U.S. stocks rose for the week, sending the Dow Jones Industrial Average (INDU) rallying the most since January, as concerns over Syria and possible cuts to central bank stimulus abated and China’s economy strengthened.
Walt Disney Co. jumped 8.6 percent on share buyback plans. Verizon Communications Inc. climbed 3.1 percent as the phone carrier sold $49 billion of bonds in the biggest corporate debt offering ever. Visa Inc., Goldman Sachs Group Inc. and Nike Inc. rose at least 4.5 percent after being picked to join the Dow. Apple Inc. tumbled 6.7 percent as its new iPhones failed to soothe investor concern over slowing growth.
The Standard & Poor’s 500 Index climbed 2 percent to 1,687.99 for the week, the biggest increase since July 12. The Dow advanced 453.56 points, or 3 percent, to 15,376.06, capping the second-best week this year.
“We’ve been given a reprieve on the Syrian issue and that’s allowed the market to focus on the data and to focus on the Fed meeting next week,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by phone. Reports from China have “helped underpin a pickup in confidence that the global economy is beginning overall to march higher.”
Equities rose amid signs tensions over Syria are easing, with officials from the U.S. and Russia negotiating in Geneva for an agreement on Syria surrendering its chemical weapons. President Barack Obama had said he would ask Congress to authorize the use of military force against President Bashar al-Assad’s regime following a suspected chemical-weapons attack on Aug. 21 that the U.S. says killed more than 1,400 people.
Better-than-forecast data on Chinese exports, industrial output and retail sales bolstered optimism that the world’s second-largest economy is gaining momentum after the slowest pace in 13 years in 2012.
In the U.S., reports showed retail sales rose less than forecast in August while consumer confidence declined this month to the lowest level since April, indicating household spending may take time to pick up.
Given the weakness in recent economic data, “the market is discounting a token taper,” Krosby said. “The assumption is that if the Fed introduces the taper, it’ll be mild and the guidance will be more dovish than hawkish.”
The Fed will reduce its $85 billion in monthly bond buying by $10 billion to $75 billion after its Sept. 17-18 meeting, according to the median forecast of economists in a Bloomberg News survey. Three rounds of central bank stimulus helped push the S&P 500 as much as 153 percent higher from its March 2009 low.
While concern over reduced stimulus contributed to a retreat of as much as 4.6 percent in the S&P 500 from its August record, investors now see the anticipated cut in bond purchases will be no big deal if it goes ahead next week, according to a Bloomberg Global Poll.
Fifty-seven percent of those surveyed say they don’t expect a sudden change in the markets on any tapering action. Eight percent see a rally on such news, while just under a third are looking for declines, based on the Sept. 10 poll of 900 investors, traders and analysts who are Bloomberg subscribers.
Options traders scaled back hedges against potential stock losses. The Chicago Board Options Exchange Volatility Index, or VIX (VIX), dropped 11 percent to 14.16 for the week, the most since July 5. The equity volatility gauge has fallen 21 percent this year while the S&P 500 is up 18 percent.
All 10 S&P 500 main industries rallied as industrial, consumer-discretionary and raw-materials companies rose the most, climbing more than 2.6 percent. The Nasdaq Composite Index advanced 1.7 percent, reaching a 13-year high on Sept. 10.
Disney surged 8.6 percent to $66.69. The world’s biggest entertainment company plans to buy back $6 billion to $8 billion of stock starting next year, stepping up efforts to increase investor returns as capital spending winds down.
Verizon advanced 3.1 percent to $47.76. The second-biggest U.S. telephone carrier sold bonds with maturities ranging from three to 30 years to help fund its buyout of partner Vodafone Group Plc.’s 45 percent stake in the largest and most profitable U.S. wireless carrier, Verizon (VZ:US) Wireless.
Visa, the largest payment network, climbed 7 percent to $189 and Goldman Sachs, the fifth-biggest U.S. bank by assets, advanced 4.7 percent to $164. Nike, the world’s largest maker of sporting goods, rose 4.5 percent to $67.91.
The three companies will be added to the Dow after the close on Sept. 20, replacing Bank of America Corp., Hewlett-Packard Co. and Alcoa Inc. in the biggest reshuffling since April 2004. Bank of America added 0.9 percent to $14.49. Hewlett-Packard slipped 1.6 percent to $22.07. Alcoa gained 2 percent to $8.08.
Delta Air (DAL:US) Lines Inc. jumped 13 percent to $22.47. The world’s second-largest carrier joined the S&P 500 after reducing debt and restarting dividend payments and a stock buyback in its comeback from bankruptcy.
International Business Machines Corp. rallied 5 percent to $192.17. The world’s largest computer-services provider agreed to sell its customer-care outsourcing business to Synnex Corp. for $505 million to focus on more profitable investments.
Molex (MOLX:US) Inc. soared 32 percent, the most in the S&P 500, to $38.65. The maker of electronic components for products such as Apple’s iPhone agreed to be bought for $7.2 billion by Koch Industries Inc., the holding company controlled by the billionaire Koch brothers.
Apple slumped 6.7 percent to $464.90 for the worst weekly decline since April. The company unveiled two iPhones that were criticized by analysts as lacking enough new features or a sufficiently low price to attract a broad range of new customers. The stock has dropped 13 percent this year amid concern increasing competition and a lack of breakthrough products will hurt profit.
Urban Outfitters Inc. (URBN:US) plunged 9.8 percent to $38.38 for the biggest retreat in the S&P 500. The teen-clothing retailer said third-quarter comparable-store sales (URBN:US) have been rising at a “mid-single-digit” rate. That missed an estimate for a “high-single digit” rate by Janney Montgomery Scott LLC.
Newmont Mining Corp., the largest U.S. gold producer, dropped 7.3 percent to $28.20 as the precious metal posted the biggest weekly decline since June.
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