Bloomberg News

U.S. Stocks Advance as Fed Says Policy Makers Wanted More Action

August 30, 2011

Aug. 30 (Bloomberg) -- U.S. stocks rose, rebounding from a 1.2 percent drop in the Standard & Poor’s 500 Index, after the Federal Reserve said some policy makers wanted to take more action to stimulate the economy during their meeting this month.

Boeing Co. and Caterpillar Inc. rose at least 1.9 percent, pacing gains among companies most-tied to the economy. Monster Worldwide Inc., the provider of help-wanted ads, advanced 21 percent, building on its 13 percent rally during the past two days. Bank of America Corp. fell 3.2 percent as the Federal Deposit Insurance Corp. objected to the lender’s proposed $8.5 billion mortgage-bond settlement with investors.

The S&P 500 added 0.2 percent to 1,212.92 at 4 p.m. in New York, recovering from earlier losses driven by consumer confidence sinking to a 28-month low. The Dow Jones Industrial Average rose 20.70 points, or 0.2 percent, to 11,559.95.

“The Fed has definitely not raised the white flag,” Bruce McCain, who helps oversee $22 billion as chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a telephone interview. “They have not accepted the idea that they ran out of tools. They recognize that the economy is far too weak and that they will do whatever is necessary to boost growth. It’s reassuring.”

The S&P 500 rose to the highest level since Aug. 3 yesterday after surging 7.7 percent in six days. Equities gained 8.1 percent between Aug. 8 and yesterday after the loss of the U.S. government’s AAA credit rating left the S&P 500 trading for 12.2 times earnings, the lowest level since 2009, according to data compiled by Bloomberg.

‘More Substantial Move’

When Fed policy makers met on Aug. 9, the S&P 500 had plunged 17 percent since July 22, including a 6.7 percent drop the previous day that was the biggest slump since 2008. The Fed said those members, who weren’t identified, “felt that recent economic developments justified a more substantial move” beyond the pledge adopted at the Aug. 9 meeting of the Federal Open Market Committee to hold its key interest rate at a record low until mid-2013.

The report indicates that Fed officials will more fully debate their options when they meet next month for a two-day meeting that was originally scheduled to last one day. Fed officials at the August meeting discussed a range of tools, including buying more government bonds, to bolster the economy. They didn’t come to an agreement on what the Fed’s next step might be should the economy continue to weaken.

Consumer Confidence

The S&P 500 slumped earlier today after the Conference Board’s index of consumer confidence fell to 44.5, the lowest level since April 2009, from a revised 59.2 reading in July, the research group said. It was the biggest point drop since October 2008. Economists predicted the gauge would fall to 52, according to the median forecast in a Bloomberg News survey.

“The consumer sentiment number was so low that it could have marked a bottom,” Mark Bronzo, who helps manage $26 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “The market has sold off so violently, and right now the selling pressure is drying up.”

The S&P 500 has fallen 6.1 percent since the end of July and was headed for its fourth straight monthly decline, the longest streak since March 2008. Financial, energy and industrial shares had the biggest losses during so far in August, slumping at least 7.4 percent.

The Morgan Stanley Cyclical Index of companies most-tied to economic growth added 0.4 percent after sinking 1.4 percent. Boeing gained 2.2 percent to $66.03. Caterpillar rose 1.9 percent to $89.83.

Monster Worldwide Soars

Monster Worldwide surged 21 percent, the most in the S&P 500, to $9.91. Three top executives led by Chairman and Chief Executive Officer Salvatore Iannuzzi bought 87,237 shares, regulatory filings showed today.

The shares were “overdue for a bounce” after other Internet companies including professional-networking firm LinkedIn Corp. have surged in recent weeks, said Douglas Arthur, an analyst at Evercore Partners Inc. in New York who rates the stock as “equalweight.”

Clorox Co. rallied 2.8 percent to $70.52. Billionaire investor Carl Icahn said today he’d buy Clorox Co. for $10.3 billion if a companion proposal to elect his slate of directors and sell the company fails.

The KBW Bank Index of 24 stocks fell 1 percent, snapping a two-day rally. Bank of America slumped 3.2 percent to $8.12. The FDIC, the receiver for failed banks, owns securities covered by the settlement and said it doesn’t have enough information to evaluate the accord, according to a filing yesterday in federal court in Manhattan.

Bearish Bets

Bearish bets by hedge funds on S&P 500 futures increased to the highest level since before the financial crisis three years ago, Bank of America Corp.’s Mary Ann Bartels said.

“Readings are a ‘crowded short’ for the first time since June 2008,” Bartels, the New York-based head of technical and market analysis at Bank of America, wrote in a note yesterday.

Large speculators boosted net wagers that the benchmark index of U.S. equities will fall to $24.6 billion in the week ended Aug. 23 from $21.5 billion a week earlier, said Bartels, citing data from the Commodity Futures Trading Commission. Bartels said she considers short positions to be “crowded” at about $25 billion. The last “crowded short zone” on S&P 500 futures came three months before Lehman Brothers Holdings Inc.’s collapse spurred a 46 percent plunge in equities.

--With assistance from Whitney Kisling, Jeff Kearns and Inyoung Hwang in New York. Editors: Joanna Ossinger, Nick Baker

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus