U.S. stocks rose, following the largest weekly gain this year for the Standard & Poor’s 500 Index, before Federal Reserve Chairman Janet Yellen delivers her first report on monetary policy tomorrow.
Apple Inc. (AAPL:US) gained 1.8 percent as activist investor Carl Icahn backed away from his push to increase share repurchases at the iPhone maker. Yelp Inc. (YELP:US) jumped 1.9 percent after a person familiar with the matter said Yahoo! Inc. will use the reviews provider to add context to its search results. McDonald’s Corp. slid 1.1 percent as sales at its established U.S. stores fell for the third straight month.
The S&P 500 rose 0.2 percent to 1,799.84 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 7.71 points, or 0.1 percent, to 15,801.79. About 6.2 billion shares changed hands on U.S. exchanges, 1.6 percent below the three-month average.
“We’re pretty close to the end of earnings season, so at this point people will start focusing on macro economic news again, for better or worse,” John Carey, a fund manager at Pioneer Investment Management Inc., a Boston-based firm that manages about $220 billion worldwide, said in a phone interview. “The general expectation is right now that Yellen will continue, at least for a time, the current policies with regard to tapering and very low short-term rates. As long she signals status quo, the markets will relax.”
The S&P 500 finished last week with its best two-day rally since October, gaining 2.6 percent amid optimism that economic growth is robust enough to weather central bank stimulus cuts even as data showed weaker-than-forecast hiring. Equities had the biggest one-day drop since June on Feb. 3 as manufacturing growth in the U.S. and China weakened more than estimated amid a rout in emerging markets.
The Fed has already decided to slow the pace of its asset-purchase program twice, reducing its monthly buying of bonds to $65 billion from $85 billion in 2013. Three rounds of stimulus from the Fed have helped push the S&P 500 as much as 173 percent higher from a 12-year low in 2009.
The Fed is studying employment and other economic data to determine when next to taper its stimulus program. The Labor Department’s Feb. 7 report showed that payrolls rose by a less-than-projected 113,000 in January, while the unemployment rate unexpectedly dropped to the lowest level in more than five years.
Yellen will speak on monetary policy and the outlook for the economy tomorrow for the first time after being sworn in as the central bank’s head on Feb. 3. The Fed chairman will testify before the House Financial Services Committee in a semi-annual report.
“It will be interesting to watch what her response will be on what do you make of two weak payroll numbers in a row, and what do you make of the recent volatility in the emerging markets,” Jim Russell, who helps oversee $115 billion as a senior equity strategist for U.S. Bank Wealth Management, said by phone.
Investors are also awaiting financial results this week from 56 companies in the S&P 500, including Cisco Systems Inc. and American International Group Inc. Of the index members to have reported their results this season, 76 percent beat analysts’ profit estimates, while 66 percent exceeded sales forecasts, data compiled by Bloomberg show.
Profit for the benchmark’s stocks rose by 8.3 percent in the fourth quarter of 2013 and revenue by 2.7 percent, according to analyst estimates compiled by Bloomberg.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 (SPX) options known as the VIX, slipped 0.2 percent to 15.26 today, following a two-day slide of 23 percent.
Seven of 10 main S&P 500 industries advanced today, with health-care companies and utilities climbing at least 0.7 percent to pace gains. Industrial and energy companies fell at least 0.5 percent for the biggest declines.
Yelp rallied 1.9 percent to $91.11. Yahoo, the U.S.’s biggest Web portal, will include Yelp’s ratings of local businesses in its search results, according to a person with knowledge of the deal, who asked not to be identified because the matter is private. The Wall Street Journal reported on Feb. 9 that the service may start within weeks. Yahoo advanced 1.4 percent to $37.76.
Apple gained 1.8 percent to $528.99, bringing its advance this month to 5.7 percent. Icahn indicated he will drop his shareholder proposal asking Apple to buy back $50 billion of stock this year, citing recent repurchases and the opposition of a proxy-advisory firm. The shares are down (AAPL:US) 5.7 percent so far this year.
Icahn said in December he would seek a vote to push Apple to buy back more stock and unlock cash held by the Cupertino, California-based company, which had $159 billion in cash and marketable securities as of Dec. 28. The iPhone maker bought $14 billion of its own shares after reporting earnings on Jan. 28, bringing its repurchases to more than $40 billion in the past 12 months.
American Express Co. advanced 1.5 percent to $88.34. Morgan Stanley raised the shares to overweight, citing the improving economy and prospects for more small businesses to accept the company’s credit cards.
Hasbro Inc. (HAS:US) rallied 4.5 percent to $52.36 for the biggest gain in the S&P 500. The maker of Nerf and Transformers toys said it will return cash to shareholders through share buybacks and dividends and is looking to cut unprofitable business lines.
Dick’s Sporting Goods Inc. jumped 1.5 percent to $51.87. The retailer reported preliminary fourth-quarter profit above its prior forecast as same-store sales rose more than it anticipated.
CNA Financial Corp. rallied 6.9 percent to $42.42. The insurer agreed to sell a life unit to Wilton Re Holdings Ltd. as the company narrows its focus to property-casualty coverage.
Green Mountain Coffee Roasters Inc. rose 2.9 percent to $110.92. The company reached a deal to sell coffee from Krispy Kreme Doughnuts Inc. for its Keurig single-cup brewing system by the end of 2014. Krispy Kreme advanced 3.2 percent to $17.96.
St. Jude Medical Inc. (STJ:US) climbed 2.6 percent to $63.59. The maker of defibrillators and pacemakers was raised to outperform at William Blair & Co. and to buy at Stifel Nicolaus & Co. The St. Paul, Minnesota-based company said at an investor day last week it targets mid- to high-single-digit sales growth in 2015.
McDonald’s slid 1.1 percent to $94.86. The world’s largest restaurant chain said sales at its established U.S. stores fell as severe weather and waning consumer confidence kept diners at home.
Sales at stores open at least 13 months slid 3.3 percent last month in the U.S., Oak Brook, Illinois-based McDonald’s said in a statement today. Analysts estimated a 1.6 percent drop. The January decline follows drops of 3.8 percent in December and 0.8 percent in November.
Loews Corp. lost 4.3 percent to $43.26 for the biggest drop in the S&P 500. Boardwalk Pipeline Partners LP, the natural gas transporter majority owned by Loews, slashed quarterly payments to investors 81 percent as cash flow drops.
Increased U.S. gas production has reduced transportation rates and revenue from storage services is expected to decline, Stanley Horton, Boardwalk’s chief executive officer, told analysts on an earnings conference call today. Boardwalk tumbled 46 percent to $13.
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