By Rita Nazareth - Mar 17, 2012 3:36 AM GMT+0700
The Dow Jones Industrial Average (INDU) snapped a seven-day gain after an increase in oil and consumer prices sparked inflation concern as the economy improves.
Energy (S5ENRS) shares had the biggest advance among 10 groups in the Standard & Poor’s 500 Index. Noble Corp. and Chesapeake Energy Corp. (CHK) increased more than 2.5 percent. The Bloomberg U.S. Airlines Index slumped 3 percent amid expectations about higher fuel prices. Bank of America Corp. jumped 6.1 percent, surging 23 percent in four days. Apple Inc. ended almost unchanged as the company started selling the new iPad.
Traders work at the New York Stock Exchange (NYSE) on March 15, 2012. Photographer: Scott Eells/Bloomberg
March 16 (Bloomberg) -- Bloomberg's Pimm Fox and Deborah Kostroun report on the performance of the U.S. equity market today. The Dow Jones Industrial Average snapped a seven-day gain after an increase in oil and consumer prices sparked inflation concern as the economy improves. (Source: Bloomberg)
March 16 (Bloomberg) -- Robert Doll, chief equity strategist at BlackRock Inc., talks about the outlook for U.S. stocks and his investment strategy. He speaks with Trish Regan, Adam Johnson and Stephanie Ruhle on Bloomberg Television's "Street Smart." (Source: Bloomberg)
The S&P 500 advanced 0.1 percent to 1,404.17 at 4 p.m. New York time, capping a fifth week of gains. The benchmark measure has risen 2.4 percent since March 9, the biggest weekly advance in 2012. The Dow dropped 20.14 points, or 0.2 percent, to 13,232.62, after rallying to the highest level since December 2007. About 8.1 billion shares changed hands on U.S. exchanges today, or 21 percent above the three-month average.
“The bugaboo in the background is oil prices,” said Madelynn Matlock, who helps oversee about $14.6 billion at Huntington Asset Advisors in Cincinnati. “I filled up my car yesterday and it hurts. Things are improving at a slow, but steady pace. If oil prices pop up, it will be different story.”
Equities were little changed as the cost of living rose in February by the most in 10 months, reflecting a jump in gasoline. Confidence among consumers unexpectedly fell in March, a sign rising fuel costs may be starting to weigh on economic prospects. Treasury Secretary Timothy F. Geithner said yesterday rising oil prices show “we still face a dangerous and uncertain world” and there’s no easy way to lower gasoline costs.
Best Since 1998
The S&P 500 is still on pace for the best first quarter since 1998 (SPX), after rallying 12 percent, amid better-than- estimated economic and corporate reports. It trades at 14.5 times reported earnings, the highest valuation level since July while still below the average since 1954 of 16.4 times earnings.
“It’s a bit of acrophobia,” said John Manley, chief equity strategist for Wells Fargo Advantage Funds in New York, citing potential investors’ fear after the S&P 500 rose to the highest level since 2008. His firm oversees $209 billion. “The market has just gone up pretty quickly. Meantime, slow and slightly improving has been the way to look at the economy.”
Energy shares gained, while airlines slumped as oil traded above $107 a barrel. Noble (NE) surged 4.8 percent to $41.25. Chesapeake Energy added 2.5 percent to $25.06. Exxon Mobil Corp. (XOM) advanced 0.4 percent to $86.44. US Airways Group Inc. (LCC) lost 5.7 percent to $7.15. United Continental Holdings Inc. (UAL) declined 2.2 percent to $19.95.
Financial Shares
Financial (S5FINL) shares in the S&P 500 rose 0.3 percent as a group. The index surged 6.2 percent in four days following dividend increases by banks including JPMorgan Chase & Co. Bank of America jumped 6.1 percent, the most in the Dow, to $9.80. Wells Fargo & Co. lost 0.5 percent to $33.89.
American International Group Inc. (AIG) fell 0.2 percent to $28.03, after rising as much as 1.1 percent earlier today. The insurer’s repayment of $1.6 billion to the U.S. Treasury Department pushed the government’s portion of recouped financial-bailout money to 80 percent, said a Treasury official familiar with the matter.
Apple (AAPL) ended almost unchanged at $585.57, after briefly rising above $600 yesterday. The 9.7-inch iPad, unveiled on March 7, is the biggest upgrade yet to Apple’s tablet before Microsoft Corp. (MSFT) introduces new software for competing devices.
Generating demand with the model is important for Apple to fend off competition from devices using Google Inc. (GOOG)’s Android operating system and the $199 Kindle Fire from Amazon.com Inc. (AMZN) that’s popular among cost-conscious buyers.
Higher Forecasts
The S&P 500, which yesterday rose above 1,400 for the first time in almost four years amid better-than-estimated economic data, may extend its gain to 1,470, according to Credit Suisse Group AG’s Andrew Garthwaite. He lifted his forecast for the index at the end of 2012 from a previous projection of 1,400, citing increasing risks for bonds and momentum in global earnings.
“The prospects for economic growth are pretty good,” Michelle Gibley, director of international research at San Francisco-based Charles Schwab Corp., said in a telephone interview. Her firm has $1.81 trillion in client assets. “Near term, you could see some volatility in stocks because the run has been so strong. Longer term, the outlook looks good.”
The benchmark measure has “healthy intermediate-term momentum” that helped it recover from a slump at the beginning of the month and may drive it higher, MKM Partners LP’s chief market technician said.
‘Breakout’
The market may be staging a “breakout” after matching its 2011 highs last week, MKM Partners’ Katie Stockton said, citing the momentum indicator known as Moving Average Convergence/Divergence. A second-straight weekly close above 1,370 today would confirm the trend and open the way to an increase to 1,440, Stockton said in a phone interview yesterday.
“I’m bullish on the market from an intermediate perspective based largely on momentum and this breakout that appears to be under way,” Stockton said. “The fact that the S&P 500 has managed to exceed resistance at the 2011 high tells us that breakout should overrule any negative set-up otherwise.”
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
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