Bank rally helps S&P 500 extend record

Bloomberg NewsJuly 13, 2013 

NEW YORK -- U.S. stocks rose Friday for a seventh day, extending a record for the Standard & Poor's 500 index, as better-than-estimated bank earnings overshadowed a reduced profit forecast from United Parcel Service.

Financial stocks rose the most out of 10 S&P 500 groups after Wells Fargo & Co. reported earnings that topped analysts' estimates. UPS fell 5.8 percent as it lowered its forecast for earnings in 2013, citing a slowing economy in the second quarter. Boeing plunged 4.7 percent after a parked 787 Dreamliner caught fire at London's Heathrow Airport.

The S&P 500 advanced 0.3 percent to a record 1,680.19. The Dow Jones industrial average added 3.38 points, or less than 0.1 percent, to 15,464.3, also an all-time high. More than 5.4 billion shares traded hands on U.S. exchanges Friday, or 15 percent below the three-month average.

The S&P 500's advance extended a record from Thursday, when the gauge jumped 1.4 percent after Fed Chairman Ben Bernanke backed sustained monetary stimulus. The index has added 3 percent in the past five days for a third week of gains and its biggest rally since Jan. 4. The surge has helped to erase losses since Bernanke first signaled the Fed may trim its $85 billion in monthly bond purchases later this year.

Equities retreated earlier Friday after Fed Bank of Philadelphia President Charles Plosser, who has opposed the central bank's current round of asset purchases, said the Fed should begin tapering in September. The benchmark gauge halted the decline after Fed Bank of St. Louis President James Bullard said the central bank shouldn't cut back until inflation accelerates toward the Fed's 2 percent goal.

The debate among policy makers in the past six weeks has sent markets lurching as investors speculate on the timing and rate of any cuts in bond buying. Central bank stimulus has helped fuel a rally in stocks worldwide.

with the benchmark U.S. index surging 148 percent from its March 2009 low.

The S&P 500 sank as much as 5.8 percent after reaching a record May 21, the day before Bernanke said the Fed may start paring stimulus efforts as soon as September if the economy improves in line with its forecasts. The index has rebounded 6.8 percent from a June 24 bottom, the fastest rally since December 2011, as economic data from hiring to housing tempered concern over possible tapering.

"The Fed's hope is that investors shift over time from liquidity-driven strength to economy-driven strength," James Gaul, a portfolio manager at Boston Advisors, which oversees about $2.6 billion in assets, said by phone. "I don't know if we've seen true economic strength here yet, but we're a lot closer than we were a couple of years ago."

Investors have also turned their attention to earnings results this week. Profit at companies listed on the S&P 500 rose 2 percent last quarter, down from a projection of 8.7 percent six months ago, according to analyst estimates compiled by Bloomberg. Lower expectations helped about 73 percent of the companies in the benchmark measure exceed forecasts by an average of 5.1 percent for the first three months of the year, Bloomberg data show.

Reports from JPMorgan and Wells Fargo, the first of the six largest U.S. lenders to report, drove bank stocks 1.5 percent higher as a group. The lenders were the only two S&P 500 companies to release earnings Friday.

Wells Fargo rose 1.8 percent to $42.63. The largest U.S. home lender said second-quarter profit climbed 19 percent as the company clamped down on expenses.

JPMorgan slipped 0.3 percent to $54.97 after CEO Jamie Dimon warned investors that higher interest rates could lead to a "dramatic reduction" in the bank's profits by eroding demand for mortgage refinancing.

The biggest U.S. bank by assets reported a 31 percent increase in second-quarter profit that beat analysts' estimates as revenue from trading stocks and bonds climbed.

Netflix gained 5.4 percent to $257.26, the highest level since August 2011. The largest subscription video-streaming service rose to its highest in more than 23 months as expectations for strong customer growth prompted Barclays to boost its price target for the shares.

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