(Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index past its record close, as speculation grew that the Federal Reserve will maintain the pace of stimulus after Congress ended the budget standoff.
American Express Co. rallied the most intraday in nearly two years after reporting third-quarter profit that beat analysts’ estimates. Newmont Mining Corp., the second-largest gold miner, jumped 5.2 percent as the price of the precious metal rallied. International Business Machines Corp. sank 6.7 percent after posting its sixth consecutive drop in quarterly sales. Goldman Sachs Group Inc. dropped 2.7 percent as the bank reported a 20 percent drop in revenue.
The S&P 500 rose 0.3 percent to 1,726.34 at 2:10 p.m. in New York, surpassing the previous record close of 1,725.52 on Sept. 18. The Dow Jones Industrial Average fell 55.13 points, or 0.4 percent, to 15,318.70, dragged lower by IBM and Goldman Sachs. Trading in S&P 500 stocks was 12 percent above the 30-day average at this time of day.
“The taper seems a little bit further out, certainly than anybody expected eight weeks ago and maybe even just a couple of weeks ago,” Walter Todd, chief investment officer at Greenwood Capital Inc., said in a phone interview from Greenwood, South Carolina. He helps manage $950 million. “It keeps a lid on rates and provides more liquidity for risk assets like stocks. People are back to focusing on the individual company dynamics that occur during earnings season.”
The S&P 500 gained 2.4 percent during the 16-day government shutdown that ended yesterday after President Barack Obama signed a bill to fund the government through Jan. 15 and extend the borrowing authority through Feb. 7.
‘Stay Course’
Investors will now weigh whether the government shutdown will harm corporate earnings and economic growth even as the impasse fueled bets that the Fed will delay reducing its $85 billion in monthly bond purchases.
Pacific Investment Management Co. said the central bank will postpone tapering. The Fed “may now have no choice but to stay longer in its intense policy experimental mode –- due both to the likelihood of weaker data and to a perceived need to take out insurance for the economy against future political dysfunction,” said Pimco Chief Executive Officer Mohamed El- Erian in a CNBC blog posting.
“Given all of the uncertainty,” it’s hard to argue to “change course” on monetary policy, Fed Bank of Dallas President Richard Fisher said today in New York. “My view will be to stay the course,” said Fisher, who has consistently called for reducing stimulus. The central bank next convenes Oct. 29-30.
Valuation, Breadth
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 21 percent this year and jumped to an intraday record of 1,729.86 on Sept. 19, a day after the Fed unexpectedly delayed tapering at its last policy meeting.
The rally in stocks this year has pushed valuations to a three-year high and is the broadest since at least 1990. The S&P 500 trades at 16.5 times reported operating profit, a 17 percent increase from the beginning of 2013, according to data compiled by Bloomberg. Some 445 stocks in the gauge have posted year-to- date gains through yesterday, data show. The second-broadest advance in the period was in 1995, when 434 stocks in the benchmark gained through Oct. 16.
Equities could come under pressure as companies from Knoll Inc. to NCI Inc. have said they expect the shutdown to affect revenue in the last three months of the year.
‘Lower Market’
“We are going to see a lower equity market and a longer period of lower rates” if corporate earnings start to deteriorate in the fourth quarter, BlackRock Inc. Chief Executive Officer Laurence D. Fink, who as head of the world’s biggest money manager oversees $4.1 trillion in assets, said today on “Market Makers” with Erik Schatzker and Stephanie Ruhle.
Knoll, an officer furniture maker, estimates about $10 million of government business to be pushed into next year, CEO Andrew Cogan said. Stanley Black & Decker Inc.’s shares yesterday dropped 14 percent, the most since 1992, after the toolmaker reduced its full-year profit forecast in part because of the shutdown. Campbell Soup Co. has seen consumers pull back after a year that included higher payroll taxes, along with the impasse in Washington, CEO Denise Morrison said.
Profits for S&P 500 companies probably grew 8.8 percent in the fourth quarter, according to analysts’ estimates compiled by Bloomberg as of Oct. 11.
