jones industrial average climbed 10.02 points, or 0.1 percent, to 16,543.08. The Russell 2000 index of smaller companies rallied 0.9 percent. About 5.3 billion shares changed hands on U.S. exchanges, 19 percent below the three-month average.

“It’s a grindingly slow, gradualistic uptrend of the U.S. economy,” David Young, founder chief executive officer of Newport Beach, California-based Anfield Capital Management, which manages $100 million, said by phone. “We absolutely, positively must factor in the vast amount of liquidity looking for an interesting home. As a result, ’sell in May and go away’ has been proven wrong, because where else are you going to go?”

Tight range

The U.S. stock market is trading in the tightest range in eight years, according to data from Bespoke Investment Group. In the last three months, the difference between the S&P 500’s intraday high and low has been less than 5 percent, the Harrison, New York-based research group said in a report Thursday.

The Markit Economics preliminary index of U.S. manufacturing increased to 56.2 in May from 55.4 a month earlier as output accelerated, the London-based group said Thursday. Readings above 50 for the purchasing managers’ measure indicate expansion and the May figure was the highest in three months. A preliminary purchasing managers’ index in China increased to a five-month high.

Other data showed sales of previously owned U.S. homes rose in April for the first time in four months as the weather warmed, price increases slowed and more properties were put on the market. More Americans than projected filed applications for unemployment benefits last week, showing uneven progress in the labor market.

The S&P 500 climbed 0.8 percent Wednesday, erasing the previous day’s declines, as Federal Reserve policy makers said continued stimulus doesn’t risk fueling a jump in the inflation rate. Central bank policy makers said last month the economy is showing signs of picking up and the job market is improving.

The central bank pared its monthly asset buying to $45 billion in April, its fourth straight $10 billion cut, and said further reductions in measured steps are likely.

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009.

The Chicago Board Options Exchange volatility index, a gauge for U.S. stock volatility known as the VIX, rose 1 percent to 12.03 Thursday. The gauge closed Wednesday at the lowest level since August.

Health care, utilities up

Eight out of 10 S&P 500 industry groups rose Thursday, with health-care and utility companies gaining at least 0.5 percent for the biggest advances. Retailers rose 0.5 percent as a group.

Best Buy rallied 3.4 percent to $26.22. The world’s largest consumer-electronics retailer posted first-quarter profit that topped analysts’ estimates as CEO Hubert Joly continued to trim costs.

Williams-Sonoma climbed 8.2 percent to a record $68.93. The seller of cookware and home furnishings raised its full-year earnings forecast to as much as $3.17 a share, after earlier predicting no more than $3.15. The San Francisco-based company also reported first-quarter profit of 48 cents a share, exceeding the 44-cent analyst projection.

Dollar Tree jumped 6.6 percent to $53.31 for the biggest gain in the S&P 500. The discount retailer reported first-quarter earnings that beat analysts’ estimates. The company said it expects as much as $2.02 billion in second- quarter revenue, exceeding analysts’ estimates of $2.01 billion for the period.

Consumer stocks are the worst-performing among 10 industries this year, down 3.6 percent as a group, after leading the S&P 500’s gain last year with a 41 percent rally.

Investors have withdrawn $3.9 billion from U.S. exchange-traded funds tracking consumer-discretionary stocks this year, more than any other industry, data compiled by Bloomberg show. The group has slumped 3.6 percent this year, the only one of the 10 main S&P 500 industries that has not advanced.


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