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U.S. Stocks Rise on Factory Data as Retailers, Small-Caps Rally

May 22 (Bloomberg) -- U.S. stocks rose, sending the Standard & Poor’s 500 Index toward a record amid a rebound in small-cap shares, as data showing strength in manufacturing boosted confidence in the global economy.

Best Buy Co. and Williams-Sonoma Inc. added more than 1.7 percent to pace gains among retailers. An index of homebuilders rallied 1.7 percent as sales of previously owned U.S. homes rose in April. Hess Corp. jumped 1.7 percent after agreeing to sell its gasoline stations and retail business. Sears Holdings Corp. fell for a fourth day after sales slid.

The S&P 500 rose 0.4 percent to 1,895.27 at 1:44 p.m. in New York. The benchmark index is within three points of an all- time high of 1,897.45 reached last week. The Dow Jones Industrial Average added 23.66 points, or 0.1 percent, to 16,556.72. The Russell 2000 Index of smaller companies rallied 1.1 percent. Trading in S&P 500 companies was 23 percent below the 30-day average for this time of day.

“It’s a grindingly slow, gradualistic uptrend of the U.S. economy,” David Young, founder chief executive officer of Newport Beach, California-based Anfield Capital Management LLC, which manages $100 million, said by phone. “We absolutely, positively must factor in the vast amount of liquidity looking for an interesting home. As a result, ‘sell in May and go away’ has been proven wrong, because where else are you going to go?”

The U.S. stock market is trading in the tightest range in eight years, according to data from Bespoke Investment Group LLC. In the last three months, the difference between the S&P 500’s intraday high and low has been less than 5 percent, the Harrison, New York-based research group said in a report today.

Economy Watch

The Markit Economics preliminary index of U.S. manufacturing increased to 56.2 in May from 55.4 a month earlier as output accelerated, the London-based group said today. Readings above 50 for the purchasing managers’ measure indicate expansion and the May figure was the highest in three months. A preliminary purchasing managers’ index in China increased to a five-month high.

Other data showed sales of previously owned U.S. homes rose in April for the first time in four months as the weather warmed, price increases slowed and more properties were put on the market. More Americans than projected filed applications for unemployment benefits last week, showing uneven progress in the labor market.

The S&P 500 climbed 0.8 percent yesterday, erasing the previous day’s declines, as Federal Reserve policy makers said continued stimulus doesn’t risk fueling a jump in the inflation rate. Central bank policy makers said last month the economy is showing signs of picking up and the job market is improving.

Fed Stimulus

The central bank pared its monthly asset buying to $45 billion in April, its fourth straight $10 billion cut, and said further reductions in measured steps are likely.

Three rounds of bond purchases by the Fed have helped send the S&P 500 up as much as 180 percent from a 12-year low in 2009.

The Russell 2000 has rallied 1.5 percent over two days. The index tumbled as much as 9.3 percent from a record on March 4 amid concern that prices have outrun earnings. Small-caps and Internet shares were among the biggest victims of the market retreat as investors fled last year’s best-performing equities.

The Dow Jones Internet Composite Index increased 1 percent today. The gauge is still down 15 percent from a 13-year high reached in March.

VIX Slips

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility known as the VIX, fell 1 percent to 11.79 today. The gauge closed yesterday at the lowest level since August.

Nine out of 10 S&P 500 groups rose today, with health-care and utility companies gaining at least 0.8 percent for the biggest advances. Retailers rose 0.7 percent as a group.

Best Buy rallied 1.7 percent to $25.78. The world’s largest consumer-electronics retailer posted first-quarter profit that topped analysts’ estimates as Chief Executive Officer Hubert Joly continued to trim costs.

Williams-Sonoma climbed 8.2 percent to $68.95. The seller of cookware and home furnishings raised its full-year earnings forecast to as much as $3.17 a share, after earlier predicting no more than $3.15. The San Francisco-based company also reported first-quarter profit of 48 cents a share, exceeding the 44-cent analyst projection.

Market Movers

Dollar Tree Inc. jumped 7 percent to $53.50 for the biggest gain in the S&P 500. The discount retailer reported first- quarter earnings that beat analysts’ estimates. The company said it expects as much as $2.02 billion in second-quarter revenue, exceeding analysts’ estimates of $2.01 billion for the period.

Consumer stocks are the worst-performing group among 10 industries this year, losing 3.5 percent collectively, after leading the S&P 500’s gain last year with a 41 percent rally.

Investors have withdrawn $3.9 billion from U.S. exchange- traded funds tracking consumer-discretionary stocks this year, more than any other industry, data compiled by Bloomberg show. The group has slumped 3.6 percent this year, the only one of the 10 main S&P 500 industries that has not advanced.

Hess jumped 1.7 percent to $90.81. Marathon Petroleum Corp. agreed to acquire the company’s gasoline stations and retail business for a total of $2.87 billion, expanding its footprint to 23 states from nine.

An S&P index of homebuilders rallied 1.7 percent after the report on existing-home sales. PulteGroup Inc. soared 1.7 percent to $19.13 and D.R. Horton Inc. climbed 2.3 percent to $22.57.

Sears Slumps

Sears Holdings slipped 0.7 percent to $36.29, extending its four-day decline to almost 10 percent. The retailer controlled by billionaire hedge-fund manager Edward Lampert posted a wider first-quarter loss amid a sales decline that’s stretched into its seventh year. Net loss in the three months through May 3 expanded to $402 million from a loss of $279 million a year earlier. Revenue fell 6.8 percent to $7.88 billion.

Activision Blizzard Inc. dropped 1.1 percent to $20.64 after saying that Vivendi SA is selling half of its remaining stake in the video-gamer maker in an offering valued at more than $850 million.

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