S&P completes biggest first-quarter rally since 1998

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U.S. stocks rose this week, with the Standard & Poor’s 500 Index completing the biggest first-quarter rally since 1998, after Federal Reserve Chairman Ben S. Bernanke said he will keep stimulating the economy and Europe agreed to increase rescue funds.

Indianapolis-based WellPoint Inc. surged 11 percent, leading health-care stocks to the biggest rally among 10 S&P 500 groups, amid speculation the U.S. Supreme Court won’t eliminate the insurance mandate while leaving intact other costly provisions in an industry overhaul. Pfizer Inc. climbed 3.8 percent after a Goldman Sachs Group Inc. analyst said the drugmaker may split itself up. Red Hat Inc. jumped 15 percent after the software maker forecast earnings that beat analysts’ estimates.

The S&P 500 rose 0.8 percent to 1,408.47 and closed at the highest level since May 2008 on March 26. It advanced 12 percent during the first quarter, including a 3.1 percent increase in March. The Dow Jones Industrial Average added 131.31 points, or 1 percent, to 13,212.04 this week. The Nasdaq Composite Index climbed 0.8 percent and surged 19 percent during the quarter, the most to start a year since 1991.

“The market can continue to rally into May and the early part of June,” Jon Fisher, a fund manager at Fifth Third Asset Management in Minneapolis, which oversees about $16 billion of assets, said in a telephone interview. “You have all that monetary policy unleashed in the market globally. At the same time, you got a huge improvement in sentiment. Outlooks for the rest of the year are going to continue to be positive.”

Equities advanced, with the S&P 500 rebounding from 2012’s biggest weekly decline between March 16 and March 23, after Bernanke said accommodative monetary policy is still needed to spur jobs. European finance ministers boosted rescue funding by 500 billion euros ($666 billion), bringing the size of the firewall to 800 billion euros in the latest move to tame the region’s debt crisis. Reports on U.S. personal spending and consumer confidence topped economists’ projections.

More than $3.6 trillion has been restored to U.S. equity values since October amid better-than-estimated earnings and economic data. The index has climbed 28 percent since Oct. 3, sending the S&P 500 to 14.6 times reported earnings, close to the highest valuation since July while below the average since 1954 of 16.4.

“We’re getting closer to fair value,” Ralph Shive, the South Bend-based manager of the $1.65 billion Wasatch-Large Cap Value Fund, said in a telephone interview. “There is most likely a correction this year for sure, with the uncertainties around the world.”

The S&P 500 Health Care Index rallied 2.7 percent this week to the highest level since December 2000. The Supreme Court ended its hearings of the health-care law March 28. The justices probably will rule in late June on how much of the law must be thrown out if they decide Congress can’t require Americans to buy medical insurance.

“We believe that the worst case scenario for managed care [solely individual mandate struck] is off the table,” Christine Arnold, an analyst with Cowen & Co., wrote in a March 30 note. “Given a heightened probability that the individual mandate and related commercial regulations will be struck, we view commercial managed care stocks as likely relative winners under the most probable Supreme Court outcome scenarios.”

WellPoint, the largest U.S. health insurer by enrollment, surged 11 percent, the most since May 2009, to $73.80. Aetna Inc. climbed 10 percent to $50.16 while Coventry Health Care Inc. advanced 10 percent to $35.57.

Pfizer had the biggest rally in the Dow, increasing 3.8 percent to $22.65. Jami Rubin, a Goldman Sachs analyst, said the company may further split itself up after selling or spinning off its animal health and nutrition businesses.

Red Hat surged 15 percent, the most in the S&P 500, to $59.89. Chief Executive Officer Jim Whitehurst said the company was surprised by demand for its Red Hat Enterprise Linux software from corporations preparing to move more applications to the so-called cloud, where they can be delivered to users over the Internet.

Profit for the current fiscal year will be at least $1.16 a share, the company projected. Analysts, on average, estimated $1.15, according to a Bloomberg survey.

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