Bloomberg News

U.S. Stocks Rise on China Amid American Budget Talks

December 10, 2012

U.S. stocks advanced, after the longest weekly rally in the Standard & Poor’s 500 Index since August, as economic data in China beat estimates and investors watched the latest developments in American budget talks.

McDonald’s Corp. (MCD:US), the largest restaurant chain, added 1.1 percent as its November sales rose 2.4 percent globally. Cliffs Natural Resources Inc. (CLF:US) and Newmont Mining Corp. (NEM:US) rose at least 1.5 percent to pace gains in commodity producers. American International Group Inc. slid 2.3 percent after the insurer said superstorm Sandy will cost the company about $1.3 billion.

The S&P 500 rose less than 0.1 percent to 1,418.55 at 4 p.m. New York time. The Dow Jones Industrial Average added 14.75 points, or 0.1 percent, to 13,169.88. About 5.3 billion shares changed hands on U.S. exchanges, or 15 percent below the three- month average, according to data compiled by Bloomberg.

“China hit that trough and is starting to see an acceleration of growth,” said Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a phone interview. “As far as our market goes, I don’t think there’s anything out there right now. It’s waiting on the politicians.”

China’s stocks rose the most among Asian equity markets today as the Shanghai Composite Index jumped to a four-week high after factory output and retail sales data beat economists’ estimates. U.S equities fell earlier today as Italian Prime Minister Mario Monti said he lost support and will resign.

Budget Talks

In the U.S., lawmakers from both parties are leaving rhetorical room for a split-the-difference agreement with President Barack Obama on a U.S. budget deal. The president and House Speaker John Boehner met one-on-one yesterday at the White House, with representatives for the two leaders offering no details of the negotiations yet issuing identical statements afterward that “the lines of communication remain open.”

McDonald’s added 1.1 percent to $89.41. Analysts projected a gain of 0.2 percent for sales at stores open at least 13 months, the average of 14 estimates compiled by Consensus Metrix. Sales in the U.S. increased 2.5 percent, the Oak Brook, Illinois-based company said today in a statement. Analysts anticipated a drop of 0.6 percent.

Commodity shares gained. Cliffs Natural added 4.6 percent to $30.86. Newmont Mining increased 1.6 percent to $45.11.

Halozyme Therapeutics Inc. (HALO:US) added 3.5 percent to $5.94 after a filing by partner Roche Holding AG with European regulators triggered a $4 million milestone payment.

Rating Upgrade

Comtech Telecommunications Corp. (CMTL:US) climbed 3.9 percent to $25.06. The satellite equipment maker that derives about half its revenue from the U.S. government rose after a rating upgrade by JPMorgan Chase & Co.

AIG (AIG:US) lost 2.3 percent to $33.36. The company will make a capital contribution of $1 billion to its U.S. property-casualty subsidiaries, the New York-based insurer said. Sandy’s cost was about $2 billion before tax, AIG said. Sandy made landfall in New Jersey in October and damaged homes, vehicles and commercial property while interrupting business in states including New York.

The S&P 500 Retailing Index dropped 1.5 percent in the biggest decline among 24 groups. Priceline.com Inc. (PCLN:US) retreated 5 percent to $625.96. The online travel service was downgraded to hold from buy at Deutsche Bank AG by equity analyst Ross Sandler. The 12-month share-price estimate is $710.

Options Traders

Options traders are sending bearish contracts on Dell Inc. (DELL:US) to the lowest level in seven years, reducing hedges after the stock plunged 29 percent this year and the third-biggest personal computer maker took steps to expand into new businesses.

Puts protecting against a 10 percent decline (DELL:US) in the shares cost 0.98 point more than calls betting on a 10 percent gain, based on three-month data compiled by Bloomberg. The price relationship known as skew reached 0.38 on Nov. 15, the lowest since August 2005. While Dell shares have climbed (DELL:US) 18 percent since reaching a 3 1/2-year low on Nov. 16, the stock is trading near its cheapest level compared with analysts’ profit estimates since 2009.

Dell is expanding with acquisitions in other businesses as customers turn to smartphones and tablets and demand for PCs declines. Goldman Sachs Group Inc. last week recommended buying the shares on speculation the company may be acquired.

Dell is buying companies that are “very high-margin, very high-growth,” Brian Frank, a money manager at Frank Capital LLC, which oversees $25 million, said in a Dec. 3 interview at Bloomberg’s headquarters. The New York-based investment firm has 3.2 percent of its assets in Dell, making the stock its ninth- largest holding, according to Frank.

To contact the reporters on this story: Rita Nazareth in New York at rnazareth@bloomberg.net; Adria Cimino in Paris at acimino1@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net; Andrew Rummer at arummer@bloomberg.net


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Companies Mentioned

  • MCD
    (McDonald's Corp)
    • $97.05 USD
    • -0.12
    • -0.12%
  • CLF
    (Cliffs Natural Resources Inc)
    • $9.22 USD
    • -0.55
    • -5.97%
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