Capital goods orders increase by the most since June 2014
U.S. stocks advanced, rising for a second day as gains in bank and consumer staples shares overshadowed declines among energy companies as investors mostly shrugged off an earlier slide in crude oil.
The Standard & Poor's 500 Index climbed 0.6% to 1,941.10 at 1:41 p.m. in New York, after erasing a 1.6 % morning selloff yesterday. The gauge is within five points of its average price during the past 50 days. The Dow Jones Industrial Average added 124.30 points, or 0.8%, to 16,609.29. The Nasdaq Composite Index increased 0.4%. Trading in S&P 500 shares was 27% below the 30-day average for this time of day.
“What we've seen over the last several weeks, we get enough data points that suggest that hope is warranted, but also get data points that continue to raise concerns,” said Eric Wiegand, senior portfolio manager at the Private Client Reserve of U.S. Bank in New York, which oversees $125 billion. “We think it's going to continue to be a very volatile environment, one where we want to be more opportunistic.”
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U.S. equities moved higher after struggling for early direction Thursday. China's stocks tumbled the most in a month as surging money-market rates signaled tighter liquidity. Meanwhile, European shares surged, pace by Lloyds Banking Group Plc, with the Stoxx Europe 600 Index up 2%. Concern that a slowdown of the Chinese economy is deepening, compounded by falling commodity prices led by crude, has roiled equity markets since August.
The S&P 500 is poised to erase this month's decline after losing as much as 6.7% on Feb. 11. The benchmark reached a six-week high on Monday after a rebound from a nearly two-year low trimmed its 2016 drop by more than half.
Tumbling oil prices, tighter credit conditions and a flatter yield curve spurred Wells Fargo Securities LLC strategist Gina Martin Adams to lower her S&P 500 target to 2,100, down from a previous call of 2,245. “Stocks will move higher over the next 12 months, but perhaps not as robustly as we forecast in early December,” Martin Adams wrote in a research note to clients Thursday. “There is likely also a lid on multiples given deteriorating credit quality.”
While the S&P 500's valuation of 16.2 times the forecast earnings of its members is above the 15 times average of the past five years, the measure is down 6.8 % since the start of the year. The gauge remains more expensive than developed markets in Europe, where the Stoxx 600 Index trades for 14.6 times estimated earnings.
Investors are scrutinizing economic data to gauge growth in the world's largest economy, and a report today showed orders for U.S. capital goods rebounded in January by the most since June 2014. Orders for all durable goods rose 4.9%, the most since March. Separate data showed the number of Americans filing applications for unemployment benefits rose last week from a three-month low, in part reflecting the typical swings during holiday periods.
“The data on durable goods will help assuage fears that a recession is lurking,” Quincy M. Krosby, a market strategist at Prudential Financial Inc., which oversees about $1.2 trillion, said by phone from Newark, New Jersey. “If we can get some more data releases showing some less bad data or stabilization it may help push us higher. The market is craving that right now.”
With the earnings season wrapping up, about three-quarters of S&P 500 firms have exceeded profit projections, while less than half topped sales forecasts. Analysts estimate earnings at S&P 500 companies fell 4.2% in the fourth quarter, compared with Jan. 15 predictions for a 7% slump. Southwestern Energy Co. and Kraft Heinz Co. are among 18 companies in the index reporting earnings today.
The Chicago Board Options Exchange Volatility Index fell 3.4% to 20 Thursday. The measure of market turbulence known as the VIX erased a 9% intraday jump yesterday, and has erased a monthly gain after rising more than 39% on Feb. 11.
