U.S. Stocks Gain a Third Week as S&P 500 Rises to 32-Month High

U.S. stocks rose for the third straight week, sending the Standard & Poor’s 500 Index to its highest level since June 2008, as the Federal Reserve raised its forecast for economic growth and most companies reporting earnings topped estimates.

Williams Cos. surged 13 percent, leading energy companies to the biggest advance among 10 S&P 500 industries, after the pipeline operator announced plans to spin off its oil and natural-gas exploration unit. Family Dollar Stores Inc. jumped 19 percent after investor Nelson Peltz offered to buy the retailer. Advanced Micro Devices Inc. gained 11 percent on speculation the semiconductor maker is an acquisition target.

The S&P 500 rose 1 percent to 1,343.01. The index needs to advance 0.7 percent to 1,353.06 to complete a 100 percent rally from its 2009 low. The Dow Jones Industrial Average gained 117.99 points, or 1 percent, to 12,391.25.

“Earnings have come through spectacularly,” said Michael Mullaney, who manages $9.5 billion at Fiduciary Trust Co. in Boston. “Everything from a fundamental standpoint feels as good as it’s felt in quite some time.”

The S&P 500 has advanced 31 percent since last year’s low in July as corporate profit surpasses analysts’ estimates for the eighth straight quarter, according to data compiled by Bloomberg. The Conference Board’s index of U.S. consumer confidence climbed to an almost three-year peak in January, and the Institute for Supply Management-Chicago Inc. said businesses expanded last month at the fastest pace since 1988.

Fed Minutes

On Feb. 16, minutes from the Fed’s Jan. 25-26 meeting showed policy makers raised their projection for economic growth this year to a range of 3.4 percent to 3.9 percent, compared with a November forecast of 3 percent to 3.6 percent. The next day, the Fed Bank of Philadelphia’s general economic index showed regional manufacturing expanded at the fastest pace since 2004 in February.

Williams rose 13 percent to $30.37. The fourth-largest U.S. pipeline operator by market value will sell as much as 20 percent of its oil and natural-gas exploration unit in an initial public offering.

Family Dollar Stores jumped 19 percent to $52.55. Peltz’s New York-based Trian Fund Management LP is proposing a bid of $55 to $60 a share, according to a regulatory filing. The second-biggest dollar chain in the U.S. may draw rival private equity bids, said analysts at Sanford C. Bernstein & Co., Nomura Securities International Inc. and JPMorgan Chase & Co.

AMD Valuation

Advanced Micro Devices gained 11 percent to $9.18. While its management vacuum is fueling speculation of a takeover, a possible price tag of three times the average premium for semiconductor makers may deter any acquirers.

AMD, whose chief executive officer resigned last month, has gained 15 percent since two more departures announced on Feb. 9 reignited bets the second-largest maker of processors for personal computers is vulnerable to a takeover. Acquirers of chipmakers in the past five years offered a median of 14.5 times earnings before interest, taxes, depreciation and amortization, according to data compiled by Bloomberg that includes net debt.

That would value AMD’s equity at $12.8 billion, 120 percent higher than its price the past 20 days. The average premium for chipmaker deals since 2006 is 35 percent. Buying AMD at that level would cost more than has been spent in all semiconductor takeovers combined in the past four years for a company that has reported only five years of profits since 2000.

Economic Reports

Home sales probably fell in January, while orders for long- lasting goods climbed, a reminder that housing lags behind manufacturing as the U.S. recovery strengthens, economists said before reports next week.

Fourth-quarter profit exceeded the average analyst estimate at 72 percent of the 395 companies in the S&P 500 that have reported results since Jan. 10, Bloomberg data show. Dell Inc., the third-largest personal computer maker, iron-ore producer Cliffs Natural Resources Inc., and oil and natural-gas driller Nabors Industries Ltd. advanced more than 9.5 percent this week after beating forecasts.

Companies slated to report results next week include Home Depot Inc., Wal-Mart Stores Inc. and Hewlett-Packard Co., all Dow average companies. Priceline.com Inc., Mylan Inc. and First Solar Inc. also have scheduled earnings releases.

Stocks fell yesterday before rising in the final hour of trading after China’s central bank raised reserve requirements for lenders 10 days after boosting interest rates as Premier Wen Jiabao tackles accelerating inflation. Fertilizer companies such as CF Industries Holdings Inc. slid as wheat declined.

Apple Inc., the maker of iPad tablet computers, fell 1.8 percent to $350.56. The U.S. Justice Department and the Federal Trade Commission are beginning to examine whether Apple’s new media subscription service violates antitrust laws, according to two people familiar with the matter.

