U.S. Stock-Index Futures Signal S&P 500 Will Rally.

http://www.bloomberg.com/news/2014-12-18/u-s-stock-index-futures-signal-s-p-500-to-rally-for-second-day.html

U.S. stock futures rose, signaling the Standard & Poor’s 500 Index will climb a second day following its biggest jump in a year after the Federal Reserve said it will be patient on the timing of interest-rate increases.

Futures on the S&P 500 expiring in March added 1.1 percent to 2,030 at 8:31 a.m. in New York. Dow Jones Industrial Average futures increased 186 points, or 1.1 percent, to 17,478 today.

“There’s no reason why the S&P 500 cannot continue to chug higher,” said Jonathan Aldrich-Blake, a U.S. equity fund manager at Ashburton Investments in Jersey, the Channel Islands. “The U.S. economy is one of the safest bets in the world, and the Fed coming out with a dovish tone yesterday just gives investors the confidence they needed. The lower oil price will be more of a positive for consumers and companies on balance.”

U.S. stocks are rebounding from a seven-day decline that erased $1 trillion from equity prices and coincided with a 15 percent drop in West Texas Intermediate crude between Dec. 5 and Dec. 16.S&P 500 (SPX) energy producers tumbled 8 percent over the stretch while chemical and mining companies lost 7.4 percent.

Should it continue, the recovery would be the fifth time this year the S&P 500 has come back after falling more than 4 percent from a high. In comparable drops beginning in January, April, July and September, the index needed about a month to erase losses, data compiled by Bloomberg show.

Economic Data

The Fed meeting took place after a series of government reports showing that the U.S. economy is thriving. Payrolls rose by 321,000 last month, the biggest increase in almost three years, while retail sales increased 0.7 percent, the most in eight months.

Jobless claims decreased by 6,000 to 289,000 in the week ended Dec. 13, the fewest since early November, a Labor Department report showed today in Washington. The median forecast in a Bloomberg survey of 51 economists projected 295,000. Jobless claims have been below 300,000 for 13 of the past 14 weeks.

Stocks in the benchmark gauge for U.S. equities are heading for their third consecutive annual gainand have risen almost 200 percent since global equities bottomed in 2009. The biggest bull marketsince the 1990s technology bubble was fueled as the Fed executed three rounds of bond buying to stimulate the economy and held interest rates near zero since December 2008.

December Gains

December has been one of the strongest months for equities since the bull market began. The S&P 500 has risen in the year’s final month sixth consecutive times, posting an annual average return of 2.2 percent.

Gains in the measure have been led by health-care companies and utilities, up 20 percent or more from the start of the year, followed by technology producers, makers of household products and banks and brokerages. Energy companies have been the biggest drag, falling 13 percent thanks to declines in four of the last five months.

Stocks in the S&P 500 are trading at 17.8 times annual earnings after valuations reached a four-year high of 18.3 times profit earlier this month. Income among the gauge’s constituents is poised to rise 3 percent in the fourth quarter and 7.3 percent in 2015, analyst estimates compiled by Bloomberg show.

Among industries, analysts estimate that earnings will grow fastest next year for consumer discretionary companies, at 14.1 percent, followed by commodity producers at 14 percent and technology makers at 13.2 percent. Energy companies may see profits fall more than 13 percent in 2015, analyst estimates compiled by Bloomberg show.

Energy Shares

Energy stocks, which soared the most in three years yesterday, continued to gain as oil extended a rebound amid speculation that crude’s tumble to a five-year low may have been excessive. Exxon Mobil Corp., the world’s largest oil company, advanced 1.6 percent. Chevron Corp. added 1.6 percent.

Oracle Corp. jumped 4.9 percent after the software maker reported second-quarter profit and sales that beat analysts’ estimates.

Hertz Global Holdings Inc. added 5 percent after shareholder Carl Icahn reported an increased stake in the car-rental company. Icahn bought 2.63 million shares on Dec. 15.