Equities climb in wake of positive data

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By Angela Moon | February 9, 2013 5:49 AM EST

Stocks edged higher on Friday, with the benchmark S&P index hitting a five-year high, in the wake of a batch of encouraging domestic and international economic reports.

Data showing stronger international trade in China and Germany, and a report indicating the U.S. trade deficit had narrowed in December, pointed to improving global demand.

"The rally is definitely slowing down. We might see a record high this year but we do need a bit of correction before going there," said Randy Frederick, director of trading and derivatives at Charles Schwab.

"We've been in this 1,516 level (for the S&P 500) for the sixth straight session and need break above to really move higher."

The Dow Jones industrial average <.DJI> was up 44.79 points, or 0.32 percent, at 13,988.84. The Standard & Poor's 500 Index <.SPX> was up 7.13 points, or 0.47 percent, at 1,516.52. The Nasdaq Composite Index <.IXIC> was up 29.51 points, or 0.93 percent, at 3,194.64.

The CBOE Volatility index <.VIX>, Wall Street's so-called fear gauge, was down 4.2 percent at 12.94. The gauge, a key measure of market expectations of short-term volatility, generally moves inversely to the S&P 500.

Some analysts wondered if the market would convincingly stride higher.

"I'm watching the 14 level closely" on the CBOE Volatility index, said Bryan Sapp, senior trading analyst at Schaeffer's Investment Research. "The break below it at the beginning of the year signaled the sharp rally in January, and a rally back above it could be a sign to exercise some caution."

Healthcare stocks climbed, with the Morgan Stanley healthcare payor index <.HMO> up 2.3 percent. Molina Healthcare Inc surged 9.7 percent to $31.67 as the biggest boost to the index after posting fourth-quarter earnings.

McDonald's Corp said January sales at established hamburger restaurants around the world fell 1.9 percent, a steeper decline than analysts had expected. Still, shares edged up 0.7 percent to $95.33.

Data showed Chinese exports grew more than expected in January, while imports climbed 28.8 percent, highlighting robust domestic demand, while German data showed a 2012 surplus that was the nation's second highest in more than 60 years, an indication of the underlying strength of Europe's biggest economy.

Separately, U.S. economic data showed the trade deficit shrank in December to $38.5 billion, its narrowest in nearly three years, indicating the economy did much better in the fourth quarter than initially estimated.

"The reason why this is so important is because the trade deficit was a major contributor to the negative GDP report we had in Q4. With today's number, we could see a reversal of this in the next GDP report, going from negative to positive," Frederick said.

On the earnings front, many companies beat estimates as their profits grew.

According to Thomson Reuters data through Friday morning, of 339 companies in the S&P 500 that have reported earnings, 69.9 percent have exceeded analysts' expectations, above a 62 percent average since 1994 and 65 percent over the past four quarters.

Fourth-quarter earnings for S&P 500 companies grew 5.2 percent, according to the data, above a 1.9 percent forecast at the start of the earnings season.

(Editing by Bernadette Baum)

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