US stocks rallied for the week, capping a monthly advance and returning benchmark indices to records, as better-than-estimated earnings and economic data eased concern about the end of US Federal Reserve bond buying.
The Standard & Poor’s 500 Index and Dow Jones Industrial Average closed at all-time highs on the final session of the week, as the Bank of Japan (BOJ) unexpectedly increased stimulus.
The S&P 500 has rallied 8.4 percent since sinking to a six-month low on Oct. 15. Optimism in the economy and better-than-estimated earnings fueled a rebound after the index had tumbled 7.4 percent from its September record on concerns that Europe would slip into a recession and that growth was slowing in China just as the Fed ends its monthly bond buying. The gauge has advanced 9.2 percent this year.
Photo: Reuters
“The buy-the-dip philosophy came back stronger than ever as everybody said the correction is behind us and the opportunity to buy stocks on sale is now,” Brian Peery, co-portfolio manager at Novato, California-based Hennessy Advisors Inc, said by phone. “The snap back happened really quickly, and at this point it’s been earnings-driven. When QE [quantitative easing] disappears and there isn’t even a blip on the radar in the downside, that’s a confidence boost.”
The S&P 500 rose 2.7 percent to 2,018.05 in the week, topping its Sept. 18 record on the final day. The index added 2.3 percent last month. The Dow average jumped 585.11 points, or 3.5 percent, to 17,390.52 for its best week since January last year, and the NASDAQ Composite Index jumped to a 14-year high after a 3.3 percent rally.
The S&P 500 posted its best gain of the week on Tuesday, rising 1.2 percent, amid improving corporate profits. Adjusted earnings per share have grown 10 percent for the 363 companies in the S&P 500 that have reported third-quarter results so far, according to data compiled by Bloomberg. About 80 percent of them have topped the average analyst estimate.
Equities slipped the next day after the Fed announced the end of its bond-buying program. The advance resumed on Thursday, after government data showed that the US economy increase at a 3.5 percent annual rate from July through September, topping the median forecast of 3 percent in a Bloomberg survey of economists.
Other reports during the week showed a gain in consumer confidence and better-than-estimated results in surveys of purchasing managers. Government data showed fewer Americans filed applications for unemployment benefits over the past month than at any time in more than 14 years, a sign the strengthening US economy is buoying the labor market.
Stocks rallied around the world on the week’s final day after Japan’s Government Pension Investment Fund said it would put half its holdings in local and foreign stocks, double previous levels, and invest in alternative assets. The Bank of Japan raised its annual target for monetary expansion to ￥80 trillion (US$724 billion) from as much as ￥70 trillion.
All 10 of the main S&P 500 groups advanced in the week. Technology stocks rose 3.3 percent for the biggest advance. Materials producers gained the least as gold sank.
Amgen Inc rallied 10 percent in the five days to a record. The biotechnology drug company is to raise its dividend 30 percent in the first quarter of next year and plans to buy back as much as US$2 billion of stock through the end of next year.
Visa Inc jumped 13 percent in the week to an all-time high. The world’s largest payments network delivered profit that topped forecasts as spending abroad improved.
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