Bloomberg News

U.S. Stocks Snap 3-Day Retreat as Jobless Claims Drop

November 21, 2013

U.S. Stocks Snap Three-Day Retreat on Jobless Claims, Buybacks

Traders work on the floor of the New York Stock Exchange on Nov. 18, 2013. Photographer: Richard Drew/AP Photo

U.S. stocks rose, sending the Dow Jones Industrial Average to its first close above 16,000, as data showed improvement in the job market and companies including Union Pacific Corp., Johnson Controls Inc. and Ace Ltd. said they would repurchase shares.

Union Pacific, Johnson Controls and Ace advanced at least 1.4 percent. Micron Technology Inc. rallied 6.3 percent, the most since August, as David Einhorn, president of Greenlight Capital Inc., recommended the shares. General Motors Co. (GM:US) gained 1.1 percent after the U.S. Treasury Department said it plans to sell its remaining stake in the company. Target Corp. (TGT:US) lost 3.5 percent after reporting profit that trailed analysts’ estimates on a loss in its Canadian unit.

The Standard & Poor’s 500 Index increased 0.8 percent to 1,795.85 at 4 p.m. in New York, erasing most of the decline from the past three days. The Dow average rose 109.17 points, or 0.7 percent, to a record 16,009.60.

“After three consecutive negative days it’s reasonable to expect a breather at least in the beginning of the day,” Lawrence Creatura, a Rochester, New York-based fund manager at Federated Investors Inc., which oversees about $364 billion, said in a phone interview. “There is some good news in the labor report too in that it does indicate a degree of improvement.”

Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising. Stock funds won $172 billion in the year’s first 10 months, the largest amount since they got $272 billion in all of 2000, according to Morningstar Inc. estimates.

Fund Flows

The move marks a reversal from the four years through 2012, when investors put $1 trillion into fixed income as the financial crisis drove many to redeem from stocks and miss out as the S&P 500 almost tripled from its low. The U.S. equity benchmark traded for about 17 times its companies’ reported earnings at its last record on Nov. 15, the highest valuation since May 2010.

The S&P 500 rose above 1,800 for the first time on Nov. 18 before erasing the advance. The equity benchmark dropped during the first three days of the week after forecasts from Best Buy Co. and Campbell Soup Co. disappointed investors and minutes from a Federal Reserve meeting indicated the central bank may reduce monetary stimulus in coming months.

Jobless Claims

U.S. jobless claims in the week ended Nov. 16 dropped by 21,000 to 323,000, the fewest since the week ended Sept. 28, from a revised 344,000 the previous week, the Labor Department said today in Washington. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 335,000.

American consumers became less pessimistic in November about the economic outlook as the effect of last month’s partial government shutdown dissipated, according to data from the Bloomberg Consumer Comfort Index released. The gap between positive and negative expectations for the economy shrank to minus 14 from a two-year low of minus 31 in October.

Financial stocks in the S&P 500 (SPX) collectively climbed 1.5 percent, the most among 10 main groups. Ace, an insurer with operations in more than 50 nations, led gains in the industry with a 3.8 percent advance to $101.53. The company said that it is targeting $1.5 billion in share repurchases through the end of next year.

Stock Buybacks

Johnson Controls, the largest U.S. auto-parts maker, climbed 4.4 percent to $50.35 after boosting a stock-repurchase program by $3 billion. Union Pacific Corp. added 1.4 percent to $160.78. The largest U.S. railroad authorized a buyback plan of as much as $9.5 billion in stock.

GM increased 1.1 percent to $38.12. The Treasury said it plans to sell its 31.1 million common shares in the company, as soon as year end depending on market conditions and trading volumes. The wind-down of the U.S. stake in GM would bring to an end a linchpin of the government’s Troubled Asset Relief Program.

Target dropped 3.5 percent to $64.19. The second-largest discount retailer in the U.S. is generating lower sales in Canada than projected as rivals cut prices. Earnings slid to 54 cents a share, from 96 cents a share a year earlier, the company said.

Green Mountain

Green Mountain Coffee Roasters Inc. (GMCR:US) jumped 14 percent to $70.57. The maker of Keurig-brand single-cup pods and machines reported fourth-quarter profit that surpassed analysts’ estimates as K-Cup and brewer sales rose. Excluding some items, the company reported profit (GMCR:US) of 89 cents a share. Analysts estimated 75 cents, on average.

Micron rallied 6.3 percent to $19.99 for the biggest gain in the S&P 500. Einhorn told investors to buy the shares at the Robin Hood Investors Conference today, according to a person with knowledge of the matter, who asked not to be identified because the presentation was private and closed to media.

Williams-Sonoma Inc. gained 7.6 percent to $59.74. The home accessories retailer raised its profit forecast after same-store sales rose faster than analysts’ estimated in the third-quarter.

Philip Morris International Inc. (PM:US) fell 3 percent to $86.60. Goldman Sachs Group Inc. cut its rating on the shares. The world’s largest publicly traded tobacco company said yesterday that fewer shipments to Europe and Russia will crimp profit growth.

GameStop Corp. lost 6.9 percent to $48.80. The video game retailer forecast fourth-quarter profit below analysts’ estimates.

Dollar Tree Inc. (DLTR:US) fell 4.5 percent to $56.28. The retailer reported third-quarter profit that fell short of analysts’ estimates and lowered the top end its full-year revenue forecast.

To contact the reporter on this story: Nick Taborek in New York at ntaborek@bloomberg.net

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


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Companies Mentioned

  • GM
    (General Motors Co)
    • $34.53 USD
    • -0.04
    • -0.12%
  • TGT
    (Target Corp)
    • $60.33 USD
    • 1.08
    • 1.79%
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