U.S. equity gauges rose to records Tuesday, the last trading day of 2013, with the Standard & Poor's 500 Index posting its biggest annual advance since 1997, as gains in consumer confidence and housing prices bolstered confidence in the world's largest economy.
Phillips 66 paced gains in energy shares after saying Berkshire Hathaway Inc. will swap about $1.4 billion in shares for full ownership of the company's pipeline-services business. Hertz Global Holdings Inc. climbed 10% to a record after saying it adopted a one-year shareholder-rights plan. Marvell Technology Group Ltd. rose 4.5% after KKR Fund Holdings disclosed a 6.8% stake in the chipmaker.
The S&P 500 added 0.4% to 1,848.36. The equities benchmark jumped 30% in 2013, ending the year at an all-time high for the first time since 1999. The Dow Jones Industrial Average increased 72.37 points, or 0.4%, to 16,576.66, also a record. About 4.5 billion shares changed hands on U.S. exchanges, 24% below the three-month average. U.S. equity markets are closed today.
“It's been a terrific year and people should be very satisfied about how the market has reacted,” Robert Pavlik, chief market strategist at Banyan Partners, which manages $4.5 billion, said. “You can question it all you want if there was enough reasoning behind the 30% gain. Lots of things went on this year (2013), but you're starting to tack this one on and put it in the book and be thankful.”
The S&P 500 gained 2.4% in December, its fourth straight monthly advance. The gauge climbed 3.7% from Dec. 13 through Dec. 27, its biggest two-week rally since July, as the Federal Reserve announced plans to reduce the pace of bond buying amid faster-than-estimated economic growth. Three rounds of Fed stimulus have sent the S&P 500 up 173% from a 12-year low in 2009.
Data Tuesday showed the Conference Board's index of consumer confidence in the U.S. rose to 78.1 in December from 72 in the prior month, the New York-based private research group said. The median projection in a Bloomberg survey of economists called for a reading of 76. A separate report showed home prices in 20 U.S. cities rose in October from a year ago by the most in more than seven years, signaling the real-estate rebound will keep bolstering household wealth in 2014.
The Dow rallied 27% last year, its best performance since 1995. International Business Machines Corp. is the only member of the 30-stock gauge that declined, even as the world's largest provider of computing services boosted its dividend and added about $20 billion to its buyback plan.
Asset purchases by the Bank of Japan and the Fed have supported the global economy and helped to increase the market value of world stocks by $9.5 trillion last year. Speculation over a reduction in bond buying whipsawed financial markets after May 22, when Fed Chairman Ben S. Bernanke first indicated cuts to the central bank's stimulus program could start last year. The S&P 500 advanced 12% since then.
2013's rally in stocks sent the S&P 500's valuation up more than 20% to 17.4 times reported earnings, the highest since 2010.
All 10 main industries in the S&P 500 advanced last year, led by a 41% gain in consumer-discretionary companies. About 460 stocks in the index were up for the year, the broadest rally in data going back to 1990. Phone companies had the weakest performance, with a 6.5% increase. The increase is the best showing for the worst-performing group since 1995, data compiled by Bloomberg show.
Netflix Inc. soared 298% in 2013 for the biggest gain in the S&P 500, as the world's largest video-subscription company reported earnings that surged more than analysts forecast. Micron Technology Inc. rallied 243%, making it the second-best performer. The chipmaker is projected to return to a profit in the fiscal year ending in August. Best Buy Co. climbed 237%, rebounding after a 49% drop in 2012.
Newmont Mining Corp. plunged 50% for the biggest annual loss in the S&P 500. The price of gold fell 28% in 2013, its biggest decline in three decades. Cliffs Natural Resources Inc., the second-worst performer in the index, lost 32%.
Equity returns will slow next year, Wall Street strategists forecast. The S&P 500 will end 2014 at 1,950, according to the average of 20 estimates compiled by Bloomberg. That represents a 5.5% gain over the next 12 months.
“I don't think the market is overvalued, but will it continue this nice smooth ascent with almost no volatility?” Tobias M Levkovich, chief U.S. equity strategist at Citigroup Inc., said in an interview with Betty Liu on Bloomberg Television. “We will see a more volatile year that might scare off some investors, which might be good. Sentiment is getting way too positive. It's beyond complacency.”
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 1.2% to 13.72 Tuesday for a third straight day of increases. The gauge finished the year with a 24% drop, the largest decline since 2009.
Seven out of 10 main S&P 500 groups increased Tuesday, with energy shares adding 0.9% to pace gains.
Phillips 66 climbed 3.2% to $77.13. Warren Buffett's company will exchange about 19 million shares, Phillips 66 said in a regulatory filing. The specific number of shares Berkshire will pay for Phillips Specialty Products Inc. will be determined when the deal is completed, the energy company said.
Valero Energy Corp. advanced 3.6% to $50.40 and Marathon Petroleum Corp. added 3.7% to $91.73 for the largest gains in the S&P 500. Tesoro Corp. rallied 3.5% to $58.50 for the index's third-biggest increase.
American Express Co. rose the most in the Dow, adding 1.3% to $90.73 for a ninth day of gains that extended an all-time high.
Hertz climbed 10% to $28.62. The largest publicly traded U.S. rental-car company adopted the plan after observing “unusual and substantial activity” in its stock. The board voted unanimously for the plan, which Hertz said wasn't adopted in response to any specific takeover bid or proposal to acquire the company, according to a statement.
Marvell Technology jumped 4.5% to $14.38. KKR Fund Holdings' disclosure comes after two people familiar with knowledge of the matter said on Nov. 5 that KKR & Co. had acquired almost 5% of the computer chipmaker.
KKR sees the Hamilton, Bermuda-based company as undervalued and has discussed its holding with the company's co-founders, Chief Executive Officer Sehat Sutardja and his brother Pantas, said one person, who asked not to be identified as the information is private.
Urban Outfitters fell 0.6% to $37.10. The clothing retailer was the only annual loss among consumer-discretionary shares in the index, dropping 5.7% last year.