Bloomberg News

S&P 500 Rebounds to Record as Putin Comments Ease Tension

March 04, 2014

U.S. Stocks Rebound as Putin Comments Ease Tensions in Ukraine

Brokers watch Russian President Vladimir Putin at the stock exchange in Frankfurt, Germany, on March 4, 2014. Photographer: Daniel Roland/AFP via Getty Images

U.S. stocks rose, with the Standard & Poor’s 500 Index rebounding to a record after its biggest loss in a month, as comments from Russian President Vladimir Putin signaled the Ukraine crisis won’t immediately escalate.

Qualcomm Inc. gained 3.4 percent after raising its dividend and boosting its buyback plan. Abercrombie & Fitch Co. (ANF:US) advanced 6.7 percent after Credit Suisse Group AG lifted its rating on the teen-apparel retailer. RadioShack Corp. plunged 17 percent after sales missed analysts’ estimates.

The S&P 500 jumped 1.5 percent, its largest gain this year, to an all-time high of 1,873.91 at 4 p.m. in New York. The Dow Jones Industrial Average advanced 227.85 points, or 1.4 percent, to 16,395.88. The Nasdaq Composite Index climbed to the highest since April 2000 and the Russell 2000 Index advanced the most in a year. About 7.7 billion shares changed hands on U.S. exchanges, 17 percent higher than the 30-day average.

“On a very short-term basis, everything you’ve seen in the market has everything to do with the Ukraine,” Kevin Caron, a Florham Park, New Jersey-based market strategist at Stifel Nicolaus & Co., which oversees about $160 billion, said by phone. “But over last 2 weeks, the market has moved higher with the exception of yesterday. The bet has been made that the economy continues to expand and most of the disruption we’ve seen has been from the weather.”

Putin Comments

The S&P 500 fell 0.7 percent from a record yesterday, the most since Feb. 3, joining a global selloff in equities on concern that Russia’s military presence in Ukraine could lead to a larger conflict. Stocks rallied today after Putin said he’s not considering taking control of Crimea and would send in troops to Ukraine only in an extreme case.

The MSCI All-Country World Index increased 1.3 percent, rebounding from its biggest drop in a month. The Europe Stoxx 600 jumped 2.1 percent and Russia’s Micex Index climbed 5.3 percent after $55 billion was erased from the value of the country’s equities yesterday. The yen weakened against all of its 16 major peers and gold fell 1.1 percent.

In his first public remarks since Ukraine said its Crimean peninsula had been taken over by Russian forces, President Putin said he reserved the right to use force to defend ethnic Russians while there’s “no such necessity” at present. U.S. Secretary of State John Kerry arrived in Kiev to offer an aid package to Ukraine’s interim government, as President Barack Obama challenged Putin’s rationale for intervening.

‘Nervous Investors’

“The drop yesterday and the bounce today are indicative of a lot of nervous investors who are trying to rationalize their long positions,” Tom Stringfellow, president and chief investment officer of San Antonio-based Frost Investment Advisors LLC, which manages about $10 billion, said by phone. “Our investment process thesis long-term has not changed. I am still an optimist that GDP growth will be higher than what downward revisions are. There are underpinnings in the economy that are churning along.”

The S&P 500 (SPX) yesterday erased its gain for the year after the gauge rallied 4.3 percent in February. Investors have been speculating that recent weakness in data from housing to jobs was caused by inclement weather and that the Federal Reserve will continue to support the economy.

The Labor Department will release its February jobs report on March 7. Economists estimate employers increased the pace of hiring to 150,000 workers after adding 113,000 in January, according to a Bloomberg survey.

Data Watch

Data yesterday showed manufacturing expanded at a faster pace than projected in February, a sign the industry was beginning to overcome bad weather across much of the country. A separate report showed consumer spending rose in January at a faster rate than forecast.

“As far as economic releases go, yesterday was pretty good, and of course everybody is looking toward the job report this Friday,” Walter Todd, who oversees about $990 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said by phone. “Perhaps investors ignored the releases yesterday and are now taking a look at them.”

Stocks are set to enter the sixth year of a bull market that started March 9, 2009. Three rounds of stimulus have helped push the S&P 500 up 177 percent from a 12-year low.

The Chicago Board Options Exchange Volatility Index, a gauge for U.S. stock volatility, plunged 12 percent to 14.10 today. Europe’s VStoxx Index dropped 15 percent to 18.65 after jumping 30 percent yesterday, its biggest gain since the European debt crisis in August 2011.

Broad Rally

All 10 main industries in the S&P 500 advanced at least 0.8 percent. Health-care and financial shares rose at least 1.9 percent to lead gains. American Express Co. jumped 2.9 percent to $92.61 for the biggest advance in the Dow. Pfizer Inc. gained 2.2 percent to $32.69, the highest since 2004.

Facebook Inc. climbed 2.1 percent to $68.80, snapping a five-day streak of declines. The social-network site owner may buy Titan Aerospace for $60 million, according to TechCrunch, which cited an unidentified person with access to information about the deal.

Qualcomm jumped 3.4 percent to $76.11. The biggest provider of mobile-phone chips boosted its quarterly dividend by 20 percent to 42 cents a share, while giving itself leeway to buy back an additional $5 billion in shares.

J.C. Penney Co. climbed 4.2 percent to $8.29. Standard & Poor’s changed the retailer’s outlook to stable from negative, citing “modest improvements during the fourth quarter.” S&P also said the company’s revised strategy is “beginning to stabilize the business.”

Clothes, Panels

Abercrombie & Fitch added 6.7 percent to $41.68. Credit Suisse raised its recommendation (ANF:US) on the New Albany, Ohio-based company to outperform, similar to a buy rating, from neutral, saying a more competitive pricing strategy, tighter cost controls and inventory management, among other initiatives, will help boost earnings.

SunEdison Inc. gained 12 percent to $20.89, the highest since July 2009. Morgan Stanley raised the St. Peters, Missouri-based provider of solar energy technology to overweight, similar to a buy rating.

RadioShack tumbled 17 percent, the biggest drop since October, to $2.25. The electronics chain posted fourth-quarter sales that missed analysts’ estimates and said it would close as many as 1,100 locations.

To contact the reporters on this story: Inyoung Hwang in London at ihwang7@bloomberg.net; Callie Bost in New York at cbost2@bloomberg.net

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


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Companies Mentioned

  • ANF
    (Abercrombie & Fitch Co)
    • $39.76 USD
    • -0.73
    • -1.84%
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