Bloomberg News

U.S. Stocks Rise as Industrial Production Increases

August 15, 2012

U.S. stocks rose, after a two-day decline in the Standard & Poor’s 500 Index, after a report showed industrial production increased in July.

Target Corp. (TGT:US), the second-largest U.S. discount retailer, gained 1.6 after profit topped estimates as sales gained at established locations. Deere & Co. (DE:US) dropped 6.8 percent as profit trailed analysts’ estimates and the largest maker of farm equipment cut its full-year earnings forecast. Staples Inc. (SPLS:US) tumbled 16 percent after reducing its sales forecast as the retailer assumes slower growth for in the U.S.

The S&P 500 rose 0.2 percent to 1,406.07 at 9:57 a.m. in New York. The Dow Jones Industrial Average added 8.01 points, or 0.1 percent, to 13,180.15 today.

Industrial production in the U.S. increased in July, propelled by a pickup in motor vehicle output and a rebound in utility use during the hottest month on record. A separate report showed manufacturing in the New York area unexpectedly contracted in August for the first time since October.

The S&P 500 slipped less than 0.1 percent yesterday. Intraday price swings in the benchmark index narrowed to a daily average of 0.7 percent from Aug. 6 through yesterday, the smallest fluctuation over a comparable period since January 2011, according to data compiled by Bloomberg.

The index has fluctuated around 1,400 for the past six trading sessions, with U.S. equity volume reaching the lowest level since at least 2008 excluding holidays and volatility sliding to a five-year low.

Awaiting Clues

Trading has slowed as vacationing traders awaited policy clues from the Fed’s summit at the end of the month and the European Central Bank meeting in September. The index has rebounded almost 10 percent from a five-month low on June 1 amid speculation global central banks will introduce further stimulus measures.

About 4.5 billion shares changed hands on all venues on Aug. 13, the lowest level in data compiled by Bloomberg going back four years that excludes the days surrounding New Year’s, Christmas, Thanksgiving and Independence Day. Volume averaged 5.9 billion shares a day this month, 12 percent below the average level during the first seven months of 2012.

The Chicago Board Options Exchange Volatility Index, known as the VIX, lost 7.1 percent to 13.70 on Aug. 13, the lowest level since June 2007. The VIX fell 2.3 percent to 14.51 today.

Target Gains

Target added 1.7 percent to $64.44. The retailer plans to boost sales growth by opening stores in Canada next year, its first expansion outside the U.S. Until then, Target has been working to spur sales by adding fresh food sections and offering customers incentives to spend with its credit card, which gives 5 percent off purchases.

National Oilwell Varco Inc. (NOV:US) climbed 1.5 percent to $77.39 after Warren Buffett’s Berkshire Hathaway Inc. added a stake during the second quarter, holding 2.84 million shares of the oilfield-equipment maker, according to a filing with the Securities and Exchange Commission.

JDS Uniphase rose 8 percent to $11.53 as the company late yesterday forecast first-quarter sales between $415 million and $435 million, compared with the average analyst estimate for $426.2 million at the time of the company’s release.

Deere lost 6.4 percent to $74.98 after reporting fiscal third-quarter profit that trailed analysts’ estimates after demand slowed outside the U.S. and Canada. Profit for the full year ending Oct. 31 will be $3.1 billion, Deere said, compared with its May forecast of $3.35 billion and the $3.33 billion average of 15 estimates.

Staples Tumbles

Staples tumbled 14 percent to $11.58. The retailer’s results in its second quarter were worse than anticipated. Sales will be unchanged this year compared to the year-earlier period, the Framingham, Massachusetts company said in a statement. The company had forecast growth in the low single-digits in May.

The S&P 500 may reach 1,500 this year as the economy picks up momentum in the fourth quarter, according to Byron Wien, vice chairman of Blackstone Group LP’s advisory services unit.

“Housing is bottoming, gasoline is down from the beginning of the year, 90 percent of the people in the country have jobs,” Wien said in an interview this morning on Bloomberg Television’s “In the Loop” show. “The European situation is getting better, not resolved, but getting better. The fiscal cliff will be deferred,” he said, referring to higher taxes and spending cuts that will take effect at year-end unless Congress acts. “There will be more good news than bad.”

Foreign Investors

Foreign investors are pouring money into U.S. equities, helping sustain a rally just as Americans take advantage of market gains to bail out. Foreign investors purchased a net $322.5 billion of U.S. stocks during the three years ended March 2012, based on the latest quarterly data from the U.S. Bureau of Economic Analysis.

During the same period, Americans pulled $251.1 billion from U.S. equity mutual funds, according to data compiled by the Investment Company Institute, a Washington-based trade group.

Foreign buying will likely continue, according to Chris Konstantinos at Riverfront Investment Group LLC, as U.S. stocks lure investors from overseas amid a contraction in Europe’s economy, the weakest Chinese growth since 2009 and more than a decade of deflation in Japan.

“America, structurally, is one of those attractive markets in the world,” Konstantinos, who helps oversee $3.2 billion as director of international portfolio management at Riverfront in Richmond, Virginia, said in a phone interview last week. “I look at all of them, and it’s hard for me to find markets that are better looking than the U.S.”

To contact the reporter on this story: Lu Wang in New York at lwang8@bloomberg.net

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


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Companies Mentioned

  • TGT
    (Target Corp)
    • $63.81 USD
    • -0.12
    • -0.19%
  • DE
    (Deere & Co)
    • $83.64 USD
    • -0.51
    • -0.61%
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