S&Ps taking out top

February 13, 2015 08:46 AM

U.S. stock-index futures rose, with the Standard & Poor’s 500 Index less than 3 points from a record, as Europe’s economy expanded more than forecast and optimism grew that leaders will reach a compromise in Greek debt talks.

Contracts on the Standard & Poor’s 500 Index expiring in March advanced 0.2% to 2,088.5 at 8:55 a.m. in New York. Futures on the Nasdaq 100 Index added 0.3%, with the underlying gauge at its highest level in almost 15 years. Dow Jones Industrial Average futures rose 45 points, or 0.3%, to 17,977. The 30-stock gauge is less than 0.5% from its all-time high.

“The U.S. market benefits from a continued improvement in sentiment in Europe, driven by today’s good GDP figures for Germany,” said Otto Waser, chief investment officer at R&A Research & Asset Management AG in Zurich.

U.S. equities are approaching record levels for the first time in 2015, bolstered by the biggest three-month rise in hiring in 17 years and signs of easing tension between Greece and its euro-area creditors.

The benchmark gauge has more than tripled from its bear- market low in March 2009, propelled higher by better-than- forecast corporate earnings and three rounds of Federal Reserve bond purchases. The Fed renewed its pledge in January to maintain record-low borrowing costs even as the economy shows signs of acceleration.

Repeated Interruptions

The S&P 500 has gone more than three years without a retreat of 10% or more. But unlike last year, when the gauge never had a streak of losses that exceeded three days, the route higher in 2015 has seen repeated interruptions.

The S&P 500 has rallied 4.7% in February after sinking 3.1% in January for its worst month in a year. Since the start of 2015, the index has experienced three declines of more than 2.7%, only to recover within a week each time, data compiled by Bloomberg show.

The strongest dollar in a decade and a plunge in oil prices that threaten investment and earnings growth have tested the resilience of investors as the bull market nears its seventh anniversary. Concern that European growth is slipping amid signs of deflation, coupled with a showdown that led to speculation Greece would exit from the region’s shared currency also weighed on investor sentiment.

Hedging Moves

Beneath the surface of the biggest equity rally since the dot-com bubble, institutions are taking steps to shield themselves should the momentum burn out. Options traders have snapped up so many puts, which pay off when the S&P 500 falls, that their cost relative to bullish contracts has jumped to the highest level since at least 2006.

Equities gained Friday as data showed the euro-area economy picked up momentum at the end of last year, with Germany reasserting itself as the driver of growth, offsetting weakness in Greece and Italy.

Government officials taking part in Greece’s debt negotiations said both sides are signaling willingness to compromise, while the German economy, Europe’s largest, expanded 0.7% in the fourth quarter, more than twice as much as forecast.

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