S&P 500 hits record on China manufacturing as tech shares rally

NEW YORK – The Standard & Poor’s 500 Index rose to a record, after posting the longest streak of quarterly gains since 1998, as technology and consumer shares rallied while data showed China’s manufacturing expanded in June.

International Business Machines Corp. climbed 2.7 percent, leading technology stocks in the S&P 500. General Motors Co. jumped 2.7 percent after posting a surprise increase in U.S. sales. Netflix Inc. advanced 6.1 percent after Goldman Sachs Group Inc. recommended investors buy shares in the world’s largest Internet-subscription service. Urban Outfitters Inc. dropped 1.9 percent after Wedbush Securities Inc. cut the stock’s rating to the equivalent of hold.

The S&P 500 climbed 0.7 percent to a record 1,973.98 at 11:44 a.m. in New York. The benchmark equity gauge rose 4.7 percent in the second quarter, a sixth consecutive increase. The Dow Jones Industrial Average increased 135.05 points, or 0.8 percent, to 16,961.65, poised for a record close. The Russell 2000 Index of smaller companies rallied 1.3 percent, heading for an all-time high.

“The market is very resilient,” Steve Krawick, president of West Chester Capital Advisor Inc. in Johnstown, Pa., said in a phone interview. The firm oversees about $900 million. “We had some crisis in Ukraine and the Middle East, but our economy has been stable. We didn’t have a correction when the market had the opportunity to correct in March. We realize the fact that valuations are not cheap, but that doesn’t translate into the end of the bull market.”

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Equity rebound

Stocks are extending a rebound from the selloff that started in March with small-cap and Internet stocks. Equities have rallied since the S&P 500 reached a two-month low in April as stimulus spread from Europe to Japan and the U.S. and economic data suggested global growth is strengthening. The Russell 2000 is trading above its March 4 record close, retracing all of its losses after a 9.3 decline through May 15.

Manufacturing in China expanded in June by the fastest pace this year, a purchasing managers’ index compiled by the government showed Tuesday. A similar gauge from HSBC Holdings PLC and Markit Economics rose to 50.7 from 49.4 in May.

The Institute for Supply Management’s U.S. factory index was little changed at 55.3 in June from 55.4 in the prior month, the Tempe, Ariz.-based group’s report showed. Readings above 50 indicate expansion. The median forecast of 88 economists surveyed by Bloomberg called for 55.9.

Monthly payrolls

Other reports this week may yield further clues on the strength of the U.S. economy. A private release may show U.S. employers hired more workers in June than in the previous month. The official jobs data is due Thursday, a day before the U.S. Independence Day holiday.

U.S. equities have reached all-time highs, with the S&P 500 gaining 6.8 percent this year, as data from employment to housing fueled confidence that the U.S. economy is rebounding after the worst contraction in gross domestic product since 2009. Federal Reserve Chair Janet Yellen said on June 18 that accommodative monetary policy, rising property and equity prices and the improving global economy should lead to above-trend growth.

The S&P 500 trades at 16.7 times the projected earnings of its members, its highest valuation in four years. The U.S. market has gone more than two years without a 10 percent drop.

Earnings season

Investors will get a further chance to assess the economy when companies start releasing financial results in July. Earnings for S&P 500 companies probably grew 5.2 percent during the second quarter while sales rose 3.2 percent, analyst estimates compiled by Bloomberg show. The forecasts are lower than they were at the beginning of April, when analysts projected earnings to rise 7.3 percent and sales to increase 3.7 percent.

“It’s a great environment,” Ernie Cecilia, chief investment officer at Bryn Mawr Trust Co. in Bryn Mawr, Pa., said in a phone interview. The firm oversees $7.4 billion. “You have a slowly broadening recovery. You have the Fed that’s going to remain accommodative. We’re soon to embark on the earnings season and we’re optimistic about that.”

Trading in S&P stocks was 11 percent above the 30-day average during this time of the day. The Chicago Board Options Exchange Volatility Index declined 3.9 percent to 11.12. The gauge, known as the VIX, is near its lowest level since February 2007.

Technology rally

All 10 industry groups in the S&P 500 advanced except for utilities, with technology, health-care and consumer-discretionary stocks climbing at least 0.9 percent. IBM, a computer-services provider, gained 2.7 percent to $186.07 for the biggest increase in the Dow.

GM rose 2.7 percent to $37.28. The automaker reported a gain of 1 percent in June auto sales, beating the average analyst estimate for a 6.3 percent decline last month.

Aided by available credit and an improving economy with housing starts that remained near the 1 million mark in May, U.S. auto sales adjusting for seasonal trends may have accelerated to an annualized pace of 16.3 million, the average of 14 analysts’ estimates compiled by Bloomberg. That’s the biggest year since 16.15 million vehicles were sold in 2007.

Netflix gained 6.1 percent to $467.29. Goldman Sachs boosted its recommendation on the Los Gatos, Calif.-based company to buy from neutral, citing the potential for global subscription growth.

Twitter, GoPro

Twitter Inc. rose 4.2 percent to $42.68 after naming former Goldman Sachs banker Anthony Noto its new chief financial officer. Noto, who led the social-media company’s initial public offering last year, replaces Mike Gupta, who will assume the role of senior vice president of strategic investments.

GoPro Inc. jumped 19 percent to $48.22 amid optimism that revenue tied to users’ shared videos will fuel profit growth. GoPro’s first-person-viewpoint cameras, which let surfers, sky divers and bungee jumpers document their exploits, have attracted a younger generation driven by selfies and sharing adventures on social media. The shares have doubled since their market debut last week.

Regeneron Pharmaceuticals Inc. rallied 6.7 percent to $301.36. Sanofi, a French drug company, plans to increase its stake in the American maker of the eye drug Eylea to 22.5 percent from 20.5 percent.

Urban Outfitters slipped 1.9 percent to $33.21. The apparel retailer was cut to neutral from outperform by Wedbush.

Exelon Corp., a utility company, fell the most in the S&P 500, erasing 2.2 percent to $35.67.

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