U.S. stocks extend last week’s rally as energy shares advance

NEW YORK – U.S. stocks rose, with the Standard & Poor’s 500 Index poised for a third straight yearly gain as equity gauges climbed past multiple milestones last week.

Gilead Sciences Inc. gained 3.3 percent as biotechnology shares continued a rebound. Energy companies increased after last week’s declines. Losses in Microsoft Corp. and International Business Machines Corp. tempered gains in the Dow Jones Industrial Average.

The Standard & Poor’s 500 Index rose 0.2 percent to 2,092.95 at 11:54 a.m. in New York. The Dow added 7.26 points, or less than 0.1 percent, to 18,060.97. The Russell 2000 Index jumped 0.3 percent. Trading in S&P 500 companies was 36 percent below the 30-day average for this time of day. Volume for U.S. exchanges on Dec. 26 was the lowest this year for a full day of trading.

Equities are approaching the end of the year at record levels, bolstered by the fastest expansion for the American economy in more than a decade. The Federal Reserve’s pledge on Dec. 17 to be patient in raising interest rates helped the S&P 500 fully recoup a 5 percent loss in the first half of the month.

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“There’s lots for investors to digest going into 2015,” said James Buckley, who helps oversee about $47 billion as a portfolio manager at Baring Asset Management Ltd. in London. “The focus will likely be on more macro-type events immediately. The U.S. economy is the one real bright spot. That economy is doing phenomenally well. That in itself is reason to be optimistic.”

Milestones

The S&P 500 has gained 13 percent this year, while the Dow is up 9 percent in 2014 after climbing above 18,000 for the first time last week. The Russell 2000 of small-cap stocks advanced to an all-time high on Dec. 26. The Nasdaq Composite Index reached its highest since March 2000 the same day, closing about 5 percent below that record.

U.S. stocks have overcome upheavals in 2014 that threatened to derail a bull market in its sixth year, ranging from violence in the Ukraine to an Ebola outbreak and a bear market in oil prices. The S&P 500’s worst retreat was only 7.4 percent, and the gauge recovered from each of its declines of 4 percent or more within one month.

The Chicago Board Options Exchange Volatility Index, a measure of demand for options on the S&P 500, dropped 12 percent last week. It gained 6.5 percent to 15.44 today. The gauge, also known as the VIX, has tumbled 34 percent from a two-month high on Dec. 16.

Earnings, valuations

The S&P 500 trades at 18.5 times profits, the highest level since 2010 and compares with the average of 16.3 over the past decade.

Analysts forecast earnings for the S&P 500 to increase 6.4 percent next year. Consumer-discretionary, technology and raw- materials companies are expected to post the fastest growth, with profits rising at least 13 percent, estimates compiled by Bloomberg show.

Stock futures slumped earlier today after Greek Prime Minister Antonis Samaras failed in his third and final attempt to persuade parliament to back his candidate for head of state. Concern that anti-austerity party Syriza will win snap elections next month roiled stocks in Athens, as such an outcome risks the European Union’s common currency and the start of the European Central Bank’s bond-buying plan.

“We’re seeing if people will try to add to performance before the year is over,” Richard Sichel, chief investment officer at Philadelphia Trust Co., which oversees $2 billion, said in a phone interview. “There might be some trading around the edges by people looking for a little more performance. It’s more of a stock-picker way of looking at it at this point.”

Economic data

Economic reports this week may show consumer confidence climbed in December, pending home sales rose in November, while an Institute for Supply Management index of manufacturing slipped this month, according to economists surveyed by Bloomberg.

Six out of 10 major group in the S&P 500 increased today. Utilities and energy companies gained the most, while consumer-staples had the worst performance.

Gilead Sciences Inc. rose 3.3 percent, rallying for a third day after the biggest two-day drop since February 2012.

Biotech shares slumped last week amid concern health insurers and companies that manage patient’s drug benefits will put new pressure on how much the industry can charge for breakthrough treatments. The selloff was prompted by Express Scripts Holding Co.’s announcement that it would block its U.S. patients from getting Gilead’s $1,100-a-pill hepatitis C medicine.

Energy shares

Energy shares gained 0.7 percent. Nabors Industries Ltd. added 1.9 percent. The stock has rallied 30 percent from a more than five-year low reached Dec. 12.

Noble Energy Inc. and Diamond Offshore Drilling Inc. increased more than 1.1 percent. Chevron Corp. added 0.7 percent.

IBM, Microsoft and Red Hat Inc. lost more than 0.8 percent. While Red Hat and Microsoft have rallied at least 25 percent this year, IBM is down 14 percent for 2014, heading for the worst performance in the Dow for a second straight year.

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