'Bullish bias' in the market
NEW YORK - US stocks swung between gains and losses, with the Standard & Poor's 500 Index set to rally a third week, as higher-than-estimated corporate earnings offset China's attempts to control inflation.
Caterpillar Inc added 2 percent after the world's largest maker of construction equipment said retail sales of machinery rose 49 percent. Intuit Inc rose 7.6 percent, while Brocade Communications Systems Inc advanced 9.1 percent after both companies forecast profits that topped analysts' estimates. Campbell Soup Co retreated 4.4 percent as the world's largest soupmaker reduced its projections for 2011 profit and sales.
The S&P 500 fell 0.01 of a point to 1340.42 at 1:45 pm in New York on Friday. The gauge was up 0.9 percent last week and needs to rise 0.7 percent to 1353.06 in order to complete a 100 percent rally from its 12-year low in March 2009. The Dow Jones Industrial Average gained 42.88 points, or 0.4 percent, to 12361.02. The stock market will be closed on Feb 21 for Presidents' Day.
"There's a bullish bias in the market fueled by higher-than-expected earnings," said Frederic Dickson, the Lake Oswego, Oregon-based chief market strategist at D.A. Davidson & Co, which oversees about $29 billion. "People are waking up and realizing that things are stabilizing so they need to put money to work. There might be some optimism that China will not have a tsunami. There's a perception that by moving slowly and steadily they can curb growth back to a reasonable rate."
US stocks rose on Friday, sending the S&P 500 to a 32-month high, as improving corporate earnings and manufacturing data overshadowed higher-than-forecast growth in consumer prices. Per-share earnings topped estimates at 72 percent of the 395 companies in the S&P 500 that reported results since Jan 10, according to data compiled by Bloomberg. Stock-index futures fell earlier on Friday as China's central bank raised reserve requirements for lenders 10 days after boosting interest rates as Premier Wen Jiabao tackles accelerating inflation. Reserve ratios will rise half a percentage point starting Feb 24, the People's Bank of China said on its website. The move will lock up about 360 billion yuan ($55 billion), Barclays Capital said.
"There comes a point, and you're seeing it in China, where they're seeing too much growth, and trying to curb it," said Peter Tuz, president of Chase Investment Counsel in Charlottesville, Virginia, which manages $1.5 billion. "The S&P 500 is reasonably valued here." At the same time, "sentiment is as bullish as you've seen it in years. That is an environment where a pull-back caused by something you and I are not thinking of is quite likely."
European Central Bank executive board member Lorenzo Bini Smaghi said the bank may need to raise interest rates as global inflation pressures mount.
"As the economy gradually recovers and global inflationary pressures arise, the degree of accommodation of monetary policy has to be monitored and, if needed, corrected," Bini Smaghi said in an interview with daily newsletter Bloomberg Brief: Economics.
Group of 20 policy makers, at odds over smoothing over global economic imbalances, confront a new threat as higher inflation ripples from emerging markets to advanced economies. A report of greater-than-expected US inflation on Friday followed a jump in the European cost-of-living index to a two-year high and a pick-up in Chinese prices, further fraying a tentative global consensus over how to sustain the recovery.
Concern about geopolitical events over the holiday weekend in the US and expiration of equity options contracts may cause stock swings to be more volatile than normal, said Andrew Ross, a partner and trader at First New York Securities LLC.
Bloomberg News
(China Daily 02/21/2011 page14)
