Bloomberg News

U.S. Stocks Halt 4-Day Drop Amid Retail Reports, Fed Bets

August 20, 2013

U.S. Stock Futures Little Changed Amid Retail Reports, Fed Bets

A trader works on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

Most U.S. stocks rose, with the Standard & Poor’s 500 snapping a four-day losing streak, as retailers’ results surpassed estimates and investors awaited signals on stimulus measures from the Federal Reserve.

Best Buy Co. rallied 13 percent after posting quarterly sales that exceeded projections. TJX Cos. added 6.9 percent as profit beat forecasts. Urban Outfitters Inc. (URBN:US) jumped 8.2 percent as Wedbush Securities Inc. raised its rating on the stock. Zillow Inc. dropped 4.8 percent after the operator of the largest U.S. real-estate website announced a share sale.

The S&P 500 rose 0.4 percent to 1,652.35 at 4 p.m. in New York. The Dow Jones Industrial Average fell 7.75 points, or less than 0.1 percent, to 15,002.99, erasing earlier gains of as much as 0.4 percent. Almost 5.3 billion shares changed hands on U.S. exchanges today, 16 percent below the three-month average, as more than three stocks rose for each that fell.

“We had some pretty good retail earnings, it just shows the consumer is not dead and that things are moving in the right direction,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a phone interview. His firm manages about $1.7 billion. “Everyone is still focused on Fed tapering. We remain cautiously bullish with pretty full exposure to stocks.”

The S&P 500 lost 2.9 percent in the previous four sessions, dropping each day for the longest losing streak this year, as speculation mounted that the Fed will start to taper its quantitative-easing program. The Dow extended its longest losing streak since December to five days.

Fed Minutes

The central bank will publish the minutes from the Federal Open Market Committee’s July 30-31 meeting tomorrow. Investors will scrutinize the discussions for anything that may indicate when the Fed will reduce the pace of its monthly asset purchases. Officials meet in Jackson Hole, Wyoming this week to discuss monetary policy.

They will start to scale back bond buying next month, according to 65 percent of economists surveyed by Bloomberg from Aug. 9-13. The median estimate suggested the first move will be to reduce purchases to $75 billion a month.

The Fed has said it will weigh economic data to decide the timing and pace of any reduction. A report tomorrow will show sales of existing homes rose in July and data Aug. 22 will indicate initial jobless claims increased last week, according to estimates compiled by Bloomberg.

Data today showed U.S. same-store sales rose 0.2 percent month over month in the Aug. 17 week. Sales at stores open at least a year rose 3.4 percent compared to a year earlier, according to the latest data released by Johnson Redbook Research.

Bull Market

The Fed stimulus has helped propel the S&P 500 (SPX) up more than 150 percent from its bear-market low in 2009. The gauge closed at a record on Aug. 2, and dropped 3.7 percent through yesterday.

“It’s just been a pretty down couple of weeks,” Craig Goryl, a portfolio manager at Cabot Money Management Inc., which oversees $500 million in Salem, Massachusetts, said by telephone. “Sentiment just went a little bit too far in one direction, and this tends to happen that we have a bounce back.”

Investors have also been watching corporate earnings for signs of strength in the economy. Of the 467 companies in the S&P 500 that have reported results this period, 72 percent have posted earnings that surpassed estimates.

The Chicago Board Options Exchange Volatility Index, or VIX, fell 1.3 percent to 14.91. While the gauge has advanced 22 percent since a low on Aug. 5, it remains 20 percent lower for the year.

Broad Rally

Eight of 10 main industries in the S&P 500 advanced. Utility stocks jumped 0.8 percent, snapping a seven-day losing streak that erased 5.8 percent from the S&P 500 Utilities Sector Index. Sempra Energy rallied 1.4 percent.

Shares in producers of consumer discretionary items jumped 0.9 percent as a group, with retailers pacing the gains.

Best Buy surged 13 percent to $34.80, the highest level in six months. The world’s largest consumer-electronics retailer posted its biggest quarterly profit since the period ended February 2011 after the company $65 million in annual costs. Best Buy also expanded store space for Samsung Electronics Co.’s gadgets and devices running Microsoft Corp.’s Windows 8 operating system.

TJX jumped 6.9 percent to $54.24. The retailer raised its full-year profit forecast (TJX:US) after reporting second-quarter earnings and sales that surpassed analysts’ estimates.

Urban, Penney

Urban Outfitters rallied 8.2 percent to $43.19. The retailer posted second-quarter earnings (URBN:US) of 51 cents a share, beating the average analyst estimate by 3 cents. The Philadelphia-based company also said comparable sales during the period rose 9 percent, more than the 8.1 percent increase projected by analysts.

J.C. Penney added 6 percent to $14.01. The department-store chain posted second-quarter sales (JCP:US) that fell more slowly than a year earlier, showing Chief Executive Officer Mike Ullman is making progress in arresting the department-store chain’s slide.

Hedge-fund manager J. Kyle Bass, the founder of Hayman Capital Management LP in Dallas, is betting on a J.C. Penney comeback, accumulating a long position in the stock over the past two weeks, according to a person, who asked not to be named because the information is private. J.C. Penney had slumped 33 percent (JCP:US) this year through yesterday as an overhaul failed to attract new shoppers, while alienating existing customers.

Pork Sausages

Bob Evans Farms Inc. rose (BOBE:US) 10 percent to a record $52.48. The maker of pork sausages reported first-quarter earnings that beat analysts’ estimates and boosted its dividend.

Dick’s Sporting Goods Inc. (DKS:US) slid 7.8 percent to $46.64. The retailer posted second-quarter earnings and sales that missed analysts’ estimates (DKS:US) as the company said it faced a “sluggish consumer environment” and cut its profit forecast for the year.

Zillow retreated 4.8 percent to $80.71. The Seattle-based company said it will sell $411.9 million in stock, with Zillow and some holders offering 5.02 million shares at $82 each. The company agreed yesterday to buy StreetEasy, a residential real-estate site with about 1.2 million monthly unique users, for $50 million in cash.

Barnes & Noble Inc. plunged 12 percent to $14.61, the lowest since Feb. 22. Founder Leonard Riggio suspended his efforts to bid for the company’s retail business, the company said in a filing today.

Riggio, who’s also the company’s chairman and largest shareholder, said in February that he planned to make an offer to buy the company’s retail assets, which include its 680 stores and website.

Medtronic Inc. (MDT:US)fell (MDT:US) 2.4 percent to $52.83. The world’s biggest maker of heart-rhythm devices posted fiscal first-quarter sales that missed analysts’ estimates on weaker-than-expected demand for defibrillators and the InFuse bone-growth product.

To contact the reporters on this story: Alex Barinka in New York at abarinka2@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

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


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Companies Mentioned

  • URBN
    (Urban Outfitters Inc)
    • $40.26 USD
    • 0.01
    • 0.04%
  • TJX
    (TJX Cos Inc/The)
    • $59.54 USD
    • 0.04
    • 0.07%
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