Bloomberg News

U.S. Stocks Advance as Investors Await Fed Decision

August 01, 2012

U.S. Stocks Rise as Investors Await Federal Reserve’s Decision

Federal Reserve Chairman Ben S. Bernanke will probably forgo announcing a third round of large-scale asset purchases today and may wait until September to unveil plans to buy debt, economists said before today’s statement. Photographer: Joshua Roberts/Bloomberg

U.S. stocks rose, halting a two-day decline in the Standard & Poor’s 500 Index, as investors awaited the outcome of the Federal Reserve’s meeting for clues on more stimulus measures to support the world’s largest economy.

Comcast Corp. (CMCSA:US), the largest U.S. cable company, and Allstate Corp. (ALL:US), the biggest publicly traded U.S. home and auto insurer, advanced after quarterly earnings beat projections. Knight Capital Corp., one of the largest market makers of U.S. stocks, plunged as much as 26 percent as it experienced technology issues with trading.

The S&P 500 rose 0.2 percent to 1,382.12 at 12 p.m. New York time. The Dow Jones Industrial Average added 34.40 points, or 0.3 percent, to 13,043.08. Trading in S&P 500 companies was up 19 percent from the 30-day average at this time of day.

The Fed “will leave the door open,” Larry Kantor, head of research at Barclays Capital, said on Bloomberg Television’s City Central. Chairman Ben S. Bernanke “doesn’t want to disappoint market expectations too much but I don’t see the Fed making any move at all this week.”

Bernanke will probably forgo announcing a third round of large-scale asset purchases today and may wait until September to detail plans to buy debt, economists said before today’s statement. Data showing manufacturing weakness from China and Europe boosted speculation policy makers will act to support the economy. Manufacturing in the U.S. unexpectedly contracted for a second month in July, indicating a mainstay of the economy was struggling to improve.

Investigating Moves

Dozens of stocks swung 10 percent or more without accompanying news in the first minutes of trading, whipsawing investors and spurring speculation that computers distorted prices for the second time in two weeks.

The New York Stock Exchange said it was reviewing trades in 148 securities between 9:30 a.m. and 10:15 a.m. New York time. Knight (KCG:US) Capital said it was investigating trading today.

Goodyear Tire & Rubber Co. (GT:US) rose more than 10 percent in the minutes after the 9:30 a.m. open in New York. Manitowoc Co. (MTW:US) gained 14 percent, Pandora Media Inc. climbed almost 11 percent and Level 3 Communications Inc. plunged 15 percent before the swings narrowed minutes later, according to data compiled by Bloomberg.

Knight, the Jersey City, New Jersey-based brokerage and one of the largest market makers for U.S. equities, is “looking into” the trades, spokeswoman Kara Fitzsimmons said in an e- mailed statement. Its own stock declined as much as 26 percent to $7.60, the lowest level since 2005.

It’s “yet another example of how the market structure plumbing is responsible for massive price distortions,” Joseph Saluzzi, co-head of equity trading at Themis Trading LLC in Chatham, New Jersey, said in an e-mail. “August 1st will be another day that will destroy investor confidence just like the May 6th flash crash.”

‘Not Aware’

Eric Ryan, spokesmen at NYSE, said in an e-mail “I’m not aware of anything.” Robert Madden, a spokesman for Nasdaq OMX, did not respond to a phone call and e-mail requesting comment.

Investors also watched corporate results. About 72 percent of the S&P 500 companies which reported second-quarter earnings beat estimates, data compiled by Bloomberg showed, even as 60 percent missed analysts’ sales forecasts.

Comcast added 3.2 percent to $33.60. The company improved its video guide, boosted Internet speeds and added phone features to fight competition from online video companies, satellite-television providers and Verizon Communications Inc.’s FiOS and AT&T Inc.’s U-verse. Comcast has curbed video losses for the seventh consecutive quarter on a year-over-year basis.

