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S&P 500 Rises to 5-Year High Amid Chinese Export Data

By Rita Nazareth and Sarah Pringle
January 10, 2013 4:28 PM EST 41 Comments
Traders work on the floor of the New York Stock Exchange in New York.
Photographer: Scott Eells/Bloomberg
Traders work on the floor of the New York Stock Exchange in New York.

U.S. stocks advanced, sending the Standard & Poor’s 500 Index to the highest level in five years, amid better-than-estimated data on Chinese exports.

Financial shares had the biggest gain in the S&P 500 among 10 industry groups as Bank of America Corp. and Morgan Stanley rallied at least 3 percent. Ford Motor Co. (F) climbed 2.7 percent after boosting its dividend. Supervalu Inc. (SVU) rose 14 percent as a Cerberus Capital Management LP-led investor group agreed to buy five of its chains in a deal valued at about $3.3 billion. Tiffany & Co. (TIF) slumped 4.5 percent as the jewelry retailer said full-year earnings will be at the low end of its forecast.

The S&P 500 advanced 0.8 percent to 1,472.12 at 4 p.m. New York time, the highest level since December 2007. The Dow Jones Industrial Average added 80.71 points, or 0.6 percent, to 13,471.22. About 6.8 billion shares changed hands on U.S. exchanges, or 9.9 percent above the three-month average.

“The market is encouraged by evidence of healing on the international front,” said Alan Gayle, senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion. “In the U.S., the earnings season is just getting started and there’s a lot of things that we don’t know. Investors will still be on that wait-and-see mode.”

Equities followed global shares higher as China’s overseas sales rose 14.1 percent in December from a year earlier, almost triple the 5 percent gain predicted. European Central Bank President Mario Draghi said the euro-area economy will slowly return to health in 2013 as the region’s bond markets stabilize after three years of turmoil. More Americans than forecast filed applications for unemployment benefits last week.

Corporate Results

Investors also watched corporate results. Fourth-quarter profits at S&P 500 companies grew 2.9 percent, according to analysts’ estimates compiled by Bloomberg. That would be the second-slowest quarterly growth since 2009, the data show.

All 10 groups in the S&P 500 rose today as financial and energy shares had the biggest gains. The KBW Bank Index of 24 stocks added 1.3 percent. Bank of America rallied 3.1 percent to $11.78, after tumbling 5.6 percent over the previous three days. Morgan Stanley rose 3.7 percent to $20.34.

Wall Street banks such as Morgan Stanley will benefit more from shareholders demanding reforms than regulators imposing new rules, CLSA Ltd.’s Mike Mayo said.

Activist investors including Nelson Peltz’s Trian Fund Management LP and Dan Loeb’s Third Point LLC will have more success in changing the biggest U.S. banks by holding managements’ “feet to the fire,” Mayo said today in a Bloomberg Television interview with Betty Liu.

‘More Shareholders’

“We need more Dan Loebs than we need regulators,” Mayo said. “We need more shareholders to step up to the plate.”

Ford (F) jumped 2.7 percent to $13.83. The second-largest U.S. automaker doubled its dividend to 10 cents per share after record profit margins boosted its cash. Ford, which resumed paying a dividend last year after a five-year hiatus, cited its strengthening business as the reason for boosting the payout.

Supervalu climbed 14 percent to $3.47. A Cerberus-led investor group agreed to acquire Supervalu’s Albertsons, Acme, Jewel-Osco, Shaw’s and Star Market grocery stores. Cerberus also will lead a group to conduct a tender offer to buy as much as 30 percent of Supervalu’s common stock for $4 a share in cash, the companies said today in a statement.

DirecTV (DTV) jumped 1.1 percent to $52.44. The company is planning to raise $750 million with bonds that may fund share repurchases at the largest U.S. satellite-TV operator, whose stock trades cheaper relative to earnings than its average U.S. competitor.

News Corp. (NWSA)

News Corp. (NWSA) gained 2.2 percent to $26.97. The media company run by billionaire Rupert Murdoch was raised to outperform from market perform at Sanford C Bernstein & Co.

Altria Group Inc. rose 2.5 percent to $32.70. The largest seller of tobacco in the U.S. was raised to buy from hold at Stifel Nicolaus Corp. by equity analyst Christopher Growe. The 12-month share-price estimate is $36.

Legg Mason Inc. rallied 3.2 percent to $26.84. The money manager searching for a new chief executive officer rose after Reuters said today that two large private-equity investors showed interest in financing a buyout led by the Baltimore-based firm’s largest affiliates. Legg Mason’s board has refused to engage in discussions about a sale, said Reuters, citing unidentified people with knowledge of the matter.

Tiffany slumped 4.5 percent to $60.40. High-income consumers’ confidence waned in the U.S. as the prospect of higher taxes approached, David Schick, an analyst at Stifel Financial Corp., who recommends holding the shares, wrote in a Jan. 7 note.

Investor Concerns

Orbitz Worldwide Inc. dropped 10 percent to $2.98. The resignation of Chief Financial Officer Mitch Marcus amplified investor concerns about the company’s ability to expand hotel bookings.

Herbalife Ltd. slipped 1.8 percent to $39.24, reversing an earlier rally of 7.6 percent. Chief Executive Officer Michael Johnson accused hedge fund manager Bill Ackman of “gross mischaracterizations” about the nutrition company’s direct-selling model as Herbalife executives mounted a point-by-point defense for investors.

Ackman said today in a statement that Herbalife “distorted, mischaracterized, and outright ignored” major portions of a Dec. 20 presentation accusing Herbalife of using inflated pricing, misleading sales information and a complicated incentive structure to hide a pyramid scheme.

Missing Target

Molycorp Inc. (MCP) tumbled 23 percent to $8.34. The owner of the largest rare-earth deposit outside China missed its 2012 output target and said revenue will be lower than forecast this year after the new chief executive officer changed its ramp-up schedule.

Microsoft Corp. lost 0.9 percent to $26.46. The world’s largest software maker was downgraded to equalweight from overweight at Morgan Stanley.

The two-month rally in U.S. stocks will end as the advance in the S&P 500 toward 1,500 depletes buyers, according to Tom DeMark, the creator of indicators to show turning points in securities.

The benchmark index for U.S. equities will climb to an intraday high of 1,492.73 and form a sell signal on a daily Combo indicator, which is designed to identify market tops and bottoms, said DeMark, who has spent more than 40 years developing market-timing indicators. The S&P 500 will then fall at least 5.5 percent, he said.

“This high could occur as early as tomorrow,” DeMark wrote in an e-mail. “1,492.73 is just shy of psychological 1,500 as most traders are predisposed to look at markets in terms of round numbers and will expect 1,500 to be hit. And just to confound them, expect market to trade not quite to 1,500.”

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Sarah Pringle in New York at springle1@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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