U.S. Stocks Fluctuate After S&P Rally on Fed Statement
<cite class="byline" style="margin: 0px; padding: 0px; border: 0px; outline: 0px; font-size: 11px; vertical-align: baseline; background-color: transparent; width: 640px; color: rgb(111, 111, 111); display: block; font-style: normal; line-height: 1.3em; position: static !important; background-position: initial initial; background-repeat: initial initial;">By Nick Taborek & Lu Wang - Sep 19, 2013 10:53 PM GMT+0800</cite>
U.S. stocks fluctuated after the Standard & Poor’s 500 Index rallied to a record yesterday on theFederal Reserve’s decision to refrain from cutting stimulus and investors weighed the latest batch of economic reports.
Apple Inc. jumped 1.8 percent to pace advances among technology shares. Agilent Technologies Inc. added 5.3 percent as the provider of bio-analytical and electronic measurement services said it will split into two public companies. Rite Aid Corp. (RAD) surged 15 percent as the drugstore chain raised its profit forecast. Oracle Corp. retreated 0.7 percent after the software maker issued a weaker-than-projected outlook.
The S&P 500 rose 0.1 percent to 1,726.37 at 10:48 a.m. in New York. The Dow Jones Industrial Average lost 15.09 points, or 0.1 percent, to 15,661.85. Trading in S&P 500 (SPX) stocks was 37 percent above the 30-day average at this time of day.
“People know the Fed at some point has to start a tapering process,” Cameron Hinds, the Lincoln, Nebraska-based regional chief investment officer for Wells Fargo Private Bank, which has about $170 billion under management, said by telephone. “Longer term, there’s also an indication of a little lack of confidence from the Fed in terms of the economic growth. We’ll see what the market does this afternoon. Perhaps it will start to reflect on a little bit of the longer-term message.”
The benchmark index climbed 1.2 percent to a record yesterday as the Fed unexpectedly refrained from reducing bond buying. Treasury yields have jumped since May, when Fed Chairman Ben S. Bernanke first outlined a possible timetable for a reduction in asset purchases.
More Evidence
The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion-a-month bond-buying program, surprising economists who predicted a reduction in the plan. The Fed has held the main interest rate near zero since December 2008 and pushed its balance sheet to a record $3.66 trillion through three rounds of stimulus, helping send the S&P 500 155 percent higher since March 2009.
“To be fair to Bernanke, he set the conditions necessary for tapering and the conditions are not there,” Ross Yarrow, who sells U.S. equities to European investors for Robert W. Baird & Co. in London, said in a phone interview today. That’s “not because of any particular deterioration but because, by talking about tapering, he already achieved an adjustment in yields,” Yarrow said.
Ten-year U.S. Treasury yields climbed as high as 3.01 percent on Sept. 6 from 1.61 percent on May 1. They plunged 16 basis points yesterday to 2.69 percent.
Index Records
Equity gauges whose performance some chart analysts consider predictive of stock market gains closed at records yesterday, including the Dow Jones Transportation Average, the Russell 2000 Index and the Morgan Stanley Cyclical Index.
About 83 percent of the stocks in the S&P 500 rose above their average price over the past 50 days yesterday, and a quarter of them reached their highest levels in 52 weeks or more, data compiled by Bloomberg show. Both measures hit their highest since Aug. 1, a day before the benchmark index peaked and started a 4.6 percent retreat.
Some 136 S&P 500 stocks had their 14-day relative-strength index above 70 yesterday, the most since May 20, Bloomberg data show. RSI measures the degree to which gains and losses outpace each other and some analysts who watch charts to predict market moves consider a reading higher than 70 as indicating the stock has gained too far too fast.
Economic Reports
Economic data today showed sales of previously owned U.S. homes unexpectedly rose in August to the highest level in more than six years as buyers rushed to lock in interest ratesbefore they rise further.
The Federal Reserve Bank of Philadelphia’s general economic index rose to 22.3 in September from 9.3 a month earlier. Readings greater than zero signal growth in the area, which covers eastern Pennsylvania, southern New Jersey and Delaware. The median forecast of 57 economists surveyed by Bloomberg called for a reading of 10.3.
Among other reports, the Conference Board’s index of leading economic indicators increased 0.7 percent in August. Jobless claims in the U.S. rose less than forecast last week as two states began working through a backlog of applications that were caused by computer-system changeovers.
Investors are also watching the political wrangling over the approaching limit on federal spending. Government funding expires Oct. 1 and the Treasury is expected to exhaust its ability to borrow funds in mid-October, when it will hit the statutory debt limit.
Spending Plan
House Republicans could vote as soon as today on a spending plan that seeks to avoid a shutdown by giving party members a chance to deny funds for President Barack Obama’s health-care law. The measure is sure to be rejected by the Democratic-led Senate.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, dropped 2.9 percent to 13.19, the lowest level since Aug. 14. The equity volatility gauge has tumbled 22 percent in September after rallying 26 percent in August, the biggest monthly gain since May 2012.
Industrial shares rose the most among 10 main S&P 500 industries, gaining 0.6 percent. Apple jumped 1.8 percent to $473.19 to pace advances among technology companies.
Agilent increased 5.3 percent to $51.93 on its plan to split into two businesses. One company will focus on life sciences, diagnostics and applied markets, retaining the Agilent name. The other will be comprised of Agilent’s current portfolio of electronic measurement products, according to a statement.
Rite Aid
Rite Aid surged 15 percent to $4.25. The drugstore chain raised its annual profit and revenue forecasts after second-quarter results exceeded analyst estimates, helped by an increase in same-store pharmacy sales.
Take-Two Interactive Software Inc. advanced 3 percent to $17.71. The video game maker said first-day sales of “Grand Theft Auto V” topped $800 million worldwide, surpassing the record set by “Call of Duty: Black Ops II” last November.
Groupon Inc. gained 7.2 percent to $12.38. The daily deals provider was raised to buy from hold at Stifel Nicolaus & Co.
Tesla Motors Inc. climbed 5.1 percent to $174.76. Deutsche Bank analyst Rod Lache said in a note the electric car maker is on track to “modestly” outperform margin expectations for the third quarter and raised his price target to $200 from $160.
Oracle Slips
Oracle declined 0.7 percent to $33.62. The largest maker of corporate-database software predicted yesterday that profit, excluding some items, for the fiscal second quarter will be 64 cents to 69 cents a share. Oracle would have to reach the top of that range to match analysts’ 69-cent average estimate, according to data compiled by Bloomberg.
Pier 1 Imports Inc. (PIR) plunged 11 percent to $20.99. The home furnishings retailer cut its earnings forecast for the year after second-quarter profit fell short of analysts’ predictions. Same-store sales increased 3.5 percent in the quarter, compared with the average analyst estimate of 6.5 percent.
To contact the reporters on this story: Nick Taborek in New York at [email protected]; Lu Wang in New York at [email protected]
To contact the editors responsible for this story: Andrew Rummer at [email protected]; Lynn Thomasson at [email protected]
