U.S. Stocks Rise Before Holiday on Durable Goods, Housing Data

Dec 24, 2013 1:41 pm ET

Dec. 24 (Bloomberg) -- U.S. stocks rose, extending records for benchmark indexes, as data showed orders for durable goods and sales of new homes topped forecasts.

U.S. Steel Corp., Alcoa Inc. and Cliffs Natural Resources Inc. advanced at least 1.5 percent to pace gains among raw- materials producers. Tesla Motors Inc. climbed 5.5 percent after saying the National Highway Traffic Safety Administration reaffirmed the safety rating for the carmaker’s Model S sedan.

The Standard & Poor’s 500 Index rose 0.3 percent to 1,833.32. The Dow Jones Industrial Average advanced 62.94 points, or 0.4 percent, to 16,357.55. U.S. equities markets closed at 1 p.m. today before the Christmas holiday. Trading volume in S&P 500 stocks was the lowest since Christmas Eve last year, and about 27 percent below the 30-day average through this time of day.

“General economic conditions are showing a sustainable recovery pattern,” Eric Teal, who helps oversee $5 billion as the chief investment officer at First Citizens BancShares Inc. in Raleigh, North Carolina, said by phone. “I think we’ll continue to grind higher through year-end and we anticipate that the fourth-quarter earnings outlook will be positive as well.”

The S&P 500 has climbed 29 percent this year, on course for its biggest annual rally since 1997. The Federal Reserve said last week it will reduce its monthly bond-buying program amid faster-than-estimated economic expansion. Three rounds of monetary stimulus have sent the equities benchmark up 171 percent from a 12-year low in 2009.

Valuations Climb

The gauge is trading at 16.6 times its members’ projected earnings, up from 13.7 times at the end of last year. Profit growth for companies in the S&P 500 will probably accelerate to 5.1 percent this quarter compared with a year ago, after rising 4.5 percent last quarter, according to analysts’ estimates and data compiled by Bloomberg.

Orders for goods meant to last at least three years rose 3.5 percent after a 0.7 percent drop the prior month, a Commerce Department report showed today in Washington. The median estimate of 75 economists surveyed by Bloomberg called for a 2 percent advance. Excluding demand for transportation equipment, which is often volatile, orders also beat projections.

Purchases of new U.S. homes exceeded projections in November, holding near a five-year high and showing the housing recovery was gaining momentum even as mortgage rates climbed. Sales declined 2.1 percent to a 464,000 annualized pace, following a revised 474,000 rate in October that was the strongest since July 2008, figures from the Commerce Department showed. The median forecast of 75 economists surveyed by Bloomberg called for 440,000.

‘Good Shape’

U.S. house prices rose 0.5 percent in October from September as buyers competed for a tight supply of properties for sale, the Federal Housing Finance Agency said.

“The economic expansion is in good shape, and the stock market is reflecting that,” Brad McMillan, chief investment officer for Waltham, Massachusetts-based Commonwealth Financial Network, said in a phone interview. His firm has more than $71 billion under management. “There’s also a rush to be in the market toward the end of the year, and I think that’s what is driving things here.”

The S&P 500 is up 1.5 percent so far this month. December has been the second-best month for U.S. equity returns, according to data compiled by Bloomberg that starts in 1928. The average gain for the month is 1.5 percent, more than twice the overall monthly mean of 0.6 percent. The last December retreat for the S&P 500 was in 2007.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 4.3 percent to 12.48. The gauge has dropped 31 percent this year.

Raw Materials

Nine of 10 main S&P 500 groups advanced today, with raw- materials companies rallying 1.1 percent to pace gains. U.S. Steel increased 1.6 percent to $29.50 and Alcoa rose 2.3 percent to $10.36. Cliffs Natural Resources added 1.7 percent to $24.76.

An S&P index of homebuilders gained 0.3 percent. D.R. Horton Inc. advanced 0.8 percent to $21.29 and Lennar Corp. rose 0.6 percent to $38.97.

Tesla climbed 5.5 percent to $151.41. Its Model S sedan keeps its 5-star rating for crashworthiness for 2014, the highest designation awarded by the National Highway Traffic Safety Administration. The agency opened a review of the car last month after fires in Tennessee and Washington state occurred when drivers struck metal debris.

--With assistance from Trista Kelley in London. Editors: Jeff Sutherland, Cecile Vannucci