Internet Bubble
LSI, a maker of chips used in computer disk drives, jumped to the highest level in almost five years on March 14 after raising its first-quarter sales prediction, citing a stronger- than-expected recovery in the industry. Analysts boosted 2012 earnings projections for the Milpitas, California-based company 16 percent, the biggest increase among the 500 companies in the benchmark gauge for American equities.
Projections for 2012 profit at Lennar are up 10 percent from four weeks ago, with analysts forecasting a 67 percent increase, data compiled by Bloomberg show. The third-largest U.S. homebuilder by revenue reported better-than-estimated net income for the period ending Feb. 29 after new home orders rose. The stock increased 38 percent last quarter, the best January- to-March period since 1998.
Financial companies, technology shares and the consumer- discretionary group led gains in the S&P 500 last quarter, with each rising at least 16 percent. The two worst-performing industries were phone stocks and utilities, industries investors typically flock to in times of economic uncertainty for their higher dividend yields.
'Biggest Friend'
"Confidence is returning on the recovery and as it does, gold's relative standing is diminishing," James Paulsen, who helps oversee about $333 billion as chief investment strategist at Minneapolis-based Wells Capital Management, said in a March 26 phone interview. "The biggest friend of gold in recent years is the same biggest friend of the bond market: fear. When confidence has returned and fear dissipates, gold pales."
Even with the rally, individuals have been reluctant to put money in equities. Net outflows of funds that invest in U.S. equities totaled $2.13 billion in January and $3.21 billion in February. The withdrawals continued into March, with $1.8 billion out in the week ended March 21 and $2.9 billion the week before, according to the Investment Company Institute in Washington.
Unemployment Declines
Gains in stocks came as the unemployment rate reached 8.3 percent in January after falling five straight months, home sales beat estimates and the Conference Board's gauge of consumer confidence rose to the highest level in a year. The world's largest economy will grow 2.2 percent this year, up from the 1.7 percent in 2011, according to the median of 72 economists surveyed by Bloomberg.
"The perceived risk in the outlook for the global economy is now somewhat lower than what it was even three months ago," said Espen Furnes, an Oslo-based fund manager at Storebrand Asset Management, which oversees $72 billion. Gold's underperformance is a "sign that investors are regaining some of the lost confidence in the capitalistic system as a whole."