Bloomberg News

U.S. Stocks Rise as Economic Data Overshadow Syria Crisis

September 03, 2013

U.S. stocks rose, following the worst month since May 2012 for the Standard & Poor’s 500 Index, as better-than-forecast economic data overshadowed concern over possible military action against Syria.

CBS Corp. (CBS:US) jumped 4.7 percent after the broadcaster’s programs returned to Time Warner Cable Inc. Microsoft Corp. slipped 4.6 percent after agreeing to buy Nokia Oyj’s mobile-phone business and license its patents for 5.44 billion euros ($7.2 billion). Verizon Communications Inc. dropped 2.9 percent after agreeing to buy Vodafone Group Plc’s 45 percent stake in Verizon Wireless for $130 billion.

The S&P 500 climbed 0.4 percent to 1,639.77 at 4 p.m. in New York, paring an earlier advance of as much as 1.1 percent. The Dow Jones Industrial Average added 23.65 points, or 0.2 percent, to 14,833.96. About 6.6 billion shares changed hands, the highest level since Aug. 1. U.S. exchanges were closed yesterday for the Labor Day holiday.

“The economy, things are coming in pretty good,” Karyn Cavanaugh, a vice president and market strategist at ING U.S. Investment Management in New York, said in a phone interview. Her firm oversees about $190 billion. “We know there are a lot tensions in the Middle East. If you wait for the dust to settle in order to get in the market, you’re going to be waiting forever. Look at the fundamentals and if the fundamentals are increasing, that’s your directional signal.”

Global stocks rose yesterday as data showed China’s manufacturing index increased to a 16-month high in August, while other gauges showed euro-area factory output expanded at a faster pace than initially estimated in August.

Economic Reports

Among today’s reports in the U.S., the Institute for Supply Management’s manufacturing index increased to 55.7 in August, the strongest since June 2011, from 55.4 a month earlier. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 54. Another report showed construction spending in the U.S. increased in July to the highest level in four years, propelled by gains in residential real estate.

Equities pared gains after President Barack Obama won endorsement from the two top Republicans in the U.S. House for taking action against Syria. Backing from Speaker of the House John Boehner and Majority Leader Eric Cantor will help the president as he makes his case to lawmakers who’ve questioned the evidence presented by the administration that the Syrian government was behind a sarin gas attack last month or whether the U.S. has a vital interest in the region.

Obama urged Congress to take a “prompt” vote authorizing military action. He announced on Aug. 31 that he’d seek support from Congress, after previously saying he had authority to order a military mission.

Fed, Syria

The benchmark index fell 3.1 percent in August amid concern the Federal Reserve would reduce its monthly bond purchases and the U.S. would take military action against Syria.

Investors in August pulled money from exchange-traded funds at the fastest rate since January 2010, with withdrawals reaching $17.7 billion, according to data compiled by Bloomberg from about 1,500 funds. The SPDR S&P 500 ETF Trust, the largest ETF for American equities, experienced $14 billion in outflows, the data show.

Better-than-estimated corporate earnings and monetary stimulus from the Fed helped the index rally as much as 153 percent from a 12-year low in 2009, with the gauge reaching a record 1,709.67 on Aug. 2.

The Fed holds a policy meeting on Sept. 17-18 to decide whether to slow the pace of its bond-buying program. Chairman Ben S. Bernanke has said that the central bank may reduce its monthly purchases if the employment outlook substantially improves and the economy grows in line with forecasts.

100-Day Average

The S&P 500 failed to stay above its average in the past 100 days after briefly surpassing the threshold that’s watched by some analysts to gauge the market’s trends. The index closed below the trend measure for a fifth session, the longest stretch since Nov. 21, data compiled by Bloomberg show. The average was at 1,640 recently.

Financial, consumer-discretionary and health-care shares climbed more than 0.6 percent for the biggest gains among 10 S&P 500 industries. Utilities and phone companies had the biggest declines, dropping at least 1.1 percent.

