U.S. stocks rose, erasing earlier losses, as House Speaker John Boehner said he had constructive talks with President Barack Obama on the budget and would accept government revenue increases coupled with spending cuts.
Home Depot Inc. (HD:US) and Alcoa Inc. (AA:US) added at least 1.4 percent to pace gains in the biggest companies. Facebook Inc. (FB:US) climbed 6.3 percent as it expanded the roster of retailers that let users buy and send items to their friends on its website. Dell Inc. sank 7.3 percent as its revenue forecast missed estimates. Sears Holdings Corp. (SHLD:US) plunged 19 percent as the retailer posted a wider loss and its 23rd straight quarterly sales decline.
The Standard & Poor’s 500 Index rose 0.5 percent to 1,359.88 at 4 p.m. New York time. The Dow Jones Industrial Average (INDU) gained 45.93 points, or 0.4 percent, to 12,588.31, trimming its weekly drop to 1.8 percent. It capped a fourth week of losses, the longest losing streak since August 2011. Volume for exchange-listed stocks in the U.S. was 7.4 billion shares today, 22 percent above the three-month daily average.
“Any tidbit of hope on the fiscal cliff front would lead to a positive response,” said Walter “Bucky” Hellwig, who helps manage $17 billion of assets at BB&T Wealth Management in Birmingham, Alabama. “Because of the oversold condition of the market, any good news is going to cause a pop. Conversely, anything that’s viewed as negative in the negotiations is going to cause a downward move.”
President Obama began his first face-to-face talks with top Republicans and Democrats in Congress on reducing the deficit since his failed attempt to strike a grand bargain last year, saying voters are demanding a deal.
“What folks are looking for, I think all of us agree on this, is action,” Obama said at the start of the meeting today with House Speaker Boehner and other congressional leaders in the Roosevelt Room at the White House.
Concern about the so-called fiscal cliff drove the S&P 500 down 1.5 percent since Nov. 9. The index capped a second week of losses and trimmed its 2012 rally to 8.1 percent.
“The markets are very shaky,” former Federal Reserve Chairman Alan Greenspan told Bloomberg Television’s “In the Loop” program with Betty Liu. “The markets will crater if we run into any evidence that we can’t solve this problem,” he said. “If we get out of this with a moderate recession, I would say the price is very cheap. The presumption that we’re going to solve this problem without pain, I think, is grossly inappropriate.”
Oil rose on concern that the clash between Israel and Hamas will escalate into a wider conflict that would endanger Middle East crude shipments. Palestinian missiles landed in areas around Jerusalem and Tel Aviv and air-raid warnings sounded in both cities as Israel extended its bombing of the Gaza Strip and planned to increase its military call-up.
Investors also watched economic data today. Industrial production in the U.S. unexpectedly declined in October as superstorm Sandy knocked out power in the Northeast.
Twenty two out of 30 companies in the Dow gained today. Home Depot advanced 1.4 percent to $62.12. Alcoa increased 1.6 percent to $8.18.
Facebook added 6.3 percent to $23.56. Partners added include Brookstone Inc., Dean & Deluca Inc. and Fab.com Inc., Facebook said at a press conference yesterday in New York. “Tens of millions” of users in the U.S. can now access products via the gifting service, which was introduced in September with retailers such as Starbucks Corp. (SBUX:US) and 1-800-Flowers.com Inc.
Cablevision Systems Corp. (CVC:US) jumped 2.9 percent to $14.02. It hired JPMorgan Chase & Co. and Citigroup Inc. to seek buyers for its Bresnan Broadband Holdings LLC unit acquired in 2010, said two people familiar with the situation.
Gap Inc. (GPS:US) gained 1 percent to $33.59. The largest U.S. specialty-apparel retailer raised its full-year earnings forecast as sales in North America advanced.
OfficeMax Inc. (OMX:US) jumped 12 percent to $9.22. A company in which it owns a stake announced an initial public offering that could bring the office-supply retailer more than $300 million.
Nike Inc. (NKE:US) gained 1.9 percent to $92.59. The largest athletic-shoe maker agreed to sell its Cole Haan fashion brand to private-equity firm Apax Partners for $570 million as it focuses on faster-growing businesses. The company yesterday announced a 2-for-1 stock split and boosted its dividend by 17 percent.
Dell retreated 7.3 percent to $8.86. The No. 3 PC maker is struggling amid a deep slump in demand as companies wait to upgrade machines and consumers turn to smartphones and tablets like Apple Inc. (AAPL:US)’s iPad and iPhone to manage their work and personal lives.
Sears sank 19 percent to $47.49. The third-quarter net loss widened to $498 million, or $4.70 a share, from a loss of $421 million, or $3.95, a year earlier, Sears said yesterday in a statement. Sales dropped 5.8 percent to $8.86 billion, continuing a streak of declines that began in 2007.
Dynavax Technologies Corp. (DVAX:US) tumbled 47 percent to $2.44 after its hepatitis B vaccine Heplisav failed to win the backing of U.S. regulatory advisers as the drugmaker seeks to bring its first product to market.
Options traders are paying the most in 15 months to protect against swings in the largest U.S. companies relative to the S&P 500 as earnings growth declines.
The CBOE OEX Volatility Index, which tracks the cost of S&P 100 Index options, has jumped 56 percent through yesterday since its low on Sept. 21 to 19.28. That’s the highest level since August 2011 relative to the CBOE Volatility Index of S&P 500 contracts, data compiled by Bloomberg show. The S&P 100 slipped 8.4 percent since its Oct. 4 high, compared with a 7.4 percent decline for the U.S. equity benchmark.
Profits for the biggest U.S. companies are forecast to slow more than smaller ones amid Europe’s debt crisis and China’s weakest economic expansion in 14 quarters. Data yesterday showed that the euro-area economy entered a recession for the second time in four years as governments imposed tougher budget cuts.
“There’s been a deafening silence among optimists regarding revenue growth for blue-chip companies,” Chad Morganlander, a Florham Park, New Jersey-based fund manager at Stifel Nicolaus & Co., which oversees about $138 billion, said by phone, referring to the largest U.S. companies. “The global macro situation is disconcerting, which is forcing market speculators into hedging their portfolios.”
International purchases of U.S. financial assets plunged in September as confidence grew that Europe was beginning to solve its debt crisis. Net buying of long-term equities, notes and bonds totaled $3.3 billion during the month, down from net purchases of $90.3 billion in August, the Treasury Department said today in Washington. Economists surveyed by Bloomberg projected net buying of $50 billion of long-term assets, according to the median estimate.
“The slowdown in the pace of the capital inflows was due in part to the improvement in global sentiment toward the European financial crisis following the European Central Bank’s quantitative easing announcement,” Millan Mulraine, senior U.S. strategist for TD Securities Inc. in New York, said before the report was released.
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