US stocks rose, snapping a three-day decline in the Standard & Poor's 500 Index, as the Federal Reserve will keep up its bond buying to stimulate the economy and euro-area leaders weighed options for Cyprus.
Homebuilders rallied, as Lennar Corp. gained 4.8 per cent after posting first-quarter earnings that beat projections. Adobe Systems Inc. climbed 4.2 per cent as the software maker reported sales and profit that exceeded analysts' estimates. FedEx Corp. slumped 6.9 per cent as it lowered its 2013 earnings forecast amid a widening customer shift to cheaper overseas shipments. Oracle Corp. tumbled 7.5 per cent after the close of regular trading as sales and profit missed estimates.
The S&P 500 advanced 0.7 per cent to 1,558.71 at 4 p.m. in New York, trading within seven points of its record reached in 2007. The Dow Jones Industrial Average rose 55.91 points, or 0.4 per cent, to 14,511.73. About 5.9 billion shares traded hands on US exchanges today, 6.3 per cent below the three-month average.
"The Fed essentially did what's to be expected, which is to reinforce that the economy still needs support," Hank Herrmann, Overland Park, Kansas-based chief executive officer of Waddell & Reed Investment Management Co., said in a phone interview. His firm manages $US103 billion. "Cyprus just reminds us all the fragility of the economic circumstances in Europe. As you look at the economic data, pretty much everywhere outside the US has been equally unconvincing in terms of any kind of expansion."
More than three years into the expansion, the central bank led by Chairman Ben S. Bernanke is pressing on with open-ended purchases of Treasury and mortgage securities to boost the pace of growth and heal a labor market still scarred by the deepest recession since the Great Depression.
Bull Market
The S&P 500 has surged 130 per cent from a 12-year low in 2009 as companies reported better-than-estimated earnings and the Fed embarked on three rounds of bond purchases to stimulate the economy. The benchmark index rose to within two points of its 2007 record last week while the Dow hit an all-time high.
The Federal Open Market Committee, at the conclusion of a two-day meeting in Washington, left unchanged its statement that it plans to hold its target interest rate near zero as long as unemployment remains above 6.5 per cent and inflation is projected to be no more than 2.5 per cent.
Policy makers lowered their expectations for the unemployment rate at the end of the year to a range of 7.3 per cent to 7.5 per cent, from a previous forecast of 7.4 per cent to 7.7 per cent. The economy will expand 2.3 per cent to 2.8 per cent this year, they estimate, compared with their earlier forecast of 2.3 per cent to 3 per cent growth.
Cyprus Rejection
Stocks rallied earlier today as euro-area leaders weighed options for Cyprus. Investors speculated that the European Central Bank will continue to support the country's banks until next week, after lawmakers in the Mediterranean nation rejected an unprecedented levy on bank deposits.
"In a lot of ways what's happening in Cyprus only serves to reinforce the Fed's current policy," Richard Helm, a portfolio manager at New York-based Cohen & Steers, which oversees more than $US40 billion, said in a phone interview. "It puts to bed that the Fed might raise rates sooner than later if you do have issues re-emerging in Europe."
Nine of 10 S&P 500 groups gained as consumer companies climbed the most, rising at least 1 per cent. The Chicago Board Options Exchange Volatility Index, which measures the cost of using options as insurance against declines in the S&P 500, slid 12 per cent to 12.67, after a 27 per cent jump over two days. The gauge, known as the VIX, is down 30 per cent this year.
Homebuilders Rally
An S&P index of homebuilders climbed 3.7 per cent to the highest level since July 2007. Builders are benefiting from revived demand for new homes as the inventory of existing houses for sale shrinks and buyers take advantage of mortgage rates that are close to record lows.
Lennar jumped 4.8 per cent to $US43.40. The third-biggest US homebuilder by revenue said earnings rose in the fiscal first quarter as prices and sales increased amid the broadening national housing recovery.
Toll Brothers Inc., the largest US luxury-home builder, added 5.9 per cent to $US36.53. Orders are up 49 per cent for the spring, Chief Executive Officer Douglas Yearley said today on Bloomberg Television.
A Bloomberg gauge of US airlines gained 2.3 per cent to 49.90, its highest level since February 2008. The airline group IATA said global airlines are on track to post profit 40 per cent higher than the previous year, due to strong passenger demand, cargo improvement and industry consolidation in domestic markets.
Airlines Surge
Alaska Air Group Inc. surged 3.4 per cent to a record $US63, while Delta Air Lines Inc. jumped 3.2 per cent to $US17.07. US Airways Group added 2.7 per cent to $US17.23, the highest level since 2007.
Adobe gained 4.2 per cent to $US42.46, as the maker of Photoshop software reported sales for the quarter ended March 1 of $US1.01 billion, beating the average analyst estimate of $US985.8 million. Profit excluding some items was 35 cents a share, exceeding the average analyst projection of 31 cents.
BlackBerry, formerly Research In Motion Ltd., increased 6.5 per cent to $US16. Morgan Stanley raised its rating on the Canadian-based phone company to overweight from underweight. The BlackBerry 10 device may boost gross margins and average selling prices, Morgan Stanley analyst Ehud Gelblum said in a note.
Discount Retailers
Family Dollar Stores Inc. rallied 3.8 per cent to $US60.36, pacing gains among discount retailers. Dollar Tree Inc. advanced 4 per cent to $US46.16, while Dollar General Corp. rose 4.2 per cent to $US49.79.
FedEx fell 6.9 per cent to $US99.13. The operator of the world's largest cargo airline said profit in the fiscal year through May will be $US6 to $US6.20 a share, down from an earlier forecast of as much as $US6.60. Both the projection and fiscal third-quarter profit trailed analysts estimates.
The company, an economic bellwether because it moves goods as varied as medical supplies and auto parts, is in the midst of a $US1.7 billion restructuring to compensate for customers moving away from the fastest, most lucrative deliveries. Starting in April, it will decrease capacity to and from Asia and put low- yielding shipments in less expensive networks, Chief Executive Officer Fred Smith said.
Oracle Corp. tumbled 7.5 per cent to $US33.10 as of 4:50 p.m. in New York. The company posted fiscal third-quarter sales and profit that missed analysts' estimates as customers chose competitors' Web-based software.
Cintas Corp. dropped 4.5 per cent to $US43.88 after the provider of restroom supplies and entrance mats said it expects full-year earnings per share of $US2.50 to $US2.54. That compares with a previous forecast of $US2.50 to $US2.58.