--With assistance from Whitney Kisling in New York, Bob Willis in Washington and Ian King in San Francisco. Editors: Nick Baker, Michael P. Regan

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Oil Falls as U.S. Monitors Iran Plan to Send Warships to Suez

Oil fell for the first time in three days as the White House said it was “monitoring” Iran’s plan to send warships through the Suez Canal, calming concern that the move would ratchet up tensions in the Middle East.

March futures slipped 16 cents after rising in earlier trading amid Mideast unrest. The current New York contract expires Feb. 22, and participants who haven’t closed out their positions must arrange for delivery at Cushing, Oklahoma, where supplies are near a record. Crude for April increased 1 percent.

“The White House comments seemed to calm the market down,” said Phil Flynn, vice president of research at PFGBest in Chicago. Oil sellers “are going to have to make delivery into record supplies, and that’s bringing us down despite the fact that there’s all this tension in the Middle East.”

Crude for March delivery settled at $86.20 a barrel on the New York Mercantile Exchange. Earlier, it touched $87.88. Futures gained 0.7 percent this week. The more active April contract increased 87 cents to $89.71 a barrel.

U.S. financial markets will be closed Feb. 21 for the Presidents Day holiday.

Egypt today approved Iran’s request to sail the ships through the canal on their way to Syria, a plan Israel has called a provocation.

“We’re monitoring that, obviously, but we would also say that Iran does not have a great track record for responsible behavior in the region, which is always a concern to us,” Jay Carney, the White House press secretary, told reporters traveling on Air Force One to an appearance by President Barack Obama in Portland, Oregon.

Iranian Ships

The Iranian vessels will anchor in Syria “for a few days” after a trip through the canal that is “routine according to international law,” Iran’s state-run Islamic Republic News Agency said, citing Ahmad Mousavi, the country’s ambassador to Syria.

Oil supplies at Cushing jumped to a record 38.3 million barrels in the week ended Jan. 28. The supply glut there has pressured the price of oil on the Nymex. Cushing inventories gained 250,000 barrels to 37.7 million in the seven days to Feb. 11, according to an Energy Department report Feb. 16.

Brent crude for April settlement slipped 7 cents to $102.52 a barrel on the ICE Futures Europe exchange in London. The contract has risen 1.6 percent this week, its fourth consecutive increase.

The difference between April contracts in London and New York narrowed for a second day. The spread was $12.81 a barrel, compared with a record $15.94 on Feb. 16. Brent was $1.28 a barrel cheaper than Nymex crude a year ago.

New Normal Premium

Brent may trade at a premium of $2 to $3 a barrel above West Texas Intermediate oil, Adam Sieminski, chief economist at Deutsche Bank, said in a note today.

“Global demand is growing faster longer-term for crude streams tied to Brent,” Sieminski said. This is because of rising consumption in Asia of products such as diesel fuel that can be refined more easily from crudes tied to the European benchmark. Brent is an international crude used to price oil in Europe and Africa.

Previously the market had been led by U.S. demand for gasoline from West Texas Intermediate, the benchmark for many North and South American oils, Sieminski said. WTI can more easily be refined into gasoline.

Bahrain, Libya

Futures advanced in earlier trading as escalating protests in Bahrain and Libya fueled concern supplies from oil-producing nations in the Middle East will be disrupted. Demonstrators in both countries called for regime change.

Bahrain, an island in the Persian Gulf, lies off the coast of Saudi Arabia, the world’s biggest oil exporter. Bahrain has a majority-Shiite Muslim population and is ruled by the Sunni Muslim Al Khalifa family. Saudi Arabia has a Shiite minority concentrated in its eastern oil-producing hub that also complains of discrimination.

“Unless problems facing Saudi Arabia are solved, what happened and is still happening in some Arab countries, including Bahrain, could spread to Saudi Arabia, even worse,” Prince Talal bin Abdul Aziz, a member of the Saudi royal family, said in an interview with BBC Arabic TV yesterday.

Twenty people were reported dead in clashes in Libya, Africa’s biggest holder of oil reserves and the eighth-largest oil producer in the Organization of Petroleum Exporting Countries. The North African country has been ruled by Muammar Qaddafi for more than 40 years.

Oil volume in electronic trading on the Nymex was 840,705 contracts as of 3:19 p.m. in New York. Volume totaled 976,236 contracts yesterday, 33 percent above the average of the past three months. Open interest was 1.53 million contracts.

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