NEW YORK – U.S. stocks fluctuated, after the longest streak of weekly gains since February, as investors awaited retailer earnings reports to gauge the strength of consumer demand and the likelihood of cuts to monetary stimulus.
Transocean Ltd. added 3.8 percent after the offshore rig contractor agreed with investor Carl Icahn to propose a $3 per share dividend. ViroPharma Inc. jumped 26 percent after Shire Plc. bought the company for about $4.2 billion. Best Buy Co. rose 2.7 percent to $43.78 as a UBS AG analyst upgraded the stock. D.R. Horton Inc. slid 2.2 percent as homebuilder stocks dropped for a third day.
The S&P 500 added less than 1 point to 1,771.05 at 12:27 p.m. in New York, within one point of its record. The Dow Jones Industrial Average climbed 20.80 points, or 0.1 percent, to 15,782.58, headed for a record close. Trading in S&P 500 stocks was 20 percent below the 30-day average at this time of day. The U.S. bond market is closed because of the Veterans Day holiday.
“Today’s going to be very light because it’s a holiday for many people,” John Carey, a portfolio manager at Pioneer Investment Management who oversees $200 billion in assets globally, said by phone from Boston. “People will be watching over the next few weeks to see if the Fed does decide to begin tapering this year. If earnings continue trending higher the support will be there for better share prices.”
Earnings scorecard
The S&P 500 added 0.5 percent last week for a fifth week of gains. Better-than-forecast data on jobs and growth indicated the economy is strong enough to withstand a reduction in Federal Reserve stimulus, even as consumer spending climbed last quarter at the slowest pace since 2011.
Corporate earnings that surpassed estimates and unprecedented monetary support from the Federal Reserve have propelled the S&P 500 higher by more than 160 percent from a March 2009 low.
Of the 447 S&P 500 companies that have released third- quarter profits so far, 75 percent have beaten analysts’ forecasts, data compiled by Bloomberg showed. Earnings per share for the companies on the gauge probably increased 4.7 percent in the third quarter, and will rise 6.2 percent in the fourth, according to estimates compiled by Bloomberg.
Wal-Mart Stores Inc., Macy’s Inc. and Nordstrom Inc. are among retail companies reporting earnings this week, while Home Depot Inc. posts results on Nov. 19.
“Investors want to know the strength of the U.S. consumer going into what might be a tepid holiday season,” said Alison Porter, who helps oversee $108 billion as U.S. equities fund manager at Ignis Asset Management. “Consumer spending has been fairly restrained. With big retailers like Wal-Mart and Home Depot yet to report, we’ll want to see whether that has picked up.”
Taper timing
Economists still forecast the Fed will delay tapering asset purchases until March even after the payrolls data beat forecasts. Policy makers will probably pare the monthly pace of bond buying, known as quantitative easing, to $70 billion at their March 18-19 meeting from the current pace of $85 billion, according to the median of 32 estimates in a Bloomberg survey Nov. 8. The median forecast in an Oct. 17-18 survey of 40 economists also called for a cut to $70 billion in March.
“There’s been a correlation between rising share prices and low interest rates and the QE program,” Carey said. “People legitimately are wondering if and when the Fed begins the tapering.”
The S&P 500 has rallied 24 percent in 2013, heading for the best annual gain in a decade. The gauge is trading at 16 times projected earnings, more than the five-year average of 14 times earnings, according to data compiled by Bloomberg.
ETF assets
Investors have poured money into exchange-traded funds tracking U.S. stocks, pushing assets in the iShares Core S&P 500 ETF above the Vanguard FTSE Emerging Markets ETF for the first time since 2010. The iShares S&P 500 fund manages $50.5 billion, compared with $48.3 billion for the ETF linked to shares of developing nations, according to data compiled by Bloomberg. The SPDR S&P 500 ETF Trust is the world’s largest ETF with about $156 billion.
“Valuations are not as attractive and people need to look deeper into the market to find better value,” Ignis’ Porter said by phone from Glasgow.
The Chicago Board Options Exchange Volatility Index, which measures future volatility signaled by S&P 500 options, fell 2 percent to 12.64 today, headed for the lowest close since August.
Five of 10 main S&P 500 groups advanced today, with financial and health-care stocks rising 0.2 percent to pace the gains. Phone shares fell 0.2 percent for the worst performance.
Icahn nominees
Transocean rose 3.8 percent to $55.49. The company agreed with Icahn to pay about $1.1 billion in dividend and to increase margins by $800 million through cost cutting. Transocean will also back two of Icahn’s nominees to the board, whose size will be cut to 11 directors from 14, according to a joint statement.
ViroPharma rallied 26 percent to $49.43, it’s highest since April 2000. Dublin-based Shire will pay $50 a share in cash for the maker of drugs that treat some rare diseases, according to a statement today.
Gogo Inc., a provider of in-flight Internet services, jumped 26 percent to a record $23.56 after the company raised its year-end revenue estimate. Itasca, Ill.-based Gogo reported a smaller third-quarter loss than analysts had expected.
Best Buy rose 3.5 percent to $43.91 after UBS analyst Michael Lasser upgraded the stock to buy from neutral. Lasser said he sees Best Buy estimates being pushed higher when the company reports third quarter earnings on Nov. 19.
Housing slump
FirstEnergy Corp. plunged 5.2 percent to $36.84, its biggest drop since May. The public utility holding company said yesterday it plans to spend $2.8 billion on transmissions through 2017.
An S&P index of homebuilders dropped 1.4 percent for a third day of declines. D.R. Horton Inc. slid 2.2 percent to $17.74, the lowest in almost four weeks.
Denbury Resources Inc. plunged 5.9 percent to $18.22 for its biggest drop since July 2012. The petroleum producer yesterday said it would initiate a regular quarterly dividend and not create a master limited partnership, something the company in May said it was considering.
