S&P 500 Rally Toward Record Broadens as Equal-Weight Climbs – Bloomberg 03-21-13

Salient to Investors:

The majority of companies surpassed their previous highs by April 2011. 59 percent of S&P 500 stocks have exceeded their previous records set before the Index peaked in 2007.

Unlike past bull markets, where a single industry dominated, all groups have improved in this rally. None of the 10 industry measures represents more than 18 percent of the S&P 500 index, versus in 2000 when tech made up 35 percent of the index and in 2006 when financial stocks made up 22 percent.

Stephen Wood at Russell Investments said the breadth of this rally is remarkable – small, medium, large, defensive, dynamic, value, growth.

Retailers, restaurant chains and other discretionary consumer stocks are up 231 percent since the bottom, financials and industrials have almost tripled, and tech, commodity and health-care stocks are up more than 100 percent. 7 S&P 500 companies have risen over 1,000 percent since March 9, 2009.

S&P 500 earnings have risen to $100.75 a share in 2012 from $61.83 in 2009.

Richard Slinn at JPMorgan Private Bank said the market reflects fundamental improvement, earnings growth, revenue growth and dividend growth, more than price momentum. Slinn said investors are naturally hesitant to jump into something they feel has risen too far, but they are wrong.

The 1990s bull market was dominated by rallies in larger US companies and tech stocks. Cisco led gains in the S&P 500 during the 1990s rally, rising more than 111,000 percent while Microsoft increased 6,831 percent.

Kevin Caron at Stifel Nicolaus said the 1990s were all about tech, but the earnings improvement is coming from a myriad of places.

The S&P 500 Equal Weighted Index rose 157 percent from 2002 through 2007 versus 102 percent for the S&P 500 and 159 percent for the Russell 2000. In the current bull market, the S&P 500 Equal Weighted Index has exceeded the S&P 500’s advance by 47 percent.

Alan Gayle at RidgeWorth Capital Mgmt said when the largest stock in the index, Apple, goes parabolic to the upside, that tends to make the overall S&P 500 look very attractive, but now that Apple has come back to earth, we can see that the broader market in fact has been recovering nicely.

The S&P 500 has lagged in surpassing its record. The Russell 2000 and Dow Transports hit new all-time highs in April 2011, the S&P Midcap 400 Index in January 2011, the Dow Industrials in March 5. The Nasdaq Composite and Nasdaq 100  are trading below March 2000 peaks.

David Bianco et al at Deutsche Bank said since 1945, the S&P 500 has risen for 30 more months after exceeding a previous record with an average gain of 59 percent, or 18 percent annualized, while only 3 bull markets have lasted less than a year after exceeding all-time highs – 1972, 1980 and 2007.

William Fries at Thornburg Intl Value Fund said one things different from 2012 and 2011 is cash flows into equities in mutual funds.

Read the full article at http://www.bloomberg.com/news/2013-03-20/s-p-500-rally-toward-record-broadens-as-equal-weight-climbs-192-.html

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U.S. Stocks Advance Amid Better-Than-Estimated Reports – Bloomberg 02-26-13

Salient to Investors:

Brad Sorensen at Charles Schwab said the economic numbers are holding up really well, and housing rebounding will continue, feeding into consumer confidence.

74 percent of S&P 500 companies so far reporting quarterly results have beat estimates. The index is at 14.8 times reported earnings versus the average since 1954 of 16.4.

Jonathan Golub at UBS said retail sales are rising fast enough to dismiss the effects of tax-law changes and gas price increases on consumer spending. Golub says the general trend is healthy despite the end of a payroll-tax break, a delay in income-tax refunds and higher gas prices, and recommends makers of food, beverages and other staples, and companies most dependent on consumers’ discretionary spending.

David Bianco at Deutsche Bank reaffirmed underweight ratings on staples companies and retailers due to the continuing struggle of low to middle-income households to make ends meet.

Read the full article at http://www.bloomberg.com/news/2013-02-26/u-s-stock-futures-advance-before-house-sales-report.html

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U.S. Stocks Retreat After S&P 500 Rallies for Six Weeks – Bloomberg 02-11-13

Salient to Investors:

The S&P 500 is at 15 times reported earnings versus a low of 13 in 2012 and the 6-decade average of 16.4.

T. Doug Dale at Security Ballew Wealth Mgmt said we’re extremely overbought, but the market can continue higher.

James McDonald at Northern Trust said a pause is understandable given the strong start in 2013. McDonald said the market’s focus will be on private sector growth as it knows the public sector won’t generate any big presents.

Goldman Sachs cut its 3-month recommendation on global equities to neutral from overweight as investors need time to digest recent gains. Analysts Anders Nielsen and Peter Oppenheimer said any strong rally near-term will be limited because US equities are above fair value.

Thomas Lee at JPMorganBank said bank stocks offer huge plays on the housing recovery, despite still being viewed as tainted – investors still worry about regulations, visibility.

David Bianco at Deutsche Bank is bullish on financial, industrial and tech companies.

Read the full article at http://www.bloomberg.com/news/2013-02-11/u-s-stock-futures-rise-s-p-500-contract-gains-0-3-.html

 

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Special Dividends Surge Fourfold as U.S. Tax Increase Looms – Bloomberg 11-19-12

Salient to Investors:

Companies are paying special dividends at four times the pace of last year with rates poised to jump in 2013. The calendar is influencing even the payment of regular dividends. Dividends are regaining popularity after falling out of favor in the 1990s.

Todd Lowenstein at HighMark Capital Mgmt said it’s a foregone conclusion the rates are going up, so it makes sense to return some of it back to shareholders now.

Ron Graziano at Credit Suisse said investors see dividends as a counter to sluggish earnings growth and low fixed-income returns. A special dividend is a good tool for reducing companies’ cash holdings because it doesn’t commit the company to a regular payout. Including additional levies related to health-care reform, the rate on dividends would reach about 44.3 percent in the highest tax bracket.

David Bianco at Deutsche Bank said industries that pay the highest dividend rates, including utilities, telecom and health care, will be most affected by a higher tax rate,

James Paulsen at Wells Capital Mgmt prefers companies to invest their cash to boost earnings – if the best they can do is pay out dividends ahead of the tax code, then that says something about their future opportunities.

Read the full article at http://www.bloomberg.com/news/2012-11-19/special-dividends-surge-fourfold-as-tax-increase-looms-in-u-s-.html

U.S. Stock Futures Rise Amid Speculation on Stimulus Bloomberg 06-15-12

Predictions:

David Bianco of Deutsche Bank no longer expects a near term rally of 5 percent or more because of uncertainty about the Greek election, but maintained his year-end prediction of 1,475 on the S&P 500.

David Trone of JMP Securities expects some of the largest financial institutions to underperform due to concern that Europe will experience significant damage.

Michael Hartnett of Bank of America said history shows that any multiyear rally in U.S. stocks depend on bond yields  reaching an inflection point and rise in response to stronger growth and a healthier global economy- three inflection points in the past century foreshadowed stock-market booms during the 1920s, after World War II, and throughout most of the 1980s and 1990s.

Read the full article at http://www.bloomberg.com/news/2012-06-15/u-s-stock-futures-rise-amid-speculation-on-stimulus.html