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 Dow Jones Futures: U.S. Stocks Rise as Earnings Outweigh Greece

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February 21^st, 2012

Dow Jones Futures - U.S. stocks rose, sending the Standard & Poor’s 500 Index above its highest close since 2008, as investors weighed a second bailout for Greece and after earnings from Home Depot Inc. to Macy’s Inc. (M) beat estimates.

Six out of 10 industries in the S&P 500 advanced as commodity producers had the biggest gain. Alcoa Inc. (AA) and Chevron Corp. climbed at least 1.6 percent. Home Depot, the world’s largest home-improvement retailer, and Macy’s, the second- biggest U.S. department-store chain, added more than 0.4 percent. Wal-Mart Stores Inc. (WMT), the world’s biggest retailer, tumbled 4 percent as low prices hurt margins.

The S&P 500 added 0.2 percent to 1,364.27 at 1:59 p.m. New York time, rising for a third day. The Dow Jones Industrial Average advanced 27.13 points, or 0.2 percent, to 12,977, briefly rising above 13,000 for the first time since 2008.

“I don’t think the market is stretched yet,” said Michael Strauss, who helps oversee about $27 billion of assets as the chief investment strategist at Commonfund in Wilton, Connecticut. “We’re positive on the U.S. economy. The earnings side has been fine. That’s providing the biggest seeds to the strength in equities,” he said. “Was there any surprise in Europe kicking the can down the road? It’s a token positive, but it doesn’t solve the long-term issue.”

The S&P 500 (SPX) added 8.5 percent this year as reported 12- month earnings for its companies increased 9.4 percent to $96.58 a share, the highest level ever. The index is trading for 14.1 times reported earnings, compared with the average since 1954 of 16.4 times, according to data compiled by Bloomberg.

$3 Trillion

More than $3 trillion has been added to American equity values since the market bottomed in October as the S&P 500 climbed 24 percent and the Dow average rallied 22 percent. PulteGroup Inc. (PHM) has the biggest increase in the S&P 500 since Oct. 3, rising 155 percent, while Akamai Technologies Inc. is up 103 percent and Regions Financial Corp. gained 100 percent

Earlier today, stocks swung between gains and losses as European finance ministers approved 130 billion euros ($173 billion) in aid for Greece by tapping into European Central Bank profits and coaxing investors into providing more debt relief to shield the region from a default. Greece’s debt may still balloon to 160 percent of gross domestic product in a worst-case scenario, analysis by the International Monetary Fund and European officials indicated.

“We’re in a topping phase,” Barry James, who helps oversee $3 billion as president of James Investment Research in Xenia, Ohio, said in a telephone interview. “Our indicators are getting less positive. The news is out about the Greece bailout. Yet we see a rolling recession throughout Europe. It’s not a buy and hold market in our opinion. We’re on edge.”

Commodity Shares

Gauges of energy and raw material producers had the biggest gains in the S&P 500 among 10 industries. The S&P GSCI index of 24 commodities added 1.7 percent. Alcoa increased 3.3 percent to $10.49. Chevron rose 1.6 percent to $108.35.

Home Depot (HD) gained 0.4 percent to $46.92. The company attracted customers who spent more as U.S. unemployment sank to a three-year low in January and builders began work on more houses. Warmer weather helped sales at stores open at least a year advance 5.7 percent, the biggest gain since a 7.7 percent increase in the first quarter of 2004. That topped the average estimate for a 3 percent gain by five analysts.

Lowe’s Cos. (LOW), the second-largest U.S. home-improvement retailer, rose 0.7 percent to $27.89.

Macy’s, Wynn

Macy’s added 1.8 percent to $36.91. Its profitability shrank less than analysts projected as it was able to sell women’s handbags and accessories with its planned promotions rather than by slashing prices during the holiday season. Planned promotions can be profitable while last-minute efforts to clear excess inventories erode margins.

Wynn Resorts Ltd. (WYNN) jumped 6.7 percent, the most in the S&P 500, to $120.20. The company bought out its largest shareholder stake at a 31 percent discount and asked him to quit the board after a probe by the casino operator uncovered allegedly improper payments to Philippine gambling officials.

Wal-Mart lost 4 percent to $59.96. Chief Executive Officer Mike Duke is working to contain Wal-Mart’s costs and last quarter started pulling the company’s greeters from store lobbies to help with customer-service tasks. The retailer is seeking to keep prices low as its low-income shoppers suffer from persistent unemployment.

Weatherford International Ltd. (WFT) tumbled 13 percent to $15.55. The oilfield-services and equipment provider said it hasn’t repaired material weakness in internal controls related to taxes and may restate results for 2008 through 2011.

Cheapest Level

The S&P 500 is approaching the cheapest level ever compared with bonds as Federal Reserve Chairman Ben S. Bernanke’s zero- percent interest rates drive investors and companies from cash.

Profits that doubled since 2009 pushed the index’s so- called earnings yield to 7.1 percent, close to the highest on record when compared with the 10-year Treasury rate, according to data compiled by Bloomberg since 1962. American companies have boosted capital spending 35 percent over six quarters, the most since 2006.

“Conditions are almost ideal for equity investors relative to all other investments,” Keith Wirtz, who oversees $14.6 billion as chief investment officer for Fifth Third Asset Management in Cincinnati, said in a Feb. 14 telephone interview. “The Fed’s keeping rates low for the foreseeable future to try to stimulate the environment for employee hiring and business activity. What does that mean for capital markets? Savers are not being rewarded.”

 - Rita Nazareth in New York at Bloomberg.