Boost Profits

Allstate added 6.1 percent to $36.38. Chief Executive Officer Tom Wilson, 54, has been seeking rate increases and changing terms of policies to boost profitability as severe weather increases claims costs and low interest rates put pressure on investment income from the company’s bond portfolio.

Casino companies gained as Macau gaming revenue rose 1.5 percent in July, beating estimates from some analysts who predicted a little changed or lower result on declining demand from mainland Chinese gamblers and the impact of a Hong Kong typhoon. Wynn Resorts Ltd. (WYNN:US) rose 1.3 percent to $95.01. Las Vegas Sands Corp. (LVS:US) gained 1.4 percent to $36.91.

Laboratory Corp. of America Holdings rallied 3.8 percent to $87.25. The company may be the target of a private equity buyout (LH:US), Reuters reported, citing Mergermarket, a provider of news and data on acquisitions.

Phillips 66

Phillips 66 (PSX:US) gained 1.3 percent to $38.07. The company, which became the largest U.S. independent refiner after its spinoff from ConocoPhillips earlier this year, said second- quarter profit rose 13 percent on higher fuel margins and announced a plan to buy back (PSX:US) shares valued at $1 billion.

Hyatt Hotels Corp. (H:US) jumped 2.1 percent to $36.30. The chain controlled by the Pritzker family said second-quarter earnings climbed 5.4 percent amid strong demand in major U.S. cities.

Avon Products Inc. (AVP:US) fell 2.5 percent to $15.11. The door-to- door cosmetics seller that rebuffed a takeover offer from Coty Inc. this year reported a 70 percent (AVP:US) decline in second-quarter profit amid a sales slump in Europe and China.

MasterCard Inc. (MA:US) lost 2.5 percent to $425.78. The company reported second-quarter sales of $1.82 billion, missing the average analyst estimate in a Bloomberg survey of $1.88 billion.

Facebook Inc. slumped as much as 3.9 percent to a record low of $20.87 The stock fell for a fourth straight day after the world’s largest social-networking service reported second- quarter results that showed slowing growth.

‘Madagascar 3’

DreamWorks Animation SKG Inc. (DWA:US) plunged 3.9 percent to $18.46. The independent film studio fell after second-quarter results (DWA:US) missed analysts’ estimates on lower-than-expected results related to “Madagascar 3.”

Career Education Corp. (CECO:US) tumbled 16 percent to $3.95. The for-profit college chain with more than 90 campuses fell a day after reporting a second-quarter loss and disclosing a regulatory investigation.

For the first time in more than two years, commodities, equities, bonds and the dollar posted a monthly gain, as the U.S. drought sent corn prices to a record and European Central Bank President Mario Draghi’s pledge to protect the euro buoyed stocks.

Monthly Returns

Raw materials led the increase as the S&P’s GSCI Total Return Index of 24 raw materials rose 6.4 percent in July, the most since October. The MSCI All-Country World Index (MXWD) of equities rallied at the end of the month for a 1.4 percent gain. The U.S. Dollar Index, a measure against six currencies, added 1.3 percent. Bonds of all types returned 1.4 percent on average, the most since December, Bank of America Merrill Lynch’s Global Broad Market Index shows.

The last time all four measures rose for a month was in April 2010, when concerns about Greece were heating up and U.S. economic reports were improving. While corn rose the most last month in almost a quarter century and wheat reached a four-year high, financial assets gained as policy makers worked to boost global growth.

Draghi’s euro pledge “brought some optimism that Europe is getting its act together,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in a phone interview. “Anything that would lower borrowing costs would be a positive from an economic standpoint. You want to see growth and you want to see an increase in corporate earnings. Those policy responses are being viewed as a way to get you there.”

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

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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Companies Mentioned

  • CMCSA
    (Comcast Corp)
    • $54.35 USD
    • -0.38
    • -0.69%
  • ALL
    (Allstate Corp/The)
    • $58.07 USD
    • -0.41
    • -0.71%
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