U.S. Stocks Rise as Jobs Data Overshadow Bugdet Imapsse
<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 & Sofia Horta e Costa - Sep 27, 2013 12:02 AM GMT+0800</cite>
U.S. stocks rose, following the longest slump this year for the Standard & Poor’s 500 Index, as an unexpected drop in jobless claims overshadowed growing concern that a budget impasse could hurt the recovery.
J.C. Penney Co. rallied 8 percent after repeating that it expects positive sales trends in the second half of the year. Bed Bath & Beyond (BBBY) Inc. added 4.1 percent after raising the low end of its earnings forecast. Eli Lilly & Co. fell 4.2 percent after its experimental drug ramucirumab failed to meet its goals for treating breast cancer in a late-stage trial. Hertz Global Holdings Inc. sank 13 percent after cutting its forecasts.
The S&P 500 rose 0.2 percent to 1,696.84 at 11:59 a.m. in New York, extending its third-quarter rally to 18 percent. The Dow Jones Industrial Average climbed 46.04 points, or 0.3 percent, to 15,319.30. Trading in S&P 500 stocks was 7 percent below the 30-day average at this time of day.
“It’s the continued moderate growth story,” James Kee, president and chief economist for South Texas Money Management in San Antonio, Texas, said in a phone interview. His firm oversees about $2 billion. “When you’re growing so weakly, somewhere around the 2.5 percent range, suddenly reading the data tealeaves is more important. That’s why the market is reacting to this jobless claims data so positively.”
The benchmark index declined 1.9 percent during a five-day losing streak through yesterday, retreating from an all-time high on Sept. 18, when the Federal Reserve refrained from reducing the pace of stimulus. Investors have been watching economic reports to help determine whether growth is sufficient for the central bank to begin cutting bond purchases at its next meeting in October.
Jobs, GDP
A Labor Department report today showed the number of Americans filing applications for unemployment benefitsunexpectedly fell last week, indicating further progress in the labor market. The economy expanded at faster pace in the second quarter from the previous three months, with gross domestic product rising at a 2.5 percent annualized rate, the Commerce Department said.
A separate report added to signs that rising mortgage rates may have slowed housing market momentum. Fewer Americans signed contracts in August to buy previously owned homes, figures from the National Association of Realtors showed. Data yesterday indicated purchases of new homes rose in August, capping the weakest two months this year.
Budget Impasse
Investors are also weighing whether lawmakers can avoid a looming government shutdown, with the S&P 500 paring an earlier gain of as much as 0.7 percent after House Speaker John Boehner, an Ohio Republican, said he doesn’t expect his chamber to pass a stopgap spending bill expected from the Senate. He also said he does not expect a government shutdown to happen.
The Senate likely will not vote on its version of the spending bill until this weekend, leaving the House just one full workday to act before spending authority for the federal government expires on Oct. 1. The House and Senate are at odds over language that withdraws funding for the 2010 health-care law.
The Office of Management and Budget estimated 30 days of shutdowns in 1995 and 1996 cost more than $1.4 billion, or $2.09 billion in today’s dollars.
On another fiscal front, Treasury Secretary Jacob J. Lew told Congress yesterday that the extraordinary measures being used to avoid breaching the debt ceiling “will be exhausted no later than Oct. 17.” Failure to increase the debt limit could lead to a downgrade of the U.S. government’s credit rating.
Losing Streak
The S&P 500 (SPX)’s losing streak through yesterday was the index’s longest since Dec. 28, when lawmakers wrangled over impending automatic spending cuts and tax increases known as the fiscal cliff.
“Washington has been dragging their feet as of late but eventually they’ll be forced into action,” said Patrick Spencer, head of U.S. equity sales for Robert W. Baird & Co. in London. “We’ve been down this road before. It’s quite natural and healthy to have pull-backs in a bull market. We’ll shift into a stronger gear with a settlement on the budget and what I think will be a very positive earnings season.”
The Chicago Board Options Exchange Volatility Index (VIX), the gauge of S&P 500 options prices known as the VIX, rose 1.5 percent to 14.22. The measure has lost 16 percent this quarter.
Nine of 10 main groups in the S&P 500 advanced today, with phone stocks and producers of consumer-discretionary products rising at least 0.7 percent.
Penney, EBay
J.C. Penney (JCP) jumped 8 percent to $10.93, rebounding from a 15 percent plunge yesterday. The department-store chain said some key items and sizes are back in stock, helping sales at stores and online. The shares have plunged 45 percent this year amid concern that it is running out of cash.
EBay Inc. climbed 3.9 percent to $56.31, a two-month high. The owner of electronic-payments service PayPal said it will bolster that business by buying Braintree for $800 million in cash to expand its mobile-transactions business.
Bed Bath & Beyond gained 4.1 percent to $77.28. The retailer predicted full-year adjusted earnings per share of $4.88 to $5.01, up from a previous range of $4.84 to $5.01.
Air Products & Chemicals Inc. jumped 3 percent to $110.70, headed for a record close. The industrial gas producer said Chairman and Chief Executive Officer John E. McGlade (ADP) will leave and it will add three independent directors, less than two months after investor William Ackman’s Pershing Square Capital Management LP became the company’s largest shareholder.
Jabil Slide
Jabil (JBL) Circuit Inc. lost 7.7 percent to $22.16, a two-month low. The electronics company that counts BlackBerry Ltd. as its second-largest customer said yesterday it will probably disengage from the struggling Canadian device maker in coming months. Jabil also forecast first-quarter profit below analyst estimates.
Eli Lilly fell 4.2 percent to $50.40. Lilly is counting on experimental drugs for Alzheimer’s, cancer and diabetes to revive growth as the company loses patent protection on some of its top products, including the antidepressant Cymbalta.
Hertz sank 13 percent to $22.37, headed for the lowest close since April. The rental-car company trimmed its forecast for full-year revenue and profit, citing weaker than anticipated car rentals at U.S. airports.
To contact the reporters on this story: Lu Wang in New York at [email protected]; Sofia Horta e Costa in London at [email protected]
To contact the editor responsible for this story: Lynn Thomasson at [email protected]
