U.S. Stocks Advance Amid Bank Rally

By Rita Nazareth - Mar 1, 2012 11:26 PM GMT+0700

U.S. stocks advanced, following the longest monthly advance for the Standard & Poor’s 500 Index in a year, as financial shares rallied and after government data showed that jobless claims declined to a four-year low.

JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) climbed at least 1.5 percent as European banks jumped amid a slump in Spanish and French borrowing costs. Gap Inc. (GPS), the largest U.S. apparel chain, surged 7.7 percent as same-store sales beat estimates. Kroger Co. (KR) advanced 2.4 percent after the grocery- store chain forecast earnings that topped projections.

The S&P 500 advanced 0.3 percent to 1,370.22 at 11:25 a.m. New York time, after a three-month rally. The Dow Jones Industrial Average rose 22.36 points, or 0.2 percent, to 12,974.43. The Russell 2000 Index gained 0.7 percent to 816.22.

“We’re not lighting the world on fire, but we’re seeing improvement in the economy,” said Mark Masterson, managing director and partner at HighTower’s Masterson, Emma & Associates in Naples, Florida. Hightower has over $25 billion in assets. “The risk from the European situation has been reduced. I don’t know that it’s been eliminated. Best I can say at this point is that it appears to have been postponed.”

Benchmark gauges rose as the number of Americans filing first-time claims for jobless benefits fell to a level matching a four-year low, more evidence the labor market is healing. Stocks briefly pared gains as manufacturing in the U.S. unexpectedly expanded in February at a slower pace than forecast as orders cooled.

European Shares

Gains in Europe also helped lift the S&P 500 after Spain and France sold 12.5 billion euros ($16.7 billion) of bonds as the European Central Bank’s long-term refinancing operation of lending to banks helped spur demand. Default insurance on Greek debt won’t be paid out, the International Swaps & Derivatives Association said after it was asked to rule whether part of the nation’s $170 billion bailout was a credit event.

Today’s advance extended this year’s rally in the S&P 500 to 9 percent. Stocks rose amid better-than-estimated economic data and expectations that Europe would tame its debt crisis. Yet the index trades at about 14.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

UBS AG raised its forecasts for the S&P 500 and its companies earnings amid a “dramatic” improvement in the economy. Jonathan Golub’s year-end forecast for the benchmark gauge rose to 1,475 from 1,325. He estimates earnings-per-share of $103 this year and $112 in 2013. The previous forecasts were $99 and $111, respectively.

‘More Room’

“There’s more room to run,” Matt Lloyd, who oversees $8 billion as chief investment strategist at Advisors Asset Management Inc. in Monument, Colorado, said in a telephone interview. “You could see a 3 percent to 5 percent correction. Yet that doesn’t sway us because we start to see a lot more upside in the equity market, especially on metrics.”

Financial shares had the biggest gain in the S&P 500 among 10 industries, adding 1.1 percent. The KBW Bank Index (BKX) rose 1 percent as 22 of its 24 stocks gained. JPMorgan increased 1.8 percent to $39.96. Bank of America climbed 1.5 percent to $8.09.

Goldman Sachs Group Inc. (GS) jumped 4.1 percent to $119.82. The fifth-biggest U.S. bank by assets agreed to buy Ariel Holdings Ltd.’s Bermuda-based insurance and reinsurance businesses to expand property and casualty coverage.

Gap surged 7.7 percent to $25.16. Sales climbed 4 percent, beating the average projection for a 1.4 percent drop from analysts surveyed by Retail Metrics Inc.

Kroger’s Outlook

Kroger gained 2.4 percent to $24.35 after forecasting 2012 earnings of at least $2.28 a share. On average, the analysts surveyed by Bloomberg estimated $2.23.

Apple Inc. (AAPL) fell 0.3 percent to $541.02. The shares added 5.7 percent in the previous five days. Now that its market value has exceeded $500 billion, the biggest challenge for the maker of iPhones and iPad tablet computers may be staying there.

Apple is the sixth U.S. company that has ever crossed the threshold, according to data compiled by S&P. The others are Microsoft Corp. (MSFT), General Electric Co., Cisco Systems Inc., Intel Corp. and Exxon Mobil Corp., in chronological order.

All five companies were below $500 billion a year after reaching that pinnacle, according to data compiled by Bloomberg. GE was the only one to surpass that value afterward.

“Getting there is hard,” Howard Silverblatt, a New York- based senior index analyst at S&P, wrote yesterday in an e-mail. “Staying there is harder.”

Research In Motion Ltd. (RIM) lost 3.7 percent to $13.64. Jefferies & Co. cut its earnings estimate and said there’s a greater than 50 percent chance that the maker of BlackBerrys will miss its device sales forecast for the fiscal fourth quarter, which ended in February.

Sotheby’s (BID) dropped 8.8 percent to $35.89. The publicly traded auctioneer of fine arts and collectibles said fourth- quarter profit fell 26 percent as sales slid.

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