Dow average climbs above 15,000 on stimulus optimism, earnings

May 7, 2013 11:25 AM

U.S. stocks rose, sending the Dow Jones Industrial Average to its first close above 15,000, on optimism over global central bank stimulus and better-than- estimated corporate earnings.

The Standard & Poor’s 500 Index rose 0.5% to 1,625.96 at 4 p.m in New York, its fourth straight record close. The Dow added 87.01 points, or 0.6%, to 15,055.90. The gauge briefly surpassed 15,000 for the first time on May 3.

“This is a QE-fueled market,” Steven Bulko, the New York- based chief investment officer of Lombard Odier Investment Management’s $1 billion long/short 1798 Fundamental Strategies Fund, said by telephone. “You’re just not seeing sales based on allocation into any other asset class because of the relative unattractiveness of everything other than equities. That’s putting in place a firm bid to the equities market.”

The S&P 500 advanced 0.2% to a record yesterday, after the benchmark gauge for U.S. equities topped 1,600 for the first time on May 3. U.S. stocks are in the fifth year of a bull market amid better-than-estimated corporate earnings and three rounds of bond purchases by the Federal Reserve.

Fed Chairman Ben S. Bernanke has injected more than $2.3 trillion into the financial system since 2008. The Fed is currently buying $85 billion of debt each month under a policy of so-called quantitative easing. Bank of Japan Governor Haruhiko Kuroda last month began a campaign to end falling prices in a bid to reach 2% inflation in two years. The European Central Bank cut its main refinancing rate last week.

Global Equities

Global equities rose today as the Reserve Bank of Australia cut its benchmark interest rate to a record low of 2.75%. The Bank of England will probably leave its stimulus program on hold this week amid signs the economy has found a firmer footing. A Bloomberg News survey of economists shows policy makers will refrain from expanding quantitative easing beyond 375 billion pounds ($582 billion) on May 9.

About 84% of S&P 500 stocks traded above their average prices from the past 50 days as of yesterday, according to data compiled by Bloomberg. That’s the highest level since March 14, while below the two-year high of 93% in January.

“It becomes harder and harder for central banks to be the odd man out,” Steven Soranno, a Bethesda, Maryland-based senior equities analyst for Calvert Investments Inc., which oversees about $12 billion, said by telephone. “The old adage used to be ‘Don’t fight the Fed.’ Now it’s ‘Don’t fight the Feds’, plural. Australia came in with the rate cut and that just adds to the coordinated central bank easing.”

About 72% of the 423 S&P 500 companies that have released results since the start of the earnings season have exceeded profit projections, while 53% have missed sales estimates, data compiled by Bloomberg show. Walt Disney Co., Mondelez International Inc. and Electronic Arts Inc. are among 22 companies scheduled to report earnings today.

Bloomberg News

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