U.S. Stocks Rise as Yellen Speech Fuels Economic Optimism

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gsr-232U.S. stocks rose, sending the Standard & Poor’s 500 Index higher for a fourth day, as Federal Reserve Chairman Janet Yellensaid the central bank will likely continue scaling back stimulus as the economy strengthens.

Sprint Corp. jumped 3 percent after posting fourth-quarter revenue that topped analysts’ estimates. CVS Caremark Corp. climbed 2.6 percent as pharmacy sales rose on new medicines and new customers. InvenSense Inc. rallied 9.9 percent after saying it has settled pending patent litigation proceedings with STMicroelectronics NV.

The S&P 500 gained 0.8 percent to 1,813.80 at 11:53 a.m. in New York. The index climbed above its average level over the past 50 sessions for the first time in more than two weeks. TheDow Jones Industrial Average rose 137.14 points, or 0.9 percent, to 15,938.93. Trading in S&P 500 stocks was 4 percent below the 30-day average during this time of the day.

“The market likes consistency and what we’ve heard this morning has been consistent with what we’ve heard for months,” Steven Rees, head of U.S. equities at JPMorgan Private Bank, which oversees $977 billion in assets, said in a phone interview. “Tapering continues, but it continues to be the result of an economic situation that’s slowly improving. The economy is still on track to have a good year.”

Yellen, 67, delivered her first public remarks as Fed chairman as policy makers pursue plans to gradually scale back the unprecedented bond-purchase program she helped put in place.

Economic growth has strengthened and there is “broad improvement” in the labor market,’’ the chairman said. She repeated the Fed’s outlook for further reductions in “measured steps” and that asset purchases, known as quantitative easing, are not on a “pre-set course.”

‘Dual Mandate’

While growth has picked up, “the recovery in the labor market is far from complete,” Yellen said in remarks to the House Financial Services Committee. “I am committed to achieving both parts of our dual mandate: helping the economy return to full employment and returning inflation to 2 percent while ensuring that it does not run persistently above or below that level.”

Federal Open Market Committee officials have twice reduced the size of the monthly asset-purchase program, lowering bond buying to $65 billion in February from $85 billion last year. Three rounds of stimulus under previous Chairman Ben S. Bernanke have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.

‘Very Methodical’

“Yellen will be very careful to create a degree of stability,” Stephen Wood, New York-based chief market strategist at Russell Investments, said by phone. “No genius ideas out of left field, just very methodical. The market is not only going to like the message but they’re going to like the messenger. The Fed will be accommodative and the Fed will maintain credibility the bond market and equity market will appreciate.”

The S&P 500 rose 0.35 percent on Feb. 15, 2006, the day of Bernanke’s first report to Congress.

The S&P 500 (SPX) last week posted its biggest weekly advance this year amid speculation that economic growth is robust enough to weather slower stimulus from the Fed even as data showed weaker-than-forecast hiring. The benchmark index has rallied 4.1 percent over the past six sessions, trimming its decline for the year to 1.9 percent.

The S&P 500 closed at a record on Jan. 15 and then dropped 5.8 percent through Feb. 3 amid signs of slowing growth in China and a rout in emerging-market currencies.

Debt Talks

Investors are also watching debt talks in Washington. The House plans to consider a debt limit bill without conditions tomorrow, according to Speaker John Boehner, who said that the burden will be on the Democrats to ensure passage of the measure. Democratic leader Nancy Pelosi said she told Boehner that Democrats “would vote for a clean” debt limit.

The Republican leadership scrapped an earlier proposal that would have tied suspending the debt limit to a provision that would restore cost-of-living adjustments for military retirees.

Sixteen companies in the S&P 500 are scheduled to release earnings results today. Of the index members to have reported this season, 76 percent beat analysts’ profit estimates, while 66 percent exceeded sales forecasts, data compiled by Bloomberg show.

Earnings Season

Profit for the benchmark’s stocks rose by 8.3 percent in the fourth quarter of 2013 and revenue by 2.7 percent, according to analyst estimates compiled by Bloomberg.

The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, dropped 5.4 percent to 14.44 today for its fourth straight decline.

All 10 main industries in the S&P 500 advanced, with commodity companies increasing more than 1.2 percent. Phone shares added 1.1 percent and technology companies climbed 0.8 percent.

Sprint jumped 3 percent to $7.92 after saying fourth-quarter sales rose to $9.14 billion, beating the average analyst estimate calling for $8.99 billion in a Bloomberg survey.

CVS Caremark added 2.6 percent to $68.65. The largest provider of prescription drugs in the U.S. posted fourth-quarter profit that topped analysts’ estimates. The new drugs and an expanded roster of clients for specialty pharmaceuticals, along with higher prices, boosted revenue from pharmacy services to $19.6 billion, the company said.

InvenSense climbed 9.9 percent to $21.53 after entering into a patent cross-license agreement with STMicroelectronics, resolving lawsuits over infringement. Neither company admitted to any liability in the dispute over micro-electro-mechanical systems, or MEMS, which incorporate motion sensors and are used in cameras, fitness equipment, smartphones, remote controls and other devices.

GM Gains

General Motors Co. gained 1.6 percent to $35.44 as sales in China rose 12 percent to a record 348,061 units last month. Buick monthly deliveries gained 16 percent to surpass 100,000 units for the first time.

ConAgra Foods Inc. dropped 6.3 percent to $29.11, the lowest level since December 2012. ConAgra cut its year-end profit forecast, reflecting a longer time frame to restore its private brands segment to planned levels of operating profit, as well as weaker-than-anticipated volumes in consumer foods.

Urban Outfitters Inc. slipped 1.7 percent to $36.03. The clothing retailer reported fourth-quarter preliminary sales of $906 million, less than analysts’ estimates of $925.97 million. Urban Outfitters will release its fourth-quarter earnings on March 10.

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