‘Resilient’ Earnings
“So far, we think earnings will be resilient, even to what happened in Washington,” Andres Garcia-Amaya, global market strategist at JPMorgan Chase & Co.’s mutual funds unit, said in a phone interview today. His firm oversees $400 billion. “Short term,you might still have the sour taste of what happened the last couple of weeks. Fundamentally, the economy still has plenty of pent-up demand. The balance sheets of the consumer are actually in decent shape.”
S&P Ratings Services yesterday said the shutdown has shaved at least 0.6 percent off of fourth-quarter 2013 gross domestic product growth, or taken $24 billion out of the economy. IHS Inc. of Lexington, Massachusetts, reduced its GDP growth estimate for the period to 1.6 percent, from 2.2 percent in September.
The U.S. economy will expand by 1.6 percent this year, according to economists surveyed by Bloomberg. That would be the slowest rate of annual growth since 2009.
A report today showed that more Americans than forecast filed applications for unemployment benefits last week. California continued to work through a backlog, indicating it will take time to gauge the impact of the federal shutdown.
Consumer Pessimism
The shutdown has delayed government data releases, including the Labor Department’s September employment report.
At the same time, Americans in October were the most pessimistic about the nation’s economic prospects in almost two years as concern mounted that continued political gridlock will hurt the expansion. The monthly Bloomberg Consumer Comfort Index expectations gauge plunged to minus 31, the lowest level since November 2011, from minus 9 in September, a report showed today.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, sank 6.9 percent, after falling yesterday by the most in more than two years. The index has retreated 24 percent this year.
Some 24 companies in the S&P 500 report results today, including Google Inc. Profits for companies in the gauge probably increased 1.4 percent during the period as sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg.
Verizon, Newmont
Eight of 10 main groups in the S&P 500 advanced today. Phone, utility and materials stocks rallied at least 1 percent to pace gains.
Verizon Communications Inc. increased 3.5 percent to $48.91 as the second-largest U.S. phone company reported profit that exceeded projections. The company’s mobile-phone business fueled gains in sales and profit, validating its decision last month to pay $130 billion for Vodafone Group Plc’s share of the joint venture.
Newmont Mining jumped 5.2 percent to $27.22. Gold rallied 2.9 percent on speculation the Fed will postpone slowing stimulus. The metal is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value and on earlier speculation the Fed would slow debt purchases this year.
Peabody Surprise
Peabody Energy Corp. surged 3.8 percent to $18.56. The largest U.S. coal producer posted a surprise third-quarter profit after a recovery in domestic prices for coal used to generate electricity and a reduction in mining costs.
American Express Co. rallied 4.3 percent, the most since December 2011, to a record $79.37. The biggest credit-card issuer by customer purchases, said worldwide card spending, or billed business, rose 7.3 percent to $236.2 billion.
SanDisk Corp. climbed 7.7 percent to $67.76 for the biggest gain the S&P 500. The company posted third-quarter adjusted earnings of $1.59 a share, exceeding the $1.33 median forecast of analysts surveyed by Bloomberg. Sales came in at $1.63 billion, compared with the $1.56 billion projected by analysts.
IBM plunged 6.7 percent to $174.16 for the biggest drop in the Dow. Third-quarter revenue fell 4 percent to $23.7 billion, $1 billion less than analysts had forecast in a Bloomberg survey.
Goldman Sachs fell 2.7 percent to $157.94. The world’s most profitable securities firm before the financial crisis said earnings were little changed as the bank cut costs in response to a 20 percent drop in revenue. The firm increased its dividend 10 percent.
IBM and Goldman are the second and third most heavily weighted stocks in the Dow.
EBay Inc. slipped 3.9 percent to $51.42 after saying fourth-quarter sales will be $4.5 billion to $4.6 billion amid “dramatically decelerating U.S. e-commerce growth.” Analysts on average were projecting revenue of $4.64 billion, according to data compiled by Bloomberg. The largest online marketplace also issued a profit forecast that missed analyst estimates.