CBS rose 4.7 percent to $53.50. The broadcaster’s programs returned to Time Warner Cable in New York, Los Angeles and Dallas after the companies ended a one-month blackout, in time for the start of National Football League regular-season games.

Cable Agreement

Time Warner Cable agreed to pay a significant increase for the right to transmit CBS signals, according to people with knowledge of the situation who asked not to be identified because the terms are private. Shares of Time Warner Cable added 1.8 percent to $109.25.

Citigroup (C:US) Inc. climbed 2.2 percent to $49.37. The third-biggest U.S. bank by assets has sold more than $6 billion in private-equity and hedge-fund assets in the past month, the Wall Street Journal reported, citing unidentified people familiar with the transactions.

Bank of America Corp. added 0.9 percent to $14.25. The lender confirmed plans to sell its remaining stake in China Construction Bank Corp. for a gain of about $750 million before taxes. The second-biggest U.S. lender first invested in Construction Bank in 2005.

Apple (AAPL:US) Inc. rose 0.3 percent to $488.58, trimming an early rally of as much as 2.8 percent. The world’s largest technology company said it will hold a Sept. 10 event, when it’s projected to announce new iPhones.

J.C. Penney Co. advanced 1.9 percent to $12.72. Hayman Capital Management LP reported a 5.2 percent passive stake in the department store chain that is seeking to rebound from its worst sales year in more than two decades.

Increased Takeovers

Stocks gained as the U.S. market is poised for the busiest month of takeovers since October 2012. More than $130 billion of mergers and acquisitions have been announced since the end of August, data compiled by Bloomberg show.

Jarden Corp. jumped 10 percent to $47.43. The company agreed to buy Yankee Candle for $1.75 billion, making its biggest acquisition to add the 43-year-old scented candle maker to its collection of more than 120 consumer brands.

More acquisitions are “indicative of increased confidence in the corporate space in that they view opportunities to take advantage of and feel comfortable using some of their capital to do so.” Ethan Anderson, senior portfolio manager at Rehmann Financial in Grand Rapids, Michigan, said in a phone interview. His firm oversees about $1.5 billion.

Microsoft, Verizon

Microsoft slid 4.6 percent to $31.88. The maker of the Windows operating system will pay 3.79 billion euros for Nokia’s devices and 1.65 billion euros for its patents, according to a statement from the companies. Microsoft is deepening a push into hardware as dwindling computer sales sap demand for the programs that made it the world’s largest software maker.

Nokia’s U.S.-traded shares surged 31 percent to $5.12.

Verizon lost 2.9 percent to $46.01. Verizon will get full control of the most profitable U.S. mobile-phone carrier in the biggest acquisition in more than a decade. The deal, sought by Verizon since at least 2004, implies a total value for Verizon Wireless of almost $290 billion -- larger than the market capitalization of Google Inc.

The Chicago Board Options Exchange Volatility Index (VIX), or VIX, fell 2.4 percent to 16.61 today, after a 26 percent rally in August. Options strategists from JPMorgan Chase & Co. to Weeden & Co. are predicting that U.S. equity volatility will extend its increase in September after posting its biggest monthly advance in more than a year.

September Volatility

JPMorgan said in an Aug. 29 note that volatility is likely to increase in September and October, and recommended buying puts on global stocks gauges including the S&P 500. Weeden told investors to implement a bearish strategy using October contracts on a security tracking the Russell 2000 Index. The VIX has fallen every September in years when volatility was below its historical average at the start of the month, data since 1996 compiled by Bloomberg show.

“There are a number of catalysts that could drive volatility higher in September such as an escalation in the Syrian crisis, further deterioration in emerging markets, or larger-than-expected tapering by the Fed,” Mandy Xu, a New York-based equity-derivatives strategist at Credit Suisse Group AG, said in an Aug. 29 interview.

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

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


Cash Is for Losers
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • CBS
    (CBS Corp)
    • $53.67 USD
    • 0.33
    • 0.61%
  • C
    (Citigroup Inc)
    • $53.52 USD
    • -0.14
    • -0.26%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus