U.S. Stocks Rise as Investors Weigh Economic Data, Syria
<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 3, 2013 11:44 PM GMT+0800
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U.S. stocks rose, following the worst month since May 2012 for the Standard & Poor’s 500 Index, as investors weighed better-than-forecast economic data against possible military action against Syria.
Consumer-discretionary, financial and raw-materials companies climbed the most among 10 S&P 500 industry groups. CBS Corp. (CBS) jumped 4.2 percent after the broadcaster’s programs returned to Time Warner Cable Inc. Microsoft Corp. slipped 6.3 percent after agreeing to buy Nokia Oyj’s mobile-phone business and license its patents for 5.44 billion euros ($7.2 billion). Verizon Communications Inc. dropped 3.2 percent after agreeing to buy Vodafone Group Plc’s 45 percent stake in Verizon Wireless for $130 billion.
The S&P 500 climbed 0.5 percent to 1,641.57 at 11:41 a.m. in New York, paring an earlier advance of as much as 1.1 percent amid concern over Syria. U.S. exchanges were closed yesterday for the Labor Day holiday. The Dow Jones Industrial Average rose 22.90 points, or 0.2 percent, to 14,833.21. Trading in S&P 500 stocks was 12 percent above the 30-day average at this time of day.
“The economy, things are coming in pretty good,” Karyn Cavanaugh, a vice president and market strategist at ING U.S. Investment Management in New York, said in a phone interview. Her firm oversees about $190 billion. “We’ve got to the point that we can stand on our own. We know that tapering will occur eventually and it has to occur eventually. We know there are a lot tensions in the Middle East. If you wait for the dust to settle in order to get in the market, you’re going to be waiting for ever. Look at the fundamentals and if the fundamentals are increasing, that’s your directional signal.”
Economic Data
The Institute for Supply Management’s manufacturing index increased to 55.7 in August from 55.4 a month earlier, the Tempe, Arizona-based group said today. The median forecast of 85 economists surveyed by Bloomberg called for the measure to rise to 52. Another report showed construction spending in the U.S. increased in July to the highest level in four years, propelled by gains in residential real estate.
Global stocks rose yesterday as data showed China’s manufacturing index increased to a 16-month high in August, while other gauges showed euro-area factory output expanded at a faster pace than initially estimated in August.
Syria Crisis
The S&P 500 fell 3.1 percent in August amid concern the Federal Reserve would reduce its monthly bond purchases and the U.S. would take military action against Syria. Stocks pared gains today after Speaker of the House John Boehner said he will support President Barack Obama’s call for action against Syria.
Use of chemical weapons requires a response and only the U.S. has the capability to “warn others around the world that this type of behavior is not going to be tolerated,” Boehner, an Ohio Republican, told reporters after meeting with Obama. “This is something that the United States as a country needs to do,” he said.
Obama announced on Aug. 31 that he’d seek support from Congress for a military strike in Syria. The decision came after the president said previously that he had authority to order a military mission in response to what his administration and the French and U.K. governments say was the Syrian regime’s Aug. 21 chemical weapons attack on civilians. The president won conditional support yesterday from Republican Senators John McCain and Lindsey Graham.
Fed Stimulus
The Fed holds a policy meeting on Sept. 17-18 to decide whether to slow the pace of its bond-buying program. Chairman Ben S. Bernanke has said that the central bank may reduce its monthly purchases if the employment outlook substantially improves and the economy grows in line with forecasts.
All 10 S&P 500 main industries gained except for utility and telephone stocks. Consumer-discretionary, financial and raw-materials companies climbed more than 0.8 percent.
Citigroup (C) Inc. climbed 2.3 percent to $49.42. The third-biggest U.S. bank by assets has sold more than $6 billion in private-equity and hedge-fund assets in the past month, the Wall Street Journal reported, citing unidentified people familiar with the transactions.
Bank of America Corp. added 1.2 percent to $14.29 after terms obtained by Bloomberg Newsshowed the lender is selling its remaining 2 billion shares in China Construction Bank Corp. for HK$5.63 to HK$5.81 apiece. The second-biggest U.S. lender first invested in Construction Bank in 2005.
Cable Blackout
Cliffs Natural Resources Inc., the largest U.S. iron-ore producer, gained 2.5 percent to $21.40. Freeport-McMoRan Copper & Gold Inc., the world’s biggest publicly traded copper miner, rose 2.6 percent to $31.01.
CBS rose 4.2 percent to $53.25. The broadcaster’s programs returned to Time Warner Cable in New York, Los Angeles and Dallas after the companies ended a one-month blackout, in time for the start of National Football League regular-season games.
Time Warner Cable agreed to pay a significant increase for the right to transmit CBS signals, according to people with knowledge of the situation who asked not to be identified because the terms are private.
J.C. Penney Co. advanced 1.7 percent to $12.69. Hayman Capital Management LP reported a 5.2 percent passive stake in the department store chain that is seeking to rebound from its worst sales year in more than two decades.
Busiest Takeovers
Stocks gained as the U.S. market is poised for the busiest month of takeovers since October 2012. More than $130 billion of mergers and acquisitions have been announced since the end of August, data compiled by Bloomberg show.
Jarden Corp. jumped 6.2 percent to $45.60. The company agreed to buy Yankee Candle for $1.75 billion, making its biggest acquisition to add the 43-year-old scented candle maker to its collection of more than 120 consumer brands.
More acquisitions are “indicative of increased confidence in the corporate space in that they view opportunities to take advantage of and feel comfortable using some of their capital to do so.” Ethan Anderson, senior portfolio manager at Rehmann Financial in Grand Rapids, Michigan, said in a phone interview. His firm oversees about $1.5 billion.
Microsoft slid 6.3 percent to $31.31 for the biggest loss in the S&P 500. The maker of theWindows operating system will pay 3.79 billion euros for Nokia’s devices and 1.65 billion euros for its patents, according to a statement from the companies. Nokia’s U.S.-traded shares surged 36 percent to $5.29.
Verizon lost 3.2 percent to $45.86. Verizon will pay Vodafone $58.9 billion in cash, financed with credit, and will issue $60.2 billion in stock to the shareholders of Europe’s largest mobile-phone operator, according to a joint statement.
Volatility Predictions
The Chicago Board Options Exchange Volatility Index (VIX), or VIX, fell 0.5 percent to 16.93 today, after a 26 percent rally in August. Options strategists from JPMorgan Chase & Co. to Weeden & Co. are predicting that U.S. equity volatility will extend its increase in September after posting its biggest monthly advance in more than a year.
JPMorgan said in an Aug. 29 note that volatility is likely to increase in September and October, and recommended buying puts on global stocks gauges including the S&P 500. Weeden told investors to implement a bearish strategy using October contracts on a security tracking the Russell 2000 Index. The VIX has fallen every September in years when volatility was below its historical average at the start of the month, data since 1996 compiled by Bloomberg show.
“There are a number of catalysts that could drive volatility higher in September such as an escalation in the Syrian crisis, further deterioration in emerging markets, or larger-than-expected tapering by the Fed,” Mandy Xu, a New York-based equity-derivatives strategist at Credit Suisse Group AG, said in an Aug. 29 interview.
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]
