S&P 500 extends record amid stimulus bets as Google surges

Bloomberg NewsOctober 19, 2013 

NEW YORK -- U.S. stocks rose, giving the Standard & Poor's 500 index its best weekly gain since July, as results from Google topped estimates and speculation grew that the Federal Reserve will delay cutting monetary stimulus.

Google rallied 14 percent to surpass $1,000 a share for the first time after reporting third-quarter sales that beat analysts' projections. General Electric added 3.5 percent as demand for industrial products boosted earnings. Chipotle Mexican Grill surged 16 percent to a record as customer traffic rose. UnitedHealth Group slumped 3.7 percent, extending yesterday's 5.1 percent slide after the insurer reported sales that fell short of analyst estimates.

The S&P 500 added 0.7 percent to 1,744.50, extending an all-time high. The gauge has rallied 2.4 in the past five days, for its biggest weekly advance since July 12. The Dow Jones industrial average added 28 points, or 0.2 percent, to 15,399.65. About 6.6 billion shares changed hands on U.S. exchanges, 12 percent higher the three-month average.

"People are looking at earnings but they're also looking at what they think is going to happen next," Sarah Hunt, an associate fund manager and analyst who helps oversee $4.5 billion at Purchase, N.Y.-based Alpine Woods Capital Investors, said in a phone interview. "After this political problem no one is expecting this to happen again in January. People are just looking for a little bit of a better economic backdrop

to continue what's been a pretty decent environment for stocks."

The S&P 500 closed Thursday at a record of 1,733.15 after Congress ended the standoff over the federal budget and borrowing authority. The 16-day government shutdown government reduced growth by 0.3 percentage point this quarter, economists said in a Bloomberg News survey.

The slower growth and delayed reporting of economic data will prevent Fed policy makers from paring the monthly pace of asset buying until their March 18-19 meeting, according to the median of 40 responses by economists in the survey conducted yesterday and today. Economists had expected the central bank to reduce purchases to $80 billion last month, according to a Bloomberg survey before the September meeting.

The Fed stimulus has helped propel the S&P 500 up by more than 150 percent from its March 2009 low. The gauge has surged 22 percent this year and jumped to its previous intraday record of 1,729.86 on Sept. 19, a day after the central bank unexpectedly delayed tapering.

Investors will have to wait until Oct. 21 to get the next snapshot of economic activity, when data on sales of existing homes is released. The September U.S. jobs report, originally scheduled to be released on Oct. 4, will be issued on Oct. 22. The report was delayed by the partial shutdown. October employment data will come out on Nov. 8, rather than Nov. 1.

In the absence of U.S. economic reports, investors have been watching third-quarter corporate earnings. Thirteen S&P 500 companies released results on Friday. Analysts have raised their forecasts for profits and now forecast an average increase of 2.5 percent for all companies in the gauge, according to estimates compiled by Bloomberg on Friday. That compares with an expected gain of 1.4 percent as of Oct. 11.

Earnings at the 100 companies that have reported so far grew by an average of 4.4 percent, while sales gained 2 percent. Some 70 percent of the companies have topped analysts' profit estimates, while 56 percent have beaten on sales.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, sank 3.3 percent to 13.04 on Friday, the lowest since August 14. The gauge plunged 17 percent in the past five days for the biggest weekly decline since March.

Nine out of 10 main industries in S&P 500 advanced, with technology and industrial companies rising at least 1.1 percent to pace gains.

Google surged 14 percent to a record $1,011.41. The owner of the world's biggest search engine reported revenue of $11.92 billion, excluding sales passed on to partner sites. That exceeded the average analyst forecast as the number of promotions sold via mobile, video and other services made up for shrinking advertising prices.

Google's rally helped the Nasdaq 100 Index gain 3.7 this week, for its highest close since Oct. 23, 2000.

General Electric added 3.5 percent to $25.55 for the biggest gain in the Dow. The company's earnings beat analysts' estimates as industrial sales climbed, led by demand for jet engines and drilling equipment, and rising orders pushed its backlog to a record.

Morgan Stanley advanced 2.6 percent to $29.69. Earnings beat analysts' estimates as equity-trading revenue jumped the most among the biggest Wall Street firms and the wealth-management profit margin climbed.

Chipotle Mexican Grill surged 16 percent, the most in one day since May 2007, to a record $509.74. The chain is spending more on marketing and traditional advertising to help maintain revenue growth that was the fastest among restaurant chains in the S&P 500 last year.

Amazon.com rallied 5.8 percent to $328.93 to close at a record. UBS analyst Eric Sheridan raised his rating on the stock to buy from hold, saying he expects revenue growth to accelerate in the fourth quarter.

Schlumberger gained 2.8 percent to $93.99 as the world's largest oilfield-services provider said quarterly net income climbed to $1.7 billion, or $1.29 a share, from $1.4 billion, or $1.07, a year earlier.

Baker Hughes gained 7.3 percent to $55.55 as the oil services provider reported third-quarter profit that beat analyst estimates and said it expects "solid, profitable" international growth in 2014.

UnitedHealth dropped 3.7 percent to $68.76, a three-month low. Shares in the largest U.S. health insurer on Thursday fell the most in more than two years after the company reported worse-than-forecast results.

Home Depot slid 1.4 percent to $74.69 and Lowe's sank 2.8 percent to $47.66. Cleveland Research analyst Eric Bosshard cut his estimates for both retailers' third-quarter same-store sales growth, citing moderating demand.

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