Stocks advance as new-home sales increase, retailers rally

NEW YORK – U.S. stocks rose, with the Standard & Poor’s 500 Index climbing above its record close, as purchases of new homes unexpectedly climbed to the highest level in more than five years and retailers rallied.

Lowe’s Cos. and Abercrombie & Fitch Co. jumped more than 6.4 percent after announcing buyback plans. Target Corp. gained 7.3 percent as profit topped analysts’ estimates. An S&P index of homebuilders climbed 3.8 percent as Lennar Corp. and PulteGroup Inc. increased at least 4.2 percent. First Solar Inc. tumbled 8.4 percent after posting a 58 percent drop in quarterly profit.

The S&P 500 rose 0.3 percent to 1,850.24 at 1:26 p.m. in New York, topping its previous closing high of 1,848.38 reached on Jan. 15. The Dow Jones Industrial Average added 45.14 points, or 0.3 percent, to 16,224.80. Trading in S&P 500 stocks was 5 percent below the 30-day average during this time of the day.

“The market is liking this” homes-sales data, Richard Sichel, chief investment officer at Philadelphia Trust Co., said in a telephone interview. He helps oversee $2 billion. “We need to see a trend of growth in the data, but we’ll take one number at a time.”

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The S&P 500 has rallied 6.2 percent since a low on Feb. 3 as investors speculated that severe winter weather explains the weakness in reports such as housing and hiring. Federal Reserve Chair Janet Yellen said this month that the economy can withstand stimulus cuts, adding that only a notable change to the outlook would prompt the central bank to slow the pace of tapering. Yellen will testify on Thursday on monetary policy before the Senate.

Fed stimulus

Three rounds of stimulus have helped push the S&P 500 up 173 percent from a 12-year low in 2009.

Money is beginning to return to ETFs with the S&P 500 trading at record levels. About $21 billion has been added to ETFs that buy and sell American shares in the past two weeks as stock prices recovered, according to data compiled by Bloomberg. The deposits compare with about $407 million sent to fixed income since Feb. 11.

The S&P 500 has climbed above its closing high of 1,848.38 each day this week, only to retreat from that level by the end of the session. The index came within six points of the record each day last week. It reached an intraday high of 1,858.71 on Feb. 24.

“The market has bounced back sharply so we’re back at the same levels as at the beginning of the year,” Veronika Pechlaner, who helps oversee global assets for Ashburton Investments, which manages about $13 billion, said by telephone from Jersey, Channel Islands. “We’ve had harsh weather in the U.S. and you see that in the macro data, but we’re not at the stage yet where we really have to worry about 2014 numbers because of the weather.”

Home sales

Sales of new U.S. homes increased 9.6 percent to a 468,000 annualized pace in January, exceeding the highest estimate of economists surveyed by Bloomberg and the most since July 2008, figures from the Commerce Department showed on Wednesday.

Earnings beat analysts’ estimates at about 70 percent of the 471 companies in the S&P 500 that have posted results so far this season, according to data compiled by Bloomberg. Analysts estimate earnings for S&P 500 companies grew by 8.6 percent in the fourth quarter of 2013, according to a survey of analysts.

The Chicago Board Options Exchange Volatility Index advanced 2.6 percent on Wednesday to 14.03, its first increase in five days. The gauge of S&P 500 options known as the VIX is up 2.5 percent for the year.

Retailers had the biggest gain among 24 major industries in the S&P 500, rallying 2.1 percent. Apparel companies jumped 1.5 percent as a group.

Retailers rally

Lowe’s advanced 6.4 percent to $51.21. The second-largest U.S. home-improvement chain announced a plan to buy back $5 billion in shares. The company also said fourth-quarter profit rose 6.3 percent as the housing rebound spurred renovation spending.

Home Depot Inc. gained the most in the Dow, adding 1.6 percent to $82.30. The company climbed 4 percent on Tuesday after it posted fourth-quarter profit that topped analysts’ estimates, marking six straight years of meeting or exceeding projections.

Wal-Mart Stores Inc. had the third-biggest increase in the Dow, advancing 1.34 percent to $74.31.

Abercrombie & Fitch increased 10 percent to $39.65 after posting fourth-quarter profit that topped analysts’ estimates and saying it would buy back $150 million in shares in the current quarter.

Target, Aeropostale

Target Corp. added 7.3 percent to $60.65 for the biggest gain in the S&P 500. The retailer posted fourth-quarter profit that topped analysts’ estimates, signaling that it’s regaining customer loyalty after a data breach affected tens of millions of shoppers at the peak of the holiday season.

Aeropostale Inc., the teen apparel retailer under pressure from an activist investor to sell itself, increased 6.4 percent to $7.39. The company is working with Barclays Plc to explore options such as the sale of a convertible note or preferred stock to a private-equity firm, people with knowledge of the matter said.

Homebuilders climbed, with all 11 members of the S&P Supercomposite Homebuilding Index advancing. Lennar added 4.4 percent to $44.13 and PulteGroup rose 4.2 percent to $21.54.

Cablevision Systems Corp. jumped 4.8 percent to $17.41 as fourth-quarter revenue topped analysts’ estimates and its operating cash flow for the period grew 49 percent.

LinkedIn Corp. added 2.3 percent to $214.73. RBC Capital Markets raised its rating on the Mountain View, Calif.-based company to outperform from sector perform. It also increased its one-year price estimate by 11 percent to $250.

First Solar

First Solar sank 8.4 percent to $53.16. The largest U.S. solar-panel manufacturer said profit in the fourth quarter slid as revenue slumped from the utility-scale power plants it is building in the southwest of the U.S. Net income fell to $65.3 million from $154.2 million, First Solar said in a statement.

DreamWorks Animation SKG Inc. plunged 13 percent to $30.56. The independent animation studio reported that fourth-quarter revenue slumped 23 percent after home-video sales of “Turbo” missed estimates.

Chesapeake Energy Corp. plunged 6.6 percent to $25.15. The second-largest U.S. natural-gas producer missed analysts’ profit estimates by the biggest margin in almost two years as energy prices fell and costs to exit leases and cut jobs rose.

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