U.S. Stocks Rise to Records in Week on Greek Deal, Fed Rate Bets

February 22, 2015

New York (Feb 22)  U.S. stocks rose for the week, sending the Dow Jones Industrial Average to its first record of the year, as Greece reached a deal on its bailout program and investors speculated the Federal Reserve will keep rates lower for longer.

The Standard & Poor’s 500 Index climbed 0.6 percent to a record 2,110.3 in the holiday-shortened week. The Dow average advanced 121.09 points, or 0.7 percent, to 18,140.44 to top its closing high from Dec. 26. The Nasdaq Composite Index extended its rally to eight days in capping a 1.3 percent gain in the week. The Russell 2000 Index of small companies rose 0.7 percent to a record. Markets were closed Feb. 16 for Presidents’ Day.

“There’s a degree of uncertainty that’s removed from the market,” Bill Schultz, who oversees $1.2 billion as chief investment officer at McQueen, Ball & Associates in Bethlehem, Pennsylvania, said in a phone interview. “That paves the way for less concern about a potential slowdown in economic growth overseas. The market was sort of teetering there depending on what was going to be said and now we got a little bit of a reprieve.”

The Dow average erased its loss for the week with a 0.9 percent rally on Friday. It’s been 56 days since the 30-stock gauge’s last all-time high on a closing basis. When the S&P 500 capped its first record of 2015 on Feb. 13, it had been 46 days since the previous one. The Dow closed at all-time highs on 38 days in 2014, and on 52 occasions in 2013.

Boeing Co. led advances with a 5.7 percent surge in the week, bringing its gain this year to 22 percent. Nike Inc. and UnitedHealth Group Inc. climbed at least 2.9 percent over the four days.

Internet Stocks

Priceline Group Inc. soared 10 percent to lead a surge in Internet stocks that sent the Nasdaq Composite to the highest in nearly 15 years. The index has rallied eight straight days, the longest streak in a year, to end 1.8 percent below its record from March 2000 during the dot-com era.

The S&P 500 closed within four points of 2,100 on the first three days of the week as investors watched developments in Europe, where stocks were whipsawed by the back-and-forth between Greek officials and creditors led by Germany.

The U.S. equities benchmark rallied to a fresh record on the final session of the week after talks in Brussels among euro-area finance officials concluded with an agreement to extend aid to Greece for four months.

Funds Flowing

The finance ministers reached an accord that would keep bailout funds flowing in return for a Greek commitment to meet certain conditions, buying time to work out the detail of a longer-term financing. A breakthrough in the standoff eases the immediate risk of the government running out of cash as early as next month.

Futures on the Euro Stoxx 50 rallied on the news after the Stoxx Europe 600 capped a third weekly advance to close at a seven-year high.

The strife over Greece’s debt was among risks to the U.S. economy cited by Fed officials as an argument for keeping rates low for longer, according to minutes from the group’s latest meeting released on Feb. 18. Policy makers said after the gathering that they “can be patient” as they consider when to raise borrowing costs, even as they described the labor market as “strong.”

Investors will receive further clues on the central bank’s assessment of the economy and the timing of a rate increase when Fed Chair Janet Yellen gives two days of testimony to Congressional finance committees starting Feb. 24.

Data Watch

Data in the week showed wholesale prices in the U.S. fell more than forecast in January, signaling inflation remains tame. Separate reports indicated housing starts dropped while factory production rose less than forecast, raising concern that economic growth is slowing.

With benchmark indexes hovering at or near records during the week, volatility was subdued. The Chicago Board Options Exchange Volatility Index slipped 2.7 percent to 14.3, the lowest level in two months. The gauge known as the VIX has tumbled for three straight weeks.

Eight of the 10 main S&P 500 groups advanced, with Boston Scientific Corp. surging 9.9 percent to lead health-care stocks to the biggest gain.

Priceline notched its biggest weekly advance in three years after earnings at the largest U.S. online travel agent topped analysts’ estimates.

Internet, Oil

The Dow Jones Internet Composite Index recorded its third straight weekly gain, the longest streak since September. TripAdvisor Inc. gained 4.7 percent and Facebook Inc. surged 5.5 percent.

Shares of energy companies in the S&P 500 declined 2.4 percent for the worst weekly performance since the five days ending Jan. 9. Oil capped its first weekly decline in a month as U.S. crude stockpiles and output expanded to the highest level in more than three decades.

Transocean Ltd. plunged 11 percent after announcing plans to slash its annual dividend 80 percent. EOG Resources Inc. slid 6 percent after the fastest-growing oil producer in the U.S. said it would cut spending 40 percent and drill half the wells it did in 2014. Exxon Mobil Corp. and Chevron Corp. sank 3.7 percent for the biggest slides in the Dow.

Wal-Mart Stores Inc. dropped 1.8 percent after forecasting profit for the current year that was less than analysts estimated. The world’s largest retailer said wage increases and other spending initiatives will boost expenses.

Source: Bloomberg

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