US stocks advanced yesterday as optimism about upcoming earnings and investor buying of the quarter's top performers lifted the S&P 500 above a key technical level.
The S&P 500 broke above its 50-day moving average at 1,305, leading investors to believe the market may have absorbed the worst of the pullback due to Japan’s earthquake and tumult in the Arab world, positioning stocks for another move higher.
“Yes, there are legitimate concerns. Yes, there are legitimate headline risks,” said Phil Orlando, chief equity market strategist at Federated Investors, in New York. “But it’s entirely possible the market feels comfortable that this seven per cent correction we saw from mid-February into mid-March has priced those concerns in, and now we are starting to look forward to the prospect of continued economic growth and solid first-quarter profits.”
The S&P 500 is up 24.8 per cent since the start of September but briefly dipped into negative territory for the year recently as global concerns pushed commodity prices up.
The Dow Jones industrial average gained 84.54 points, or 0.70 per cent, to end at 12,170.56. The Standard & Poor’s 500 Index climbed 12.12 points, or 0.93 per cent, to 1,309.66.
The Nasdaq Composite Index rose 38.12 points, or 1.41 per cent, to 2,736.42.
Ken Polcari, managing director at ICAP Equities in New York, said the S&P’s 50-day moving average has acted as a point of resistance for the last week and a half, and a close above 1,305 will be bullish in the short-term.
Semiconductor stocks were among the best performers and helped boost the Nasdaq after Micron Technology posted a quarterly profit that topped Wall Street’s forecasts.
Micron shares jumped 8.4 per cent to $11.50 (£7.04). The PHLX semiconductor index gained 2.5 per cent.
It was the second consecutive day of gains for the market, with the S&P 500 up 2.4 per cent so far for the week. With the market near the end of the quarter, portfolio managers will buy equities that have performed well as they execute window dressing, and hedge funds will cover short positions that are under pressure.
The S&P energy index is among leading sectors for the quarter, with gains so far of 13.7 per cent. Tesoro was the top performer in the sector for the quarter, up 40.4 per cent.
The S&P technology index, up 3.1 per cent so far for the quarter, was up 1.6 per cent yesterday.