Gap Inc. (GPS), the largest U.S. specialty apparel chain, surged 11 percent after forecasting earnings that beat analysts’ estimates. MasterCard Inc. (MA), the world’s second-biggest payments network, jumped 6.7 percent as profit climbed 24 percent. Citigroup Inc. (C) and Bank of America Corp. (BAC) added at least 1.2 percent. Internet and social media companies rose after Facebook Inc. filed to raise $5 billion in an initial public offering. Zynga Inc. and Groupon Inc. (GRPN) rallied more than 7.3 percent.
About three stocks gained for every two that declined on U.S. exchanges as of 4 p.m. New York time. The S&P 500 advanced 0.1 percent to 1,325.54 today. The Dow Jones Industrial Average dropped 11.05 points, or 0.1 percent, to 12,705.41.
“It’s a great time to be placing your bets, seeding your garden, because we’re fixing the problems,” John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, said in a telephone interview. His firm oversees $211.5 billion. “If you believe the U.S. economy is going to get better, you want to own stocks.”
A report tomorrow may show employers boosted payrolls in January by 140,000 workers and the jobless rate held at an almost three-year low of 8.5 percent, according to median estimates in a Bloomberg survey. Data today showed that claims for U.S. jobless benefits fell last week and productivity cooled in the fourth quarter, signaling hiring may accelerate as companies reach the limits of how much efficiency they can wring from existing work forces.
Earnings Season
Earnings beat projections at 67 percent of the 246 companies in the S&P 500 that reported results since Jan. 9, according to data compiled by Bloomberg. The S&P 500 is trading for about 13.8 times its companies’ earnings and has been stuck below its five-decade average multiple of 16.4 since May 2010, the longest stretch since a 13-year period beginning in 1973.
“If you have earnings growth and valuations that are still reasonable, equities might end up being a good asset class,” Matthew DiFilippo, who helps manage $1 billion as chief portfolio strategist at Stewart Capital in Indiana, Pennsylvania, said in a phone interview. “The earnings season hasn’t been that positive, but it hasn’t been negative either.”
David Kostin, a New York-based strategist at Goldman Sachs Group Inc., raised his three-month estimate for the S&P 500 to 1,275 in a report to clients today, up from a November prediction of 1,150.
Gap Soars
Gap surged 11 percent, the biggest gain in the S&P 500, to $21.52. The San Francisco-based company said it expects fourth- quarter earnings to be as much as 42 cents per share. That beats the 35-cent estimate of 29 analysts surveyed by Bloomberg.
MasterCard advanced 6.7 percent to $381.57. The results cap a year in which the company, led by Chief Executive Officer Ajay Banga, surged 66 percent, the fourth-best performance in the S&P 500. The firm repurchased stock as the global shift from cash and checks to electronic payments continued.
The S&P 500 Diversified Financials Index rose 0.8 percent today for the biggest gain among 24 industries. Citigroup advanced 1.3 percent to $31.99. Bank of America added 1.2 percent to $7.45.
Internet and social media companies rose. Zynga, the largest developer of games for Facebook, rose 17 percent to $12.39. Groupon (GRPN) rallied 7.4 percent to $23.08. Renren Inc. gained 8.2 percent to $5.42.
Diesel Engines
Cummins Inc. (CMI) jumped 7.1 percent to $113.31. The maker of diesel engines reported a sales forecast that topped analysts’ estimates, boosted by growth in the construction, power generation and oil and gas markets.
Green Mountain Coffee Roasters Inc. (GMCR) surged 24 percent, the most since March, to $66.42. The maker of Keurig brand single- cup pods and brewers reported profit that beat analysts’ estimates as sales rose.
Abercrombie & Fitch Co. (ANF) tumbled 14 percent, the biggest decline in the S&P 500, to $40.40. The teen apparel chain reported preliminary fourth-quarter earnings that trailed analysts’ estimates as holiday promotions narrowed profit margins.
Boston Scientific Corp. (BSX), the second-biggest cardiac-device maker, slumped 4.1 percent to $5.84. Fourth-quarter earnings plummeted 55 percent.
“A positive attitude toward equity investing is now in order” because U.S. bank stocks are doing relatively well and volatility is fading, according to Donald Coxe, a strategy adviser to Bank of Montreal.
Lift Holdings
Coxe recommended that U.S. pension funds lift holdings of domestic stocks by 6 percentage points, to 20 percent of assets. The Chicago-based strategist also called for a 2-point increase in dividend-paying shares, to 12 percent.
KBW Inc.’s regional-bank gauge jumped 37 percent from Sept. 21, when its ratio reached last year’s low, through yesterday. The S&P 500 rose 13 percent during the same period. Similarly, the KBW Bank Index (BKX) gained more than twice as much as the S&P 500 during the past two months.
“It is good for the stock market that they are thriving,” Coxe wrote in his report, dated Jan. 27. He added that the VIX (VIX), the Chicago Board Options Exchange Volatility Index, signals the market “isn’t skating on a pond whose ice is about to crack.”
The VIX has closed below 20 for the past 10 trading days, the longest streak since June. When stocks slumped last August, the index rose as high as 48.
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
http://www.bloomberg.com/news/2012-02-02/u-s-stock-futures-are-little-changed-before-initial-jobless-claims-report.html
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