U.S. Stocks Rise on Obama Speech as Investors Weigh Data
<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 Lu Wang - Sep 24, 2013 11:21 PM GMT+0800</cite>
U.S. stocks rose, after a three-day drop in the Standard & Poor’s 500 Index, after comments by President Barack Obama eased concern over Middle East tensions and investors weighed economic reports.
Homebuilders gained 3 percent as a group as data showed home prices increased by the most in more than seven years and Lennar Corp.’s profit beat analyst estimates. Applied Materials Inc. advanced 7.4 percent after agreeing to buy Tokyo Electron Ltd. for about $9.39 billion in stock. Red Hat Inc. slumped 11 percent after second-quarter billings at the largest seller of the Linux operating system trailed estimates.
The S&P 500 rose 0.2 percent to 1,705.07 at 11:20 a.m. in New York. The Dow Jones Industrial Average added 26.72 points, or 0.2 percent, to 15,428.10. Trading in S&P 500 stocks was 7.7 percent above the 30-day average at this time of day.
Equities erased earlier losses as Obama said recent overtures from Iran may offer a basis for a “meaningful agreement” to resolve the confrontation over the Persian Gulf nation’s nuclear program, one of the primary sources of instability in the Middle East.
The S&P 500 declined 1.4 percent in the previous three trading sessions after reaching an all-time high of 1,725.52 as the Federal Reserve refrained from cutting stimulus. The Federal Open Market Committee said after its Sept. 17-18 meeting that it will continue to buy $85 billion of assets a month, surprising economists who had forecast a reduction. The S&P 500 has gained 6.2 percent this quarter and is up 20 percent for the year.
June Forecast
Fed Bank of New York President William C. Dudley said today the central bank may reduce the pace of its quantitative easing program in 2013 depending on the economy’s performance.
“If the economy were behaving in a way aligned with the Fed’s June forecast, then it’s certainly likely that the Fed would begin to taper later this year,” Dudley said in an interview with CNBC. “I certainly wouldn’t want to rule it out. But it depends on the data.”
Stocks fell on Sept. 20 as Fed Bank of St. Louis PresidentJames Bullard said policy makers may decide to reduce their monthly bond purchases at the meeting in October.
“There are so many different views from the Fed itself and there is no one voice that seems to be articulating a common message,” Mark Freeman, who oversees about $15.8 billion as chief investment officer at Westwood Holdings Group Inc. in Dallas, said by phone. “What they ultimately created is uncertainty and that’s never a positive for the market.”
Economic Reports
Among economic reports today, the Conference Board’s index of U.S. consumer confidence decreased to 79.7 in September from a revised 81.8 a month earlier. The median forecast in a Bloomberg survey of economists called for a decrease to 79.9.
A gauge of manufacturing in the region covered by the Federal Reserve Bank of Richmond shrank in September. The central bank’s fifth district factory index, which covers North Carolina, South Carolina, the District of Columbia, Maryland, Virginia and most of West Virginia, fell to zero from 14 in August.
Another report showed home prices in 20 U.S. cities rose in the 12 months through July by the most in more than seven years. The S&P/Case-Shiller index of property values in 20 cities increased 12.4 percent from July 2012, matching the median projection of 31 economists surveyed by Bloomberg and the biggest year-to-year advance since February 2006.
Budget Debate
Investors are also watching the debate in Washington over spending cuts. Hardening positions on the federal budget and borrowing limit, and recent political setbacks suffered by both President Barack Obama and Republican congressional leaders as they go into the fight, are raising the odds of a government shutdown, debt default or near-miss that could roil equities markets.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options prices known as the VIX, fell 3.5 percent to 13.81, extending its drop for the year to 23 percent.
Six out of 10 S&P 500 industry groups rose as industrial and consumer-discretionary companies gained the most, each adding 0.7 percent. Telephone and utility companies erased more than 0.2 percent for the worst performance.
The S&P Supercomposite Homebuilding Index climbed 3 percent, with all its 11 members rising. Lennar, the third-largest U.S. homebuilder by revenue, jumped 5.3 percent to $36.37 after fiscal third-quarter earnings topped analysts’ estimates, driven by higher sales and home prices.
Applied Materials
Applied Materials advanced 7.4 percent to $17.17 as the largest supplier of chipmaking equipment said it will buy Tokyo Electron. Gary Dickerson, chief executive officer of Applied Materials, will become CEO of the combined company, which will be 68 percent owned by Applied Materials shareholders.
Facebook Inc. climbed 4.7 percent to $49.43. Citigroup Inc.’s Mark May raised his recommendation on the social-network operator to buy from neutral, saying feedback from advertisers and agencies suggest that the growth seen in the second quarter is sustainable. May also boosted his price estimate by 72 percent to $55 a share.
CarMax Inc. gained 3.4 percent to $51.73. The car dealer said second-quarter profit beat analyst estimates as used car sales climbed 20 percent from a year ago.
Red Hat tumbled 11 percent to $46.92. Billings, a predictor of future revenue, rose 8 percent in the second quarter from a year earlier to $376 million. Analysts at CLSA had projected an increase of 17 percent, and Stifel Nicolaus & Co. predicted 14 percent growth.
Carnival Corp. slipped 6.4 percent to $35.01. The world’s largest cruise-ship operator forecast fourth-quarter results that trailed analysts’ estimates, citing a decline in advance bookings and higher fuel prices.
To contact the reporter on this story: Lu Wang in New York at [email protected]
To contact the editors responsible for this story: Lynn Thomasson [email protected